LePage proposes nation’s toughest Medicaid cuts

AUGUSTA, Maine — Medicaid spending is a matter of urgency almost everywhere in the country right now, but in few places is the urgency as palpable as it is here, where the governor refers to the federal-state health insurance program for the poor as “welfare,” says it’s necessary to eliminate coverage for 65,000 adults, and wants to stop paying room and board for some 2,000 elders who live in group homes.

All these ideas are part of Republican Gov. Paul LePage’s plan to close a $220 million hole in the state’s biennial Medicaid budget.

“If we are to bring our welfare system to a manageable level that Maine can afford,” LePage insists, “we must make the necessary structural changes. … The state can no longer use gimmicks to fill the hole.”

The size of Maine’s Medicaid shortfall is substantial, but it pales in comparison to gaps in many other states. In fact, health experts in Maine say the program has survived far bigger shortfalls in recent years without cutting the rolls. Still, LePage argues that the program can no longer provide a “free lunch” to poor 19- and 20-year-olds, or to healthy adults responsible for the care of others.

Some of LePage’s proposed Medicaid cuts, such as eliminating dental care, physical therapy and chiropractic services, are not too different from ones that governors in both parties are recommending in states across the country. Neither are his proposed reductions in payments to hospitals and doctors or limits on prescription drug coverage.

But LePage also wants to get at enrollment, and this is what makes him, at the moment, the most draconian of the governors when it comes to health policy. In his Jan. 24 state of the state speech, LePage argued that “we have encouraged people to rely on the taxpayers, rather than rely on themselves.” The cuts to enrollment, he argues, are necessary to shore up the state’s safety net so it can continue to care for its most vulnerable residents — children, elders and the disabled.

But for many of Maine’s citizens, the enrollment cuts would be life-changing.

Betina Pelletier lives about 20 miles from Augusta, in the town of Oakland. She has relied on Medicaid on and off since she became a single mother 25 years ago. Recently she had to quit her job to take care of her mother. Pelletier pays her bills by running a small home-based day care service. If she loses Medicaid, she says, there won’t be enough money for the medicines she herself needs to treat her diabetes.

“I’ll be forced to take a full-time job to get insurance,” she says. “I wonder how much the state will have to pay for my mother’s nursing home if that happens.

“I try not to think about it,” says Pelletier. “But I’m worried.”

If the governor’s Medicaid proposal is the most talked about issue these days, the governor himself has been the biggest news in the state since he was elected in November 2010. Winning office in a multi-candidate contest with far less than a majority of the vote, he has seen his statewide approval ratings hover around 40 percent. His rough-hewn style and seeming disregard for protocol have been difficult for many to adjust to.

But in spite of these distractions, LePage has been relatively effective at moving much of his program. He reformed the state employee pension plan, reducing its liability by $1.7 billion. He deregulated the insurance industry so that, among other things, out-of-state carriers can sell health policies in Maine. And he got legislative approval to cut temporary welfare cash assistance to needy families and disqualify 1,550 legal non-citizens from participating in the Medicaid program.

His greatest achievement was the biggest tax cut in Maine history. The state’s $6 billion two-year budget enacted last June included a reduction in the top tax bracket, increased estate tax exemptions and elimination of income taxes for low-income Mainers.

Opponents of the governor’s Medicaid reductions have suggested repealing the tax breaks or adding a new tax for the state’s wealthiest 1 percent. Some have suggested that he simply postpone the cuts for one year so that low-income residents can keep their health insurance during that period.

No one disputes that Maine’s Medicaid budget gap is real, even if it is not among the larger ones in the nation in proportional terms. The current crisis began late last fall when state Health and Human Services Commissioner Mary Mayhew says her agency discovered the checks going out the door were eating the budget up too quickly. Without a supplemental budget, no more Medicaid checks could be written after April 1, 2012. With that news, the governor developed his proposals to fill this year’s hole of $120 million and another projected gap of $100 million for 2013.

“We cannot be all things to all people,” he said in his state of the state speech. “Maine’s welfare program as it stands today will run out of money in early April, and all services will be lost.”

But LePage’s insistence on cutting the eligibility rolls strikes some as more of a political statement than a fiscal solution. Ending coverage for adults would fill only $37 million of the $220 million deficit, a sum most agree could be found with less onerous measures. “What we have here,” says Trish Riley, who was an adviser to LePage’s Democratic predecessor, “is clearly an ideological fight.”

The Republican legislative majority has already rejected the governor’s proposal to close group homes for the elderly, a $60 million piece of his budget reduction. It remains unclear what Republicans will do on his enrollment cuts. “Nobody wants to do this,” says Jay Finegan, spokesperson for the House GOP majority. “These are real people.”

For now, the joint House-Senate Appropriations Committee has delivered a counter-proposal that would solve the immediate Medicaid budget crisis and pay the agency’s bills until July 1. If approved by a two-thirds majority and signed by the governor, it would take effect immediately.

Even if lawmakers do approve his proposals, LePage-style enrollment cutbacks may not be a legal option at the moment. The 2010 national health law requires all states to maintain their current eligibility rules until 2014, when Medicaid eligibility is slated to expand to anyone with an income lower than 133 percent of the federal poverty line.

At that time, states would be allowed to drop coverage for those with higher incomes, since federal tax credits would be in place to help pay for private insurance. In the meantime, according to a provision called “maintenance of effort,” any change to the program that would reduce the rolls is prohibited without a waiver.

So far, Arizona is the only state that has been granted a waiver, and that was for technical reasons that do not apply in Maine’s case. On Jan. 26, the U.S. Department of Health and Human Services indicated in a letter to Democratic state Rep. Margaret Rotundo that the federal government was unlikely to approve Maine’s enrollment cuts.

Still, LePage is insisting that state lawmakers endorse his budget proposals so that he can formally seek a waiver with the backing of the legislature. “It strengthens our proposal if the legislature is in support of our efforts,” Mayhew says.

Betina Pelletier, whose children are grown, currently qualifies for Medicaid because her income is less than 200 percent of the federal poverty level — which is about $22,000 for an individual. LePage points out that Maine is one of only a handful of states that extends that kind of coverage to adults without dependent children. Even with his cuts, the LePage administration says, Maine w ould still provide coverage to 15 percent more people per capita than the national average.

Although Maine is one of the poorest states in New England and has the oldest population in the nation, it has a long history of providing generous health benefits for people in need. In addition to subsidizing coverage for small businesses, the state has long exceeded federal Medicaid requirements for covering low-income residents.

Maine ranks eighth in the country in overall quality of health, and its rate of uninsured citizens, at less than 10 percent, is the fourth-lowest in the nation. Maine stands to be a winner under the federal health law, because it already covers adults at higher income levels than the Affordable Care Act calls for. That means the federal government will pick up most of the costs starting in 2014 and Maine can drop coverage for anyone making more than 133 percent of the federal poverty measure.