Snow blankets the Maine State House in Augusta. (AnnMarie Hilton/Maine Morning Star)
The Legislature’s budget committee begins public hearings on Tuesday for the governor’s proposal to address a Medicaid funding shortfall in the current budget that, if left unaddressed, could result in the state being unable to pay health care providers.
Gov. Janet Mills proposed a $94 million emergency supplemental budget for the general fund on Jan. 10. The budget would be funded with newly recognized revenue for the current fiscal year.
Supplemental budgets at the start of a new Legislature are not necessarily unusual, as they are used to adjust to changes in predicted revenue. During a meeting of the budget committee, known as Appropriations and Financial Affairs, earlier this session, Chris Nolan, director of the Office of Fiscal and Program Review, explained that much of the positive adjustment is due to payments coming in after the extended tax filing deadlines following consecutive storms last winter.
About $80 million of the additional $247.9 million the general fund is expected to see this fiscal year is due to those delayed payments. Higher than expected capital gains and corporate income tax returns, as well as wage growth, are among the other reasons for the short-term increase.
Kirsten Figueroa, the commissioner of the Department of Administrative and Financial Services, warned in a letter to legislative leadership and members of the budget committee earlier this month that if the Legislature fails to enact the supplemental in “a timely manner” the Department of Health and Human Services will likely have to limit payments to health care providers as soon as this spring.
Gov. Mills administration calls for urgent budget changes to address Medicaid gap
Two-thirds support of the Legislature is needed to pass the change package as an emergency measure, allowing it to take effect immediately upon the governor signing it.
Rural providers and patients most impacted
Health care providers who accept MaineCare submit claims to the state, which reimburses them at rates based on type of service. The state, in turn, is reimbursed most of those costs by the federal government.
However, reimbursement rates for Medicaid are lower than what health care providers say they can get from private insurance providers. Senate Minority Leader Trey Stewart (R-Aroostook) said during a press conference last week that this is particularly a concern for rural Mainers.
“A lot of us, we represent rural Maine,” Stewart said, “and we’re talking about rural hospitals that are on the cusp of closing.”
Mills’ proposed budget for the next biennium includes funding for Medicaid, raised in part through new taxes on private ambulance services and pharmacies.
However, Mills is also proposing some cutbacks to reimbursement rates.
The cuts would amount to a 36% reduction in payments to doctors for Medicaid services over the next five years and would cost hospitals $24 million per year starting in 2026, with further reductions after that, hospital officials told the Portland Press Herald.
“They’re already inadequate,” House Minority Leader Billy Bob Faulkingham (R-Winter Harbor) said of reimbursement rates during the press conference, criticizing Mills’ proposed cuts. “They’ve been inadequate.”
In addition to opposing the rate reductions, Faulkingham said his caucus wants to decrease the number of people on MaineCare.
The state is looking at other likely Medicaid challenges in the coming year with the Trump administration promises to make cuts to the federal budget. Insufficient federal reimbursement rates and changes to eligibility would disproportionately impact states like Maine, since rural communities rely on Medicaid more than urban areas.
Laura Guerra-Cardus, director of state Medicaid strategy for the Center on Budget and Policy Priorities, said that when reimbursement rates are cut, it disincentivizes providers from accepting MaineCare, which then makes it harder for people on Medicaid to find services.
“What we see is fewer providers wanting or being able to participate in Medicaid, and then it becomes a lot more challenging for people with Medicaid coverage to find providers,” Guerra-Cardus said. “This is an especially acute problem in more rural areas and smaller communities that just have fewer options, so you find people having to travel a lot further for specialty care and even primary care and that then increases the burden locally for people who can’t find care elsewhere.”
To make up costs for uncompensated treatment, hospitals may also start charging people with private insurance more, Guerra-Cardus said.
“That shifts the cost burden of healthcare to local communities, local taxpayers, and contributes to increased healthcare coverage costs for everyone, including people with insurance,” Guerra-Cardus said.
Maine has a record of owing providers
This is not the first time the state has been at risk of having to issue IOUs to providers, though Mills argued the reasons behind possibly having to do so are different this time around.
“It’s not the same thing,” Mills said during her budget press conference on Jan. 10. “It was a different kind of cost settlement backlog of payments.”
Before the Affordable Care Act, otherwise known as ObamaCare, Maine had been a leader in expanding Medicaid eligibility to people who earn slightly more than the federal poverty level.
How the incoming Trump administration could impact people covered under MaineCare
At the time, in the early 2000s, Maine resorted to issuing IOUs to hospitals as well as capping the number of people on MaineCare, the state’s Medicaid program, to keep numbers down. This led to the state racking up debt, which was paid off under former Gov. Paul LePage, who used money from one of the state’s regular liquor contracts.
In 2017, Maine voters approved Medicaid expansion but LePage refused to implement it, arguing the Legislature had not allocated sufficient funding. The citizens who had gotten the Medicaid referendum on the ballot eventually won a lawsuit forcing his administration to implement the program, though LePage dragged out the process. Ultimately implementation was left to Mills, who signed an executive order for the expansion as one of her first acts.
The current funding gap is due to several factors, one being an increase in the number of people on the MaineCare rolls from the federal continuous enrollment requirement during the pandemic and other changes that resulted in increased eligibility, according to the Mills administration. Inflation-driven cost increases for health care services, workforce challenges, as well as an increase in people using MaineCare following declines during the pandemic also contributed to the increase.
Last year, Former Senate President Troy Jackson (D-Aroostook) introduced emergency legislation in the final weeks of the session in an attempt to boost funding for nursing homes in particular, after they warned earlier of a tens of millions of dollar shortfall partly due to insufficient MaineCare reimbursements for patients.
A scheduled increase in reimbursement rates began this year, and last year’s budget provided $26 million to help ease the transition, but some lawmakers argued it wasn’t enough.
While not all bills this session are available yet as legislation is still being finalized and printed, proposals that are public so far show provider reimbursements will be a focus, including for ambulance services, veteran’s homes and pharmacies.
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