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Critical Condition: Idaho Health and Welfare's Annus Horribilis

One state agency's battle against an avalanche of problems

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You can't get any higher than Dick Armstrong at Idaho's Department of Health and Welfare, literally or figuratively. The elevator on his floor has no up button. His 10th-floor State Street office looks out on downtown Boise and the nearby Foothills. But when BW sat down with Armstrong for a wide-ranging interview on Dec. 7, a thick fog had settled over the Treasure Valley. The backdrop was surreal for an examination of, by many accounts, the most difficult year in the agency's history, from severe budget cuts to layoffs to shuttering offices to a Medicaid crisis. We asked Armstrong to cut through the misunderstanding and misinformation.

When 2010 was just days old, Armstrong warned lawmakers that his agency had drained operating costs and could "no longer guarantee changes would result in good public policy." Over the course of the next 12 months not only did his prediction of dire cuts come true, but a series of high-impact challenges arose, each more complicated than the one before.

Idaho's Department of Health and Welfare is getting smaller. In the wake of furloughs and layoffs and a shrinking budget, workers in every division across the agency worked fewer hours in 2010 yet continued to serve more clients than ever before. From Medicaid to child protection, from adult mental health to childhood immunizations, the numbers continued to rise. Idaho's food assistance, for example, now leads the nation in growth of participation--a 41 percent increase in the last 10 years. Participation has doubled since 2007.

Though 2010 is coming to a close, Armstrong and his colleagues keep their eye on at least three calendars. The traditional calendar most of us live by begins in January, which is when Armstrong's boss, Gov. C.L. "Butch" Otter gives his State of the State Address. Then there's Idaho's fiscal year calendar, on which 2012 will begin on July 1, 2011. And finally, the federal fiscal year calendar, on which 2012 will start Oct. 1, 2011. Each date triggers its own budget, deadlines and challenges.

In our review of calendar year 2010, which at times Armstrong described as "awful," we began with the early days of January when he walked up State Street to the Capitol with some sobering news.

BW: In January you announced limited office hours and furloughs. You proposed a $2.1 billion budget, but you had to know you weren't going to get that. Did you have a sense for how much worse things could be?

Armstrong: Furloughs may be an effective short-term tool, but they're very disruptive when you try to figure out how you're going to manage your work. And the work was going way up because the recession was continuing to deepen and we hadn't hit bottom yet. So we knew that free fall would continue for a while.

But you weren't saying that publicly.

Well, I can tell you as a management team we were talking about it privately. We didn't know what the legislature would do, but we did know that it would be substantive reductions.

On March 4, 2010, the legislature's budget writers--the Joint Finance Appropriations Committee--approved a Medicaid budget of $1.55 billion, trimming about $47 million. Providers like the Cystic Fibrosis Center of Idaho were victims of major cuts. "This will probably end up costing the county, the state and Medicaid a lot more in the long run," said Dr. Perry Brown at the time. "Quite simply, patients will end up having more difficulty accessing preventative care."

BW: How dramatic of an impact did cutting state funds have on federal matching funds for Medicaid?

Armstrong: In order for us to pull that money down from the federal government, we have to put up our portion. The good news is that we had gone from a 69 percent federal match all the way up to about 79 percent because of extra stimulus funds. So that helped us for fiscal year 2011.

But that's going away.

It's going away pretty rapidly. We're dropping down from 79 percent to about 68 percent in July of 2011. It's a real dilemma, 10 percent is a lot of money.

Are we talking about millions?

Actually, it's about $140-$150 million.

So what are your options?

Under current state statute, we can pull down some extra funds from Idaho hospitals and nursing homes in the form of an irrevocable fee.

But isn't that a tax?

In effect, yes. It can't be voluntary. It has to be a legal, irrevocable assessment. You see, if we can get some extra monies from hospitals and nursing homes, we can leverage the funds to pull down more federal matching monies. The only other alternative would be to reduce the reimbursement rates to providers. But that's a lose-lose proposition because everybody would lose money. We're pretty happy that the hospital and nursing home industries stepped forward. Between the two of them we were able to raise $35 million, which we could use to pull down more federal money.

Is this a formula you're inclined to revisit?

We only have the legal authority to assess hospitals and nursing homes.

T.S. Eliot called April the cruelest month, quite appropriate for April 2010. Armstrong announced the department would cut 4 percent of its work force (126 employees) and close nine of its 29 offices.

BW: Were the layoffs inevitable?

Armstrong: We weren't talking about letting people go who were not good performers. It became an issue of how we could consolidate services so that citizens of Idaho would have access to the services they need.

How did you decide which offices to close?

We had to consider things like travel time to the nearest office and which services each office provided. In some instances, we decided to station an employee in the community but not have an office there. That's what we did in McCall, for example.

Are there other offices that could be closed?

Well, our list was more than nine when we went through it initially. We're not expecting to close any other offices.

How many offices were evaluated?

Twenty.

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