Medicaid cuts could rock state Maine stands to lose $50M to $60M a year

AUGUSTA – State Medicaid officials were told last week that the Bush administration is proceeding with plans to cut $12.2 billion from the Medicaid program over the next five years without congressional approval. Maine officials estimate Maine could lose $50 million to $60 million a year depending on which rule changes are finally implemented.

“They have a deficit; they are concerned about their budget,” Trish Riley, Gov. John Baldacci’s chief health policy adviser, said. “We have seen a growing tendency of the federal government to be more aggressive in looking at the states to help solve their budget problems.”

The proposal to change Medicaid rules was first floated last spring. Last summer more details became available, and governors and state congressional delegations across the country raised concerns.

Baldacci joined with most members of the National Governors Association in writing Health and Human Services Secretary Michael Leavitt in opposition to the proposed rule changes.

President Bush’s chief of staff, Josh Bolton, defended the proposals in a statement earlier this year when he was director of the Office of Management and Budget.

“We’re not going after the benefits that poor people get under Medicaid; we’re trying to squeeze the anomalies out of the system, prevent measures that states and private parties have been using to circumvent the system and get federal money to which we believe they’re not entitled,” he said.

Medicaid is basically the health insurance plan for the poor and is paid for by both the federal and state governments.

The proposals have not been actually posted under the rule-making process, but federal officials made it clear last week the provisions are likely to include a cap on the taxes states can impose on providers in order to generate additional federal Medicaid dollars.

Maine, like most states, uses general tax revenues from sales and income taxes to pay for most of the Medicaid program. The program serves about 262,000 Mainers at an estimated cost of $2.2 billion with the state paying $872 million of that total.

The current rules allow states to implement up to a 6 percent tax on nursing homes and hospitals to raise revenue to pay for the state share of Medicaid. Maine currently taxes nursing homes at the 6 percent rate, but taxes hospitals at a rate of 2.23 percent. The Bush proposal would limit the rates of both taxes to 3 percent.

Riley said a big question is what changes in definitions will be proposed for “rehabilitative services” in the new regulations. She said there are many services for children with learning disabilities in the schools under that section of the program

“We have to wait and see what the feds are going to propose and see if they grandfather any of these programs that were set up in good faith to provide some very needed services,” she said.

The proposed regulations have been met with a bipartisan storm of criticism from members of Congress. Democratic 1st District U.S. Rep. Tom Allen serves on the House Energy and Commerce Committee, which has oversight over the Medicaid program. He said the proposed regulations in Medicaid are part of a pattern of the Bush administration to avoid congressional oversight.

“Most all of it is just a shift of costs from the federal government to the state government,” he said. “It will reduce services or drive up state taxes, that’s what it is going to do.”

Sens. Olympia Snowe and Susan Collins, both Republicans, signed a letter last summer along with 41 other senators asking the administration not to make the changes in regulations after Congress had rejected the changes.

“These changes should be done through the normal legislative process, not by fiat within the Department of Health and Human Services,” Snowe said. She serves on the Senate Finance Committee that has oversight over the Medicaid program.

Allen said even with the bipartisan opposition to the changes, Congress can’t easily block the rule changes because they are administrative actions. He said the new democratically controlled Congress will likely hold hearings on the rules, but reversing them could take months.

“If they go through with the rules changes, the states will be hit hard,” he said. “We might be able to reverse them in the future, but that won’t help the states when the cuts take effect.”

All members of the state’s congressional delegation oppose the rule changes. Second District Congressman Michael Michaud, a Democrat, said he has also signed a letter objecting to the proposed regulations, as have 82 House Republicans in the current Congress.

He said there is a disproportionate impact on rural nursing homes and some hospitals which tend to have a greater share of Medicaid patients, and that means Maine will be harder hit than some states.

Riley said Maine has a “SWAT Team” ready to go to work as soon as the regulations are proposed to determine exactly what impact they have on the state and what options the state has under the regulations.