With a $138 million shortfall in the state’s Medicaid budget and, absent the possibility of a tax increase to fill it, it was expected that Gov. John Baldacci would propose broad cuts to the health care service for at least the remainder of the ’04-’05 biennium. The cuts are there and much of them may be unavoidable, but his plan should be accompanied by ways of making these important services more affordable to offer.

The governor’s supplemental budget is a mix of 1990s-style gimmicks and recognition of the new reality that neither the federal government nor the economy will bail the state out of its shortfall. Medicaid will be cut and its generous federal match surrendered to avoid raising taxes. The governor is looking for about $78 million in Medi-caid cuts and efficiencies (plus $25 million from the last shortfall), dropping some adult medical services such as some out-patient care, dental care, hearing aids, speech therapy, psychological services and prosthetics.

The cuts are part of the governor’s basic benefits package, which would also eliminate for some adults such services as transportation and case management. All together, these are serious reductions and people who need these services will suffer as a result, as the Legislature will hear loudly Monday when the governor’s plan is heard.

One of the Medicaid debates in Augusta is between those who want to maintain all the services but cut the list of those eligible and those who would cut services but maintain eligibility. Trish Riley, the administration’s health-policy director, makes a persuasive case that people who are cut from the rolls still end up sick, in the hospital and on charity care. If they can be kept on Medicaid, even in a reduced plan, they are likely to remain healthier and to have lower health care bills – and the governor’s health plan, Dirigo, is more likely to be fully launched.

Maine is constrained in its Medicaid cuts by federal rules and court consent decrees, so it cannot always act most efficiently but Ms. Riley maintains that the current Medicaid system is so fragmented, with 7,000 billing providers and uneven standards of medical necessity and reimbursement levels, that its inefficiencies drive a significant amount of cost. If those can be lowered, service could be improved without adding cost.

That will also require the state to look further into incentives for good outcomes and for providing only necessary services. Reducing administrative overhead, for instance by reducing the number of forms and separate partial interviews with clients, was discussed during the reorganization meetings for the Department of Human Services and ought to be part of a long-term plan.

One positive result of the budget crisis, Ms. Riley said, is that “these awful circumstances have invited creativity. People will offer things now that they would not in another environment.”

Lawmakers will need to hear more about creative ideas for delivering affordable services through Medicaid. They should be receptive to the administration’s difficult choices, or be willing to provide alternatives swiftly themselves.