AUGUSTA — For much of the past year, the LePage Administration worked hard to protect federal funding for assisted-living homes for the elderly and group homes for people with mental illness or disabilities.

Officials held meetings around the state and hired workers to survey hundreds of the agencies as part of their effort to maintain “necessary medical services to this very needy population,” according to an Oct. 12 letter from Department of Health and Human Services Commissioner Mary Mayhew to a federal Medicaid official.

Then, Dec. 6, Gov. LePage proposed cutting off all state and federal funding for the same homes.

“To say it was shocking or out of the blue would be an understatement,” said Matthew Walters, chief operating officer of Woodlands Assisted Living, a Waterville-based chain of 10 assisted-living and memory care facilities.

The proposed elimination of MaineCare funding for so-called private non-medical institutions would save about $60 million and help close an estimated $220 million shortfall over the next 18 months. The cut also would mean the loss of more than $100 million in matching funds from the federal Medicaid program.

DHHS officials told the operators of assisted-living homes and other institutions that the proposed funding cut was a difficult decision.

“We understand how this budget recommendation may cause confusion for you given the work we have done to find solutions (to the federal funding issues) … Our desire and commitment to work with you is and has always been genuine,” Mayhew said in a letter circulated the day after submitting the budget.

The uncertainty about future federal funding for the homes became a top priority for Mayhew and other state officials during the summer and fall.

After routine reviews of Medicaid contracts, federal officials notified the state that at least some services provided through Maine’s private non-medical homes don’t appear to qualify for reimbursements.

Federal standards had been set up to encourage non-institutional care and include limits on what is paid for, as well as other requirements such as giving patients a choice of medical providers. The institutions in Maine often have their own medical staffs to care for residents.

“We feel there might be some issues that need to be addressed as far as how the facilities get paid,” Richard McGreal, who oversees Medicaid programs in New England for the U.S. Department of Health and Human, said last week. “There’s no threat of any type of reimbursement (suspension) or financial action against the state at this point.”

In Maine, state officials and operators of the homes had been working to understand the complex federal rules and how to bring the institutions into compliance with as little disruption and loss of funding as possible.

“We’re still trying to understand what the problem is … so we can address it,” said Richard Erb, president of the Maine Heath Care Association, which represents assisted living homes. “Maine is more heavily dependent on Medicaid-funded assisted living than other states and we do operate with bundled rates, but we’re not the only state that does that.”

To help protect the funding, Maine’s DHHS hired workers to survey the agencies about how they operate and bill for services. It also hired a director of program and regulatory accountability who had been exploring ways to bring the programs into line with federal rules.

Now the potential disruption in federal funding is cited as one reason the homes were included in the proposed cuts.

“We know that the federal government has expressed concern over the last several years,” said LePage spokeswoman Adrienne Bennett. “It’s not a model they endorse.”

Bennett said the administration wants to allow a transition to some other model of service, although it’s not clear what that will be or what it will cost.

The operators of the homes say they are confident the state will be able to protect the federal funding — as long as the budget cut doesn’t go through in the meantime.

“I’m aware of 48 states that provide some form of Medicaid-funded assisted living,” Erb said.

Roger Katz, R-Augusta, an Appropriations Committee member, said he also is confident the state can find a way to keep the homes and comply with the federal requirements, although lawmakers will then have to find other ways to save the $60 million.

The LePage Administration anticipated support in the Legislature for keeping the institutions. And, despite the proposed cut, DHHS officials have stayed in contact with federal officials and continue meeting with operators of the homes in an effort to resolve the reimbursement issues.

“We continue to work with the state on that process,” said McGreal, the federal Medicaid manager.

McGreal said the federal government also is watching Maine’s budget-cutting debate. But it won’t get involved.

“States are (dealing with) distressed budgets right now,” he said. “It’s a state-operated program. They need to make those decisions.”

John Richardson — 620-7016

[email protected]

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