Gov. Mills administration calls for urgent budget changes to address Medicaid gap

The Maine Department of Health and Human Services has seen growth in MaineCare and other program costs that have resulted in current appropriations being insufficient to meet needs. (Photo by Getty Images)

MaineCare payments to health care providers may be limited if the Maine Legislature doesn’t enact budget changes to address the funding gap the state’s Medicaid plan is facing in the current fiscal year, according to a letter Kirsten Figueroa, the commissioner of the Department of Administrative and Financial Services, sent to legislative leadership and members of the budget committee on Tuesday.

The Maine Department of Health and Human Services has seen growth in MaineCare and other program costs that have resulted in current appropriations being insufficient to meet needs. The gap amounts to roughly $118 million in the current fiscal year, Figueroa wrote. 

As a result, Gov. Janet Mills is now planning to introduce a supplemental budget to bridge the MaineCare gap for the current fiscal year, in addition to a biennial budget for 2026-27. Scott Ogden, the governor’s deputy chief of staff for communications and strategy, said Mills will introduce both budgets on Friday.

“If this supplemental is not enacted in a timely manner, the Department of Health and Human Services will likely have to take the extraordinary step of limiting payments to health care providers as early as the spring of 2025,” Figueroa wrote.

The Governor’s Office and Maine Department of Health and Human Services did not respond to a request for the date by which they are seeking the Legislature to enact these supplemental changes. 

In the letter, Figueroa explains that the gap is due to several factors, one being an increase in MaineCare enrollment from the federal continuous enrollment requirement during the pandemic and other changes that resulted in increased eligibility. 

Other contributing factors include an increase in the overall cost of health care services due to inflation and workforce challenges and an increase in people using MaineCare services following declines during the pandemic, Figueroa wrote. 

Mills has already vowed a lean biennial budget in light of projected revenue shortfalls. 

According to the revised projections from the Legislature’s Revenue Forecasting Committee in December, the state is facing a gap of $450 million in the next biennium.

In the letter, Figueroa reiterated Mills’ commitment to a lean biennial budget, writing that the governor’s proposal will focus on maintaining core commitments such as the expansion of voter-approved health care, 55% of education funding, free community college, and 5% of revenue sharing for municipalities. 

However, Figueroa added that lawmakers should understand that a “diversified approach” will likely be necessary to close the gap between funding needs and projected revenues.

“While, on balance, the State of Maine has enjoyed significant new revenues over the past several years that have allowed for investments in important new programs that have benefited Maine people, difficult decisions should be expected and difficult changes must be adopted this year to balance the budget and ensure the fiscal stability of the State budget moving forward,” Figueroa wrote. 

Last year, Mills and Figueroa warned of plateauing revenues and Mills had called for $107 million in savings — an ask lawmakers ultimately halved in the final budget plan. At the time, lawmakers and advocates pushed back on the savings, particularly in light of the state’s Budget Stabilization Fund, otherwise known as the rainy day fund, which remains at its statutory maximum of nearly a billion dollars.

In her letter to lawmakers on Tuesday, Figueroa warned against tapping into that fund in budget planning this session.

“The Budget Stabilization Fund, which exists for the purpose of covering budget shortfalls in times of economic distress, should not be considered as a source of revenue to balance the budget,” Figueroa wrote.