Overly optimistic savings initiatives, budgeting based on still-unapproved cuts and a failure to forecast health care claims all are contributing to a projected $100 million shortfall in the state’s Medicaid program.
However, there are still many unanswered questions left to explain a budget gap that has been ballooning by an estimated $2.5 million each week since the current fiscal year began July 1.
Shortfalls are not uncommon in MaineCare, the state’s Medicaid program; but the magnitude and timing of the latest one stunned and perplexed lawmakers on the Legislature’s budget-writing committee, which learned of it Thursday, six days before the swearing in of the new Democratic majority.
Lawmakers didn’t ask a single question when Department of Health Human Services Commissioner Mary Mayhew delivered the news. The queries began in earnest after the meeting and are likely to continue until and after Mayhew presents a more detailed analysis of the shortfall sometime in December.
Frustration is mounting about state management of the program and yet another shortfall that equals about $77 for every Maine resident. Worsening the scenario are other budget issues that include a $35 million revenue gap in the current budget and a projected $880 million gap in the next two-year spending plan.
The Medicaid problem further complicates the state’s budget picture.
“Solving this has to be one of the top priorities of the next legislative session,” said Sen. Roger Katz, R-Augusta. “Providing health care to our most vulnerable residents is important, but all of these cost overruns at DHHS are crowding out other state spending priorities.”
The $2.1 billion DHHS budget is 45 percent of the state’s overall budget. The projected Medicaid shortfall represents less than 5 percent of the agency’s budget.
Mayhew will be the recipient of the most pointed questions.
She is not the first DHHS commissioner to oversee sizeable shortfalls, but she has been criticized previously for presenting lawmakers with an approximately $121 million budget gap last year and this year revealing that a computer glitch granted 19,000 ineligible Mainers access to Medicaid benefits.
Mayhew reiterated Friday that the Medicaid shortfall represents the state’s ongoing battle with the program.
“The fact is that … not only is this problem not unique to this administration, it’s not unique to this state,” said Mayhew, adding that the state’s Medicaid program has grown $1 billion over the last 10 years.
While many states are dealing with Medicaid funding issues, some states are faring better than others.
According to a June survey by the National Association of Budget Officers and the National Governors Association, Medicaid budgets for current fiscal year assumed a growth rate of 3 percent over fiscal 2012. That compared to an 11 percent increase in 2011 and average annual spending growth of 7 percent from 2007 to 2010.
Mayhew blames much of the current shortfall on the federal government.
About $20 million of the current Maine shortfall is the result of cuts that were passed by the outgoing Legislature but that still are awaiting federal approval. There were early warnings that some of the reductions — about $10 million — wouldn’t receive federal waivers, but Republican lawmakers, at the urging of the LePage administration, still booked the savings in a party-line budget vote this past spring.
The federal government has yet to grant permission for the Medicaid reductions.
Mayhew said Friday that it wasn’t a gamble to book the savings without federal approval.
“Our request to the federal government was to live within the means of our budget resources,” she said. “We brought our challenges to the federal government. We are limited with what we can do. … This is an entitlement program. It’s not a capped budget.”
Mayhew and the LePage administration argue that the Medicaid reductions are long-term structural reforms to rein in spending. The outgoing Legislature instituted more than $100 million in Medicaid cuts.
However, the current shortfall suggests there are other problems besides Medicaid caseloads.
Having fewer eligible Medicaid recipients was designed to lower costs, but it’s not happening.
“It strikes me that we’re still in this position after all that was done last session,” said Sen. Dawn Hill, D-Cape Neddick. “I’m pretty sure that taking people off health care is not the answer to our budget problems.”
Other drivers in the shortfall include cost-saving initiatives that have not and probably won’t come to fruition.
“It’s pretty clear that a portion of this problem is due to overly optimistic predictions,” Katz said. Lawmakers, spurning Gov. Paul LePage’s proposal earlier this year to eliminate coverage for childless adults, instead banked on a forecast that those recipients would cyle out of the program. The attrition savings were estimated at $11 million. Mayhew said vitrually no savings have been realized.
Another $5 million in savings was booked through the MaineCare redesign task force that was designed to find program efficiencies. Mayhew said the task force was able to uncover only $1 million.
Mayhew also has blamed the shortfall on the state’s inability to recover from the loss of one-time federal stimulus funding and a decreased federal match rate.
Skeptics note that those factors were known well in advance and should have been calculated into the budget. The criticism feeds into a larger sentiment that DHHS, in this administration and the ones before it, has based its budgets on unreliable data and assumptions.
“I have never felt good about the numbers that we have,” Hill said. “All the numbers and the forecasting are so mercurial.”
Katz suggested that some of the problems may originate in a DHHS computer system that has plagued the state for years.
“It’s certainly had a tortured history,” he said. “I’ve said that we don’t need an (information technology) person there; we need an exorcist, because it continues to be a huge problem.”
Nonetheless, the shortfall’s largest driver is not yet clear. Mayhew thinks it’ll ultimately end up being a combination of unachieved savings initiatives and “an inability of the state to recover from the loss of federal dollars.”
Mayhew also emphasized that the current state’s new billing system made it so the state was seeing its debt “in real time.” Before this year, the state reimbursed hospitals based on prospective Medicaid claims. Hospitals then sent another bill to the state when the claims exceeded the original payment. However, the hospital bills didn’t always line up with the state’s budget process, meaning that hospitals would sometimes have to wait up to two years to receive payment.
The new state billing system now pays Medicaid claims every week.
Documents provided by shows that DHHS has been an average of $2.5 million over budget every week since July 1.
So why is DHHS just now delivering the bad news?
Mayhew said her agency had been waiting to see whether the effects of phased budget initiatives would offset the overages. She said it was impossible to build an accurate shortfall forecast based on weekly or monthly cycle payments.
Nonetheless, more questions remain for Mayhew and a Medicaid shortfall that will test the new Legislature.
“We have a lot of questions and a lot of concerns,” Hill said. “It’s frustrating for the public and for legislators, but you can’t come up with solutions without first nailing down the problem.”
Steve Mistler — 791-6345