Leaders of nonprofit agencies that provide Medicaid services for disabled people said Wednesday those services are at risk because of a Mills administration decision to revoke a cost-of-living increase set to take effect this month.

The groups say the cost-of-living-adjustment, or COLA, would have amounted to a 2.54% pay raise for workers in a field that is experiencing drastic workforce shortages.

Future cost-of-living increases for Medicaid — or MaineCare in Maine — have not been included in Gov. Janet Mills’ two-year budget proposal, which would potentially mean pay freezes and further cuts to services for disabled people through at least 2027.

The issue is expected to come up at the Legislature’s Appropriations and Financial Affairs Committee meeting on Thursday in Augusta. A December letter to legislative leaders pleading their case was signed by dozens of nonprofit agencies.

Adam Bloom-Paicopolos, executive director of the Alliance for Addiction and Mental Health Services, Maine, which advocates for behavioral health nonprofits, said a 2022 law that mandated a Medicaid rate review every five years and a COLA in the intervening years, gave nonprofits more certainty about what to expect with Medicaid reimbursements.

“This certainly came as a shock to the provider community, because this was the system we had been working under for the past few years,” Bloom-Paicopolos said. “We felt like we were finally gaining some momentum, but retreating from this commitment puts a lot of these critical services in jeopardy.”

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The Medicaid reimbursement rates — which translate into dollars sent to the nonprofits — are what determines the wages and raises the nonprofits can afford to give their direct care workers. These workers provide services for people who need help doing daily tasks in their homes, group homes or in facilities such as nursing homes and rehabilitation centers. The services are for people with physical disabilities, mental health needs, substance use disorder and intellectual disabilities.

Lindsay Hammes, spokesperson for the Maine Department of Health and Human Services, said that “we recognize and understand the frustration of providers” but that Medicaid is “confronting a budget gap” in the current fiscal year, and additional “budget constraints” for the following two years.

“These MaineCare budget constraints are driven primarily by an increase in enrollment … a rebound in the utilization of health care services following the pandemic, and an increase in the cost of health care services due to inflation and workforce shortage,” Hammes said in a written statement.

Hammes said federal reimbursement cutbacks to Maine add to the difficult budget environment. Medicaid is a federal program operated by the states that is funded with a blend of federal and state dollars.

Hammes pointed out that a “majority of states are facing Medicaid budget challenges resulting from enrollment and cost increases and flattening of state revenues after years of growth. Any one of these factors on their own would not present significant budget difficulty, but, when taken together, create a perfect storm that must be addressed to stabilize MaineCare costs into the future.”

For Kristin Overton, executive director of SKILLS Inc., a St. Albans nonprofit that provides residential care and helps train people with disabilities to join the workforce, the COLA cuts will amount to $180,000 in lost revenue in this year’s $9 million budget.

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Overton said SKILLS gave 2% wage increases in October — anticipating a January COLA increase from the state — because many of their employees were struggling financially.

“We had a couple employees who had their cars repossessed, and requests for emergency loans to prevent eviction,” Overton said. “We didn’t feel like we could wait to give the raises.”

SKILLS can afford to pay about $2-$3 above minimum wage — which currently is $14.65 per hour — but that’s comparable to what people can make in starting pay at local big box retailers, Overton said.

The Medicaid COLA affects 126 of the agency’s 142 employees, and eliminating the cost-of-living increase would mean a wage freeze for at least the next year, Overton said.

“We’re already on the verge of not being competitive in wages,” she said. “These can be really rewarding jobs, but also really difficult jobs. We want to pay our employees what they’re worth.”

Bloom-Paicopolos said that by cutting COLA, the Mills administration is also reneging on a U.S. Department of Justice consent agreement that was signed in late November, about a week before DHHS announced the cuts that would take effect in January.

The consent agreement, which was settled after a Justice Department lawsuit against Maine for failing to provide adequate services for children with disabilities, requires Maine to “provide annual cost-of-living adjustments for community-based services.”

Separately, a bill by House Speaker Ryan Fecteau, D-Biddeford, would boost wages even higher — by setting reimbursement rates to allow nonprofits to pay 140% of minimum wage, an increase over the current 125% of minimum wage.

Laura Cordes, executive director of the Maine Association for Community Service Providers, said without COLAs, the nonprofits won’t be able to pay even 125% of minimum wage, which is the current state law.

“For a state service system grappling with a workforce shortage, COLAs are not a luxury. They are a necessity, and key to sustaining staff and services,” Cordes said.

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