Maine Gov. Paul LePage's remedy for a $220 million, two-year Medicaid budget deficit is a package of eligibility and coverage cuts that the state's medical association warns would only shift health care costs to a different part of the health system.

The state expects to spend $120 million more on Medicaid than budgeted in fiscal 2012 and $100 million more than expected in fiscal 2013. It could run out of Medicaid funding by April 1, said State Sen. Richard Rosen, chair of the chamber's Appropriations and Financial Affairs Committee.

In December 2011, LePage proposed closing the deficit in part by ending Medicaid eligibility for childless adults, all 18- and 19-year-olds and certain parents. LePage also would end Medicaid funding for private non-medical institutions. These facilities provide residential and medically necessary services to more than 5,500 Medicaid patients who are not at the level of care for a hospital or nursing home but still need continuing care, LePage said. The Dept. of Health and Human Services no longer matches Maine's Medicaid spending on these services, he noted.

The eligibility restrictions would reduce Medicaid enrollment by about 75,000 people, lowering the state's total enrollment to 285,000 people, said LePage spokeswoman Adrienne Bennett.

The national health system reform law requires states to maintain existing Medicaid eligibility until 2014, but Maine could obtain an exemption from the federal Dept. of Health and Human Services. Regardless of any exemption, the health reform law would restore Medicaid eligibility to most people earning up to 133% of the federal poverty level starting in 2014.

The state's joint budget committee took the unusual step of holding four days of hearings on LePage's proposals in December. Normally the committee would not meet until January, Rosen said. The panel is still in the early stages of drafting a budget adjustment bill, he said.

Medicaid cuts of this size would cost the state millions in federal Medicaid matching funds, said Gordon Smith, executive vice president of the Maine Medical Assn. The federal government provides about $1.70 for every $1 the state spends on Medicaid, he said.

"It is truly setting back health care in Maine a couple of decades," Smith said.

Also, these populations are unlikely to be able to buy private health coverage, which is relatively expensive in Maine, Smith said. He said Maine has relatively high health care costs in part because its population is older than average and tends to live in rural areas. "It's ludicrous -- the notion that these people are going to be anything other than uninsured."

Maine had a difficult time predicting its Medicaid spending for several reasons, Rosen said. The state recently received final federal certification for its revamped Medicaid billing system, which had been having problems for years. Also, federal stimulus funding ran out at the end of fiscal 2011, which required a 32% increase in state Medicaid spending. The state changed its hospital payment formula, and the state had been seeing a relatively low number of Medicaid claims.

For years, Maine has been adjusting its Medicaid budget in mid-cycle, Rosen said. "I don't think we were ever building in accurate enough assumptions of those costs."

LePage, a first-term Republican governor, criticized the Legislature for not adopting his Medicaid eligibility reductions as part of the fiscal 2012 budget. The Legislature also is under GOP control.

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