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Iowa lawmakers debate Medicaid work rules, budgets as they aim to end 2025 session • Iowa Capital Dispatch [1]
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Date: 2025-05-14
Lawmakers could wrap up the 2025 session as early as Wednesday – but there are still several spending and final policy measures left on the chambers’ calendars before legislators can head home.
Before ending the session, lawmakers must approve the state’s budget, the collection of bills funding Iowa’s state departments, agencies as well as meeting other spending obligations. Several of the appropriations bills for fiscal year 2026 passed Monday and Tuesday, some moving between chambers and others going to Gov. Kim Reynolds.
The spending bills sent to the governor reflect the budget agreement reached between the Senate and House Republican majorities earlier in May. Some of the budget items House Republicans had requested – like $14 million for paraeducator pay and $8 million for the public safety equipment fund – have been provided through a one-time allocation from the Sports Wagering Fund, which currently contains $40 million.
The Senate Appropriations Committee approved Senate Study Bill 1240 Wednesday, the bill making this appropriation, as well as Senate Study Bill 1241, the standings appropriations bill.
In addition to the budget bills being passed, there are several pieces of legislation on policy changes on the list for lawmakers to consider. Here is what the Iowa Legislature has passed so far Wednesday:
Budget bills passed
Health and human services: The Senate sent House File 1049, providing funding for Iowa’s health and human services programs, to the governor with a 31-15 vote. The bill provides a total of $2.469 billion in funding, with a total of $1.903 billion going to Medicaid and expanded Medicaid programs.
This funding includes a $230.4 million increase for expected funding shortfalls for Medicaid and Healthy and Well Kids in Iowa (Hawki), the health coverage program for uninsured children of low-income, working families. It also includes $20 million for nursing facility providers Medicaid rate rebasing and more money for Medicaid reimbursement for maternal health care providers.
The bill also includes a portion denying Medicaid coverage for transgender Iowans seeking sex reassignment surgery, hormone treatment therapy and other physical interventions for the treatment of gender dysphoria. This provision was amended from earlier versions of the bill that restricted Medicaid coverage for all treatment for gender dysphoria, which could have included mental health care.
Sen. Mark Costello, R-Imogene, said he believes prohibiting Medicaid for gender-affirming care is a policy “supported by a majority of Iowans.”
The Senate had also debated the measure Tuesday, but deferred the bill. Sen. Molly Donahue, D-Marion, said the provision banning Medicaid coverage of these treatments for transgender Iowans is unconstitutional under the Equal Protections Clause.
“This section of the bill is not just bad policy, it is unconstitutional,” Donahue said. “It is cruel, it is inhumane. Just as an example, if I needed a hysterectomy as a female and then hormonal replacement, I can get that. But our friend who may be transgender cannot, because they are transgender.”
Donahue also said a vast majority of the funding increase is “merely maintaining a status quo,” backfilling federal money given during the COVID-19 pandemic.
“That’s not progress,” she said. “That’s treading water, and for too many Iowans simply not enough, and they’re drowning.”
Costello said Wednesday during closing comments the bill provides needed funding for Iowa’s health services and other programs, but stays within needed budget restraints when considering the revenue decreases from implementing income tax cuts in recent years – a tradeoff Iowa Republicans support.
“This is a policy that none of us in the majority are questioning,” Costello said. “We know that Iowans deserve to keep more of their hard-earned dollars, and that our budgets are built on that commitment. The minority party’s rhetoric during debate on these budgets shows they want to spend more of your tax dollars, and their answer to spending more is to raise your taxes.”
Judicial branch: Senate File 648, the bill appropriating funding for Iowa’s courts, was sent to the governor by the House in a 86-1 vote. It allocates $221.83 for the state’s judicial branch and includes a 2.5% increase to judicial officer salaries, totalling $1.27 million.
Rep. Ross Wilburn, D-Ames, said he appreciated the raise for judicial pay included in the budget, though he supported further increases so Iowa can enlist and keep qualified judges in the state. He echoed comments made by Sen. Matt Blake, D-Urbandale, Tuesday, pointing to a recent situation where only two candidates applied for a judge opening in Iowa, as a reason why Iowa needs to increase pay.
“I think it’s critical in terms of recruitment, retention, retirement, that we stay competitive, that we have access to an adequate pool of talented justices, court officers, available,” Wilburn said.
Rep. Brian Lohse, R-Bondurant, the bill’s floor manager, said he spoke Thursday morning with former Iowa Rep. Dustin Hite, who was appointed as a district court judge in 2024, who said he believed he was “a better judge because he had been in private practice.” Increasing pay for judges will help the state recruit more lawyers in private practices to take judgeships, Lohse said, who can offer different expertise than county attorneys and lawyers in the public defender’s office or indigent defense – the people who typically take judge positions.
“We have to continue to fight to increase judge pay to a point where it is truly competitive, so that we can get the best applicants available – and from the positions and those areas of the law where we need really good, qualified, well-rounded judges,” Lohse said.
He also said the budget includes a change based on issues identified during the judicial branch’s review of a coding error that caused the misallocation of court debt funds. Lohse said it was discovered roughly $140,000 each year in fees paid by individuals for a court interpreter were being transferred to the jury and witness fee revolving fund instead of into the general fund as intended. The budget bill includes a policy change to continue transferring this money into the revolving fund, he said.
Justice system: Senate File 644, passed 60-27, provides $924.9 million for Iowa’s justice system, including funding for the state’s law enforcement entities including the departments of justice, corrections and public safety. Of that amount, $703.1 million comes from the general fund.
Lohse, who also managed the justice system spending bill, said the measure includes $1.07 million for indigent defense, raising the pay rate by roughly $2 per hour, in addition to transferring $1.95 million from the Indigent Defense Fund to the state Public Defender’s Office for the hiring of 13 new staff.
Rep. Charley Thomson, R-Charles City, said though he supported the bill and Lohse’s efforts to provide funding for indigent defense, the state is still not meeting its legal or moral obligation to provide adequate funding for the lawyers representing people who cannot afford a lawyer.
“It’s pretty simple,” Thomson said. “It’s not that expensive. Yet we are paying so little as a state that we are not able to attract very many competent counsel to do the job while we’re making progress in raising that rate, it is still hopelessly too low. … At some point, sooner rather than later, we’re going to get sued and be compelled to pay adequate amounts.”
Lohse said he agreed with Thomson, saying House lawmakers will come back in 2026 to “continue to fight for indigent defense to do what we can, both in terms of dollars, but also in other legislation.”
The measure also includes $150,000 for the victims assistance grant fund through the Iowa Attorney General’s office to provide services for human trafficking victims, and has a transfer of $100,000 from the public defender’s office to the College Student Aid Commission, providing funding for the Rural Attorney Recruitment Assistance Program.
Rep. Megan Jones, R-Sioux Rapids, proposed but withdrew an amendment to limit the use of “geofencing,” the ability to obtain information from devices being used within geolocational boundaries, to monitor mobile phone use within the Iowa Capitol. The Iowa Division of Criminal Investigation used “geofencing” software in the sports wagering probe that resulted in four Iowa State University athletes facing charges.
She said filings in a lawsuit on the sports wagering case contained information showing geofencing software had been used at the Capitol, a practice she said violated the Fourth Amendment of the Constitution, protecting people from unreasonable searches and seizures from the government.
“The innocent, our constituents, Iowans, our visitors to this very building suffer at the very contemplation that their phones were being geofenced for whatever legal purpose and monitored while they were in this building,” Jones said. “How sad it is that these words have to even be spoken in this building. Iowans, you deserve to be safe in this building, in these hallowed walls. You deserve to be able to seek redress against your government without being feared of being spied on.”
The measure heads to the governor for final approval.
Administration and regulation: The Senate sent legislation setting the administration and regulation budget for the state to the governor’s desk Wednesday with a vote of 31-15.
House File 1044 sets general and other state appropriations for statewide offices and agencies to the tune of more than $200 million, $73 million from the state’s general fund. Sen. Dennis Guth, R-Klemme, said many of the items in the bill are receiving status-quo funding, but the overall appropriation amount increased by more than $62 million.
Senate Democrats thanked Guth for his transparency and openness in the process of crafting the legislation, but still called for their fellow lawmakers to vote no on the bill.
Discussion of the bill turned to accusations of past budget mismanagement and overspending before its passage, with Sen. Janet Petersen, D-Des Moines, saying Reynolds is “breaking her own budgeting policies” by planning recurring withdrawal from the state taxpayer relief fund despite saying one-time funds should only be used for one-time expenses. There is also a $917 million “hole in the budget,” she said, that Reynolds didn’t address with cuts to her own office.
Sen. Tim Kraayenbrink, R-Fort Dodge, said over the past nine years, the state has gone from a $400 million budget shortfall to a $6 billion surplus. He attributed the $917 million shortfall to $300 million in property tax relief provided to small businesses over three years.
He added he wished other lawmakers would “tell the truth” about how the budget works and said there is a plan in place that works and that his party understands.
“Go figure out whatever numbers you want to put in your projections, but my projections look very good,” Kraayenbrink said.
Policy bills advance
Expanded Medicaid work requirements: The Iowa House approved an amendment from the Senate on the bill setting work requirements for the Iowa Health and Wellness Plan (IHAWP), sending it to Reynolds for final approval.
Senate File 615 requires IHAWP recipients to work at least 80 hours per month in order to remain eligible for health coverage through the expanded Medicaid program that covers able-bodied adults from ages 19 to 64 with incomes 133% or below the federal poverty level. It includes exceptions for people with high-risk pregnancies, those with children under age 6 and those in substance abuse treatment programs for up to six months.
The measure also includes “trigger” language that would end IHAWP if the federal government approves, then later rescinds, approval of work requirements.
The Senate amended the bill to remove a provision included in a House amendment to the bill directing Iowa HHS to study and return to lawmakers before the 2026 legislative session with a report on the Medicaid for Employed People with Disabilities (MEPD) program.
The House approved this change. Rep. Carter Nordman, R-Adel, said he was still in support of the study, but said the language was not necessary as Iowa HHS director Kelly Garcia has made a “commitment” to study and discuss the program with lawmakers before the next session.
“I will also commit, while we will be taking this out of the bill, (to) working with Rep. Turek and Director Garcia in the interim to see to it that this still gets done,” Nordman said.
Rep. Josh Turek, D-Council Bluffs, said this provision was a step to ensure “work without worry” efforts – removing the Medicaid asset and income limits for people with disabilities – moves forward. A subcommittee meeting was held on a bill making these changes to Medicaid in 2025, but the measure did not advance.
He said he appreciated work Nordman has done on this issue, and said the issue was with the Senate.
“I think that we should send this back to them,” Turek said. “Let them choke on it.”
Turek and other Democrats also took issue with the bill as a whole. Rep. Beth Wessel-Kroeschell, D-Ames, called the MEPD study “the only good piece in the bill.”
“The governor has already requested this waiver unilaterally,” Wessel-Kroeschell said. “So then the only thing left is to gamble with the lives of over 180,000 Iowans who would lose their health insurance. … That’s the gamble. Stop gambling with the lives of Iowans who make less than $17,000 a year.”
Reynolds and the Iowa Department of Health and Human Services have submitted a waiver request to the federal government to implement work requirements. The HHS proposal is slightly different from the legislative proposal, requiring Iowans on IHAWP work 100 hours per month or earn the equivalent to working 100 hours per month at $7.25 per hour. People can also retain coverage if they are enrolled in education or job skills programs.
The legislation was approved 56-30 and heads to Reynolds’ desk.
Grain indemnity: After bouncing from the Senate to the House and back, legislation to expand the minimum and maximum amount of money allowed in the fund made to reimburse farmers when grain buyers close down has been sent to Gov. Kim Reynolds’desk.
The House passed the bill May 8 with an amendment changing the proposed new lower and upper limits to $8 million and $16 million, reflecting original House legislation on the topic and increasing what the Senate proposed.
Sen. Kerry Gruenhagen, R-Walcott, said the amendment also determines what qualifies as purchased grain for deferred pricing and deferred payment contracts, raises the maximum loss cap and sets up a review process for sellers to recover losses from repaying grain dealers’ bankruptcy estates.
Sen. Mike Zimmer, D-DeWitt, encouraged lawmakers to vote in favor of the legislation and thanked them for their work on the bill, which he said is good for farmers and grain producers.
“This is a long time coming,” he said.
The legislation passed unanimously.
Unemployment insurance tax: The governor’s proposal making changes to Iowa’s unemployment insurance taxes passed both chambers.
This story will be updated.
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