Maine Medicaid costs up; national figures show drop

AUGUSTA – For the first time since the Medicaid program was created in 1965, spending has decreased. But as spending under the Medicaid program went down nationally for the first nine months of the year, it increased in Maine.

According to the Bureau of Economic Analysis in the U.S. Commerce Department, Medicaid spending nationally went down 1.4 percent through October, while Maine’s spending went up 6 percent.

“There are a lot of reasons for that,” Brenda Harvey, Maine’s commissioner of health and human services, said last week. She said many of the states that have seen decreases in Medicaid spending have done so by implementing changes in their programs to reduce eligibility and by using cost controls that Maine has had in place for several years.

“Those states have fundamentally changed their program and have restricted benefits,” she said. “Maine has chosen not to take that route. We have not taken the block grant approach, and we have not reduced eligibility for Medicaid services.”

Harvey said many states also saw a decrease in their Medicaid expenditures as the Medicare Part D drug plan started to pick up costs that had been picked up by Medicaid. Medicaid is separate from Medicare, which insures more than 42 million elderly and disabled people across the country. While Medicaid is paid for by the states and the federal government, Medicare is paid for entirely by the federal government and has seen its costs go up 15.6 percent.

“Many states benefited from the Medicare Part D picking up some drug costs, but we did not,” Harvey said. “We have been penalized through the ‘clawback’ because we already were efficiently running our drug programs.”

The process through which the states help finance the new Medicare drug benefit is commonly known as the clawback (the federal term is “phased-down state contribution”). The clawback is a monthly payment made by each state to the federal Medicare program with the amount roughly reflecting what the state would have had to spend on drugs for those individuals who were enrolled in both Medicare and Medicaid, the “dual eligibles.”

Harvey said many states were able to reduce their Medicaid costs this year by establishing cost controls on drug purchases and nursing home costs, something Maine has been doing for years.

“Pharmacy is a very good example,” she said. “We have had prior authorization in place for several years.”

Former Gov. Angus King, the vice chairman of federal advisory panel on Medicaid, agreed Maine already has taken several steps to hold down Medicaid costs. He said he well remembers implementing prior authorization and having to deal with doctors angry at the state action.

But, he said, all of the states are going to have to do more to hold down Medicaid costs that threaten to “gobble up” state budgets.

“I think this decline is an aberration, a one-time thing, “he said. “We found that Medicaid costs are increasing at an unsustainable rate, and there needs to be changes made to reduce costs.”

King said the panel did not look at Medicaid state by state, so he is not sure what Maine specifically has done, since he left office, to reduce expenditures and how that compares to other states.

“I am impressed and surprised to see that the national figures have declined,” said Sen. Richard Rosen, R-Bucksport, a member of the Legislature’s Health and Human Services Committee. “I am disappointed at Maine’s increase, the rate of increase that we have seen in Maine’s Medicaid program.”

Rosen, elected to be the assistant Senate GOP leader in the new Legislature, said Maine has been slow to use the flexibility granted by Congress and President Bush to make changes in the program.

“There are some valuable tools there that I have yet to see Maine utilize,” he said. “I think we have opportunities here to design our benefits plan and manage it to fit within our available resources.”

He agreed with King that all states are facing the need to change their Medicaid programs. Rosen said Maine had decided to implement a managed care program for behavioral services, booked an estimated $10 million in savings and then postponed its implementation.

Harvey said designing and implementing managed care systems has proved more difficult than first thought. She said her agency is on track to implement several managed care and cost control measures beginning next July.

“We have been really working hard to put cost containment measures in place,” Harvey said. “For example, in July of ’07, which will be our next fiscal year, we will have standard rates for services to people with developmental disabilities, and we are moving to a managed care environment for behavioral health services.”

Rosen expects the new Legislature will take a close look at those plans to make sure they achieve the promised savings.