Overly optimistic savings initiatives, budgeting based on still-unapproved cuts and a failure to forecast health care claims are all contributing to a projected $100 million shortfall in the state’s Medicaid program.
However, many questions remain about a budget gap that has been growing 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 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 Health and Human Services Commissioner Mary Mayhew delivered the news. The queries began in earnest after Thursday’s meeting and are likely to continue.
Mayhew is expected to present a more detailed analysis of the shortfall this month.
Frustration is mounting over the state’s management of MaineCare, with a shortfall that equals about $77 for every Maine resident.
Worsening the scenario are budget issues that include a $35 million revenue shortfall in the budget that ends June 30 and a projected $880 million gap in the next two-year budget.
“Solving (the MaineCare problem) 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 department’s $2.1 billion budget is 45 percent of the state’s overall budget. The projected MaineCare shortfall represents less than 5 percent of the department’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 for presenting lawmakers with a $121 million budget gap last year and revealing this year that a computer glitch had given 19,000 ineligible Mainers access to MaineCare benefits.
Mayhew said Friday that the latest shortfall represents the state’s ongoing battle with the MaineCare program.
“Not only is this problem not unique to this administration, it’s not unique to this state,” Mayhew said.
Mayhew blames much of the current shortfall on the federal government.
About $20 million of it comes from cuts that were passed in the last legislative session but still don’t have federal approval. There were early warnings that some of the reductions — about $10 million — wouldn’t get federal waivers, but Republican lawmakers, at the urging of the LePage administration, booked the savings in a party-line budget vote. The federal government has yet to grant permission for the 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.”
The LePage administration argues that the Medicaid reductions are long-term structural reforms to rein in spending.
The current shortfall suggests there are problems besides Medicaid caseloads.
The outgoing Legislature made more than $100 million in Medicaid cuts. Reducing eligible MaineCare recipients was intended to lower costs, but that’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-York. “I’m pretty sure that taking people off health care is not the answer to our budget problems.”
Other causes of the shortfall include cost-saving initiatives that have not, and likely 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 LePage’s proposal earlier this year to eliminate coverage for adults without children, instead banked on a forecast that those recipients would cycle out of the program, saving an estimated $11 million. Mayhew said virtually no money has been saved.
Another $5 million in savings was booked through a MaineCare redesign task force, which was designed to find efficiencies. Mayhew said the task force uncovered only $1 million in savings.
Mayhew has also 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.
But skeptics note 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 (Internet technology) person there, we need an exorcist, because it continues to be a huge problem.”
Nonetheless, the largest driver of the shortfall is not yet clear. Mayhew believes it will end up being a combination of unachieved savings and “an inability of the state to recover from the loss of federal dollars.”
Mayhew also said the state’s new billing system enabled the state to see its debt “in real time.”
Before this year, the state reimbursed hospitals based on prospective Medicaid claims. Hospitals then sent additional bills to the state when the claims exceeded the original payments.
However, the hospital bills didn’t always line up with the state’s budget, so hospitals would have to wait as long as two years to receive payment.
The new state billing system now pays Medicaid claims every week.
Documents show that the DHHS has been an average of $2.5 million over budget every week since July 1.
So why is Mayhew just now delivering the bad news?
She said her agency waited to see whether the effects of phased budget initiatives would offset the overspending.
She said it is impossible to build an accurate shortfall forecast based on weekly or monthly payments.
Nonetheless, questions remain for Mayhew, and the MaineCare shortfall will test the new Legislature.
“It’s frustrating for the public and for legislators,” Hill said, “but you can’t come up with solutions without first nailing down the problem.”
Staff Writer Steve Mistler can be contacted at 791-6345 or at: