Why is DHHS always asking for more money?

Posted May 24, 2013, at 3:47 p.m.
Last modified Oct. 29, 2013, at 2:06 p.m.
Health and Human Services Commissioner Mary Mayhew discusses the state's request to the federal government to reduce Medicaid coverage in August.
Health and Human Services Commissioner Mary Mayhew discusses the state's request to the federal government to reduce Medicaid coverage in August. Buy Photo

When the Legislature’s Appropriations Committee met last Sunday for a rare weekend session, the focus was a May 28 deadline for lawmakers to approve $35.3 million in additional funding so the Department of Health and Human Services could make its final Medicaid payments of the fiscal year.

It was far from the first time the budget-writing appropriations panel has been caught addressing a DHHS budget shortfall. Since lawmakers passed the last two-year state budget in 2011, they’ve had to pass three midyear budgets designed to shore up cost overruns in the state’s Medicaid program, MaineCare, which provides health insurance to more than 300,000 low-income residents.

Health and Human Services Commissioner Mary Mayhew on Sunday argued that lawmakers haven’t provided enough Medicaid funding to cover the insurance program’s costs. Democrats on the panel, meanwhile, criticized Mayhew for not previously alerting them that they faced a May 28 deadline for allocating additional funds. They’ve also doubted the accuracy of DHHS figures.

Disputes over DHHS funding are not new. Supplemental requests for funding for Maine’s Medicaid program have been commonplace for decades, a result of the unpredictable nature of budgeting for a program that pays for people’s health care and a political reality that sometimes leads to lawmakers balancing budgets by building in savings that don’t bear fruit.

An inexact line item

MaineCare is the single largest program managed by the state Department of Health and Human Services, accounting for nearly 70 percent of the $1 billion the agency receives each year from the state General Fund.

In 2009, Medicaid covered 27 percent of Maine’s population — the fourth highest total nationwide — and Medicaid spending accounted for nearly 22 percent of health care spending in Maine, compared with a national average of 16.5 percent. Maine spent $8,077 per Medicaid recipient, the 16th highest total nationwide, according to the Centers for Medicare and Medicaid Services.

In addition to being large, Medicaid is also among the most unpredictable items in any state budget. Maine is not alone in facing frequent Medicaid budget shortfalls, said Matt Salo, executive director of the National Association of Medicaid Directors in Washington, D.C.

“Trying to plan out what you will spend in a program the size and complexity of Medicaid is extraordinarily difficult,” he said. “There are so many moving pieces, and there’s so much wiggle room.”

The first challenge in crafting a Medicaid budget is projecting enrollment. Officials can never be certain how many low-income people will qualify for the public health insurance program and what portion of eligible people will actually sign up.

“You can make a guess,” said Salo. “You don’t know.”

The same goes for how much health care Medicaid recipients will use once they’ve enrolled and how much health care costs will change each year. It’s never certain, for example, how many times patients will visit the doctor and how many costly MRIs will be ordered.

Those uncertainties can be complicated by outside factors, such as an economic downturn that boosts enrollment as more people slip into the income ranges that qualify them for Medicaid. Public health epidemics, such as spikes in certain types of illicit drug use, also contribute to Medicaid’s uncertainties, said Salo.

“You start seeing impacts not only in terms of drug treatment and incarceration, but babies being born drug-addicted,” he said. “You certainly can’t predict those things.”

More Medicaid services

In recent decades, states across the country have folded a growing slate of services into their Medicaid programs. The Medicaid umbrella has grown to cover mental health services, substance abuse treatment, health services offered at schools, and elder services.

States may claim federal funds for providing these services. In Maine, the federal government pays 62.57 percent of all Medicaid costs. But the trend to bill Medicaid for more services also adds to the uncertainty of Medicaid budgeting.

It’s not only because Medicaid officials have to account for more people and the costly services they receive. It’s that federal officials are more closely scrutinizing the services states bill to Medicaid and for which they collect federal matching funds.

“They’re tightening up their funding to the states,” said Mayhew. “There’s closer scrutiny of state Medicaid policies. Some of those practices from the early 1990s to maximize federal Medicaid dollars are coming home to roost today.”

In Maine, health services provided at schools that have been billed to Medicaid have caught the eye of federal officials. The U.S. Office of the Inspector General in 2010 questioned whether the state improperly billed the federal government for $138.9 million in Medicaid matching funds between 2006 and 2008. And Maine hasn’t been the only state to attract that type of scrutiny, Salo said.

“You had some certainty, then the feds came along and disallowed a chunk of it, and, boom, you’re in the hole,” he said.

Budget reality

Political reality can also contribute to Medicaid budgets’ unpredictability.

Lawmakers are under pressure to produce balanced budgets, Salo said, and they often balk at Medicaid budget requests that increase expenditures beyond available funds. If the Legislature doesn’t provide enough money to cover costs, the state’s Medicaid program is forced to return to the Legislature later to request more funds.

“It’s politically easier to squeeze money out slowly that way than it is to go with a massive request,” Salo said.

Mayhew argues that the last two-year budget passed by lawmakers left the state’s Medicaid program $220 million short. State funds, she said, didn’t fully compensate for a loss of federal funds as the federal Medicaid match rate dropped after the expiration of federal stimulus funds.

In some cases, the budget included “aspirational savings” that weren’t realized, Mayhew said, such as a Medicaid redesign task force that fell short of its goal of finding more than $5 million in savings.

Lawmakers generally try to determine what DHHS needs to cover costs and provide that funding, said Rep. Peggy Rotundo, D-Lewiston, the Appropriations Committee’s House chairwoman. But the department often returns to request more funds when cost savings initiatives built into its budget aren’t realized, she said.

Plus, Rotundo said she questions the accuracy of figures provided by DHHS in recent years.

The data on which the LePage administration based its first budget request underestimated the program’s true costs, Mayhew said. Those data came from an old claims system that often underpaid health care providers and delayed payments.

While the implementation of the state’s new Medicaid claim system hasn’t been smooth, the program has led the state to pay providers’ full bills in real time, Mayhew said. In the end, that has shown up as increased program costs, she said.

A newly formed data analytics unit at the Department of Health and Human Services, Mayhew said, is also helping the agency more accurately predict Medicaid costs.

“Now, we’re trying to build this stable financial foundation for this program and to acknowledge its true costs,” Mayhew said.

The LePage administration’s DHHS budget request for the two-year cycle that starts July 1 increases Medicaid funds by more than $234 million to keep up with costs. Lawmakers have so far been hesitant to grant the requested increase.

“What’s been mystifying to us recently is, the number of people benefiting from MaineCare has been stable or declining and the costs have been increasing,” said Rotundo.

Matthew Stone is a reporter in the BDN’s State House bureau.

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