Helena budget fight stalls Medicaid provider pay hike, lawmakers push back

Helena child psychiatrist Heather Zaluski said the city was already down to one local provider for some Medicaid-covered behavioral health services as Gov. Greg Gianforte’s administration withheld a 3% rate increase that was set to begin July 1. The state said Montana’s Medicaid budget was short by nearly $200 million and that pausing the hike would save about $10 million, but providers and lawmakers warned the move would squeeze clinics already trying to keep staff, pay rent and keep seeing patients.

The Legislature folded the increase into its 2025 budget, and House Bill 2 later became the vehicle for more than $38 million in Medicaid rate changes for fiscal year 2026. The Department of Public Health and Human Services said its fee schedule updates were tied to money appropriated by lawmakers and were meant to take effect July 1, 2025. Instead, the administration said it would not move ahead with the increase while it worked through the budget gap.

Democratic lawmakers pushed back at a Tuesday news conference in Helena, arguing the state should solve the shortfall somewhere other than Medicaid provider pay. Rep. Paul Tuss said the governor had other choices, and Rep. Mary Caferro of Helena said Medicaid was one of the last places the state should cut because it supports health care and the private sector across Montana. The fight has landed squarely in Lewis and Clark County because it is being decided at the State Capitol and because local patients are already dependent on a small pool of providers.

Zaluski’s comments pointed to the most immediate risk for Helena and surrounding communities: when reimbursement does not keep pace with overhead, providers can lose money on Medicaid visits and begin limiting those patients or leaving the program altogether. That would affect not just behavioral health, but also the local clinics, therapists, specialists and nursing homes that depend on Medicaid volume to keep schedules full and staff paid. If the 3% increase survived, it would give those providers a little more room to keep nurses, support staff and clinicians in place.

Montana’s Health and Human Services budget is the state’s largest department budget and is heavily federally funded, which is why a provider-rate decision can ripple through the broader budget so quickly. Lawmakers also considered House Bill 750, which would have created annual Medicaid reimbursement increases, but it died in the House after missing deadlines, leaving the budget bill as the only practical path for the raise.