Why Maine state spending might already be out of control

Governor Janet Mills speaks in the cabinet room. Photo courtesy Governor Janet Mills official Facebook page.

AUGUSTA – Most Mainers who follow politics are probably aware that Governor Janet Mills immediately took action to expand Medicaid under the Affordable Care Act when she became Governor. It was a cornerstone of her 2018 campaign, and she, along with Democrats, have touted the expansion after lengthy battles, including legislation, lawsuits and a referendum.

But word that Governor Mills had drawn more than $10 million from Maine’s budget stabilization, or rainy day fund, at the end of February, set off alarms for some people in Augusta.

One major concern that budget experts have maintained throughout the debate over Medicaid expansion is that there was a great deal of uncertainty around the FMAP, (federal medical assistance percentage) reimbursement rate for Maine’s new enrollees.

Under the Affordable Care Act, states that expanded Medicaid to cover people who met the new, expanded requirements in the law would receive 100% reimbursement initially, with that amount tapering down to 90% by 2020. This higher rate is known as enhanced FMAP.

States would still only continue to receive the smaller traditional FMAP rate for any individual who was eligible under the guidelines established in 2009. In Maine, the traditional FMAP rate is 63.8% in 2019.

So while political pundits have argued that Maine gets a 93% federal match for expanding Medicaid, the reality is, well… not so simple.

Maine will receive the 93% enhanced FMAP from the federal government for some of the people who have enrolled in Medicaid in 2019, but the 63.8% traditional FMAP rate for others. The details on those reimbursement rates for Maine’s 10,075 new enrollees this year so far are probably only known by a handful of top bureaucrats and Governor Janet Mills herself.

If a significant portion of the new Medicaid enrollees are only eligible for the traditional FMAP reimbursement rate, Maine could be staring down the barrel of tens of millions of dollars in additional costs that were not accounted for in Governor Janet Mills’ proposed budget.

Compounding that problem is that Maine still has not actually received the approval for Medicaid expansion from the federal government. Under the ACA, states are required to file what is known as a state plan amendment (SPA) with the federal Center for Medicare or Medicaid Services. Until that SPA is approved, a state does not have any guarantee that there will be any reimbursement, or a date when those reimbursements begin.

But the Mills administration has moved forward with hiring of dozens of new staff to handle the onboarding of new Medicaid enrollees and put the wheels in motion on the inititative, which requires them to spend significant money now, with no federal dollars or additional state appropriations for Medicaid expansion as a backstop.

The non-profit Maine People Before Politics pointed out in a news release from Communications and Policy Director Julie Rabinowitz yesterday that the cost to Maine taxpayers for the 10,075 enrollees who have enrolled as of March 8, 2019, could already exceed $70 million if the feds do not approve the SPA for the date requested by the Mills administration.

Even more risky, if the Mills administration significantly overestimated the number of people the state of Maine would enroll at the 93% enhanced FMAP, Maine could be looking at tens or hundreds of millions of additional state taxpayer dollars that need to be redirected to DHHS in every future state budget, impacting available funds for schools, roads and other critical state programs.

According to Maine People Before Politics, the LePage administration estimated that about 60% of Medicaid enrollees would qualify for the higher federal match rate, but advocates for Medicaid expansion estimated almost all of them would.

At the average cost of $7,000 per enrollee, the difference in cost between the lower reimbursement rate and the higher one equals about $2,100 per year in Maine taxpayer dollars for each Medicaid enrollee.

MPBP has called on the Mills administration to release numbers on the first 10,075 enrollees to allow lawmakers time to estimate and plan for actual costs, but it remains to be seen if Governor Mills will agree to release the data.

If the LePage administration’s estimates were accurate and only 60% of new enrollees qualify for the highest FMAP rate, it could mean nearly $120 million more in state taxpayer dollars in each future state budget.

Because the Mills administration is operating under the previous biennial state budget and relying on funding sources of questionable strength to manage Medicaid expansion, federal approval becomes more and more critical each day.

If that approval doesn’t come soon, and perfectly in line with what the Mills administration requested when they started enrolling people in Medicaid in January, that controversial $10 million hit to the rainy day fund on February 28 won’t be the last, or biggest hit the rainy day fund takes.

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