A $120 million budget deficit projected for the fiscal year that began July 1 has set off an ideological debate over the future of Maine’s Medicaid program.

The deficit itself, however, is mostly the result of a series of technical budgeting miscalculations, according to a report prepared by the LePage administration.

Problems with a new claims processing system, a loss of federal funds that wasn’t accounted for, and a failure to budget for increases in federal Medicare premiums are among the biggest causes.

Leaders in the administration will present a report on the deficit today to the Legislature’s Appropriations Committee. A written report was provided to the lawmakers Friday.

The shortfall in the Department of Health and Human Services has created a financial emergency that Gov. Paul LePage wants to solve by making deep cuts in MaineCare, which he says has grown nearly 80 percent in the past decade.

“For decades, policies led by Democratic leadership have expanded Medicaid benefits far beyond the national average, creating an unsustainable program,” LePage said in a prepared statement Monday.


Growth in enrollment has continued this year and is contributing to the projected deficit, but not significantly, according to the administration’s report.

Increased enrollment accounts for just $6.5 million of the $120 million shortfall, the report says.

Most of it is due instead to inaccurate assumptions built into the DHHS budget, some of which were carried over from past budgets, the report says.

The transition last year to a new system for processing health care claims from doctors and hospitals, for example, disrupted claims and caused an estimated $30 million overrun when the claims arrived in this fiscal year instead of last year, the report says.

Another big chunk of the deficit comes from the fact that the budget simply did not set aside enough money for private non-medical institutions, like residential homes for the disabled.

DHHS Commissioner Mary Mayhew said the LePage administration inherited some of the mistaken cost assumptions when it built its first budget in the spring.


After LePage took office in January, “we had a very short period of time to build a biennial budget. We were building a (budget) on top of a baseline where we did not have a lot of the supporting information around the assumptions,” Mayhew said Monday.

She said she is working to improve the department’s ability to track spending and predict expenses for future budgets.

There were some special challenges this year, aside from the change in administrations, she said.

Maine lost hundreds of millions of dollars when federal stimulus funding ended, which wound up increasing claims costs in ways that were not anticipated.

The state now has to pay a larger share for health care claims, including for past claims that had to be reprocessed because of errors.

“The magnitude of the change in federal funding certainly has created even greater challenges for this budget than perhaps were fully understood or anticipated,” Mayhew said.


MaineCare budgets are notoriously complex and difficult to predict.

Shortfalls — and supplemental budgets to close them — have been common over the years, including under the previous administration. Mayhew, however, is expected to face some pointed questions from lawmakers today.

That’s partly because of the magnitude of the cuts that the administration wants. Democratic lawmakers also say they aren’t convinced that the numbers are solid. Mayhew increased the estimated size of the deficit repeatedly in recent weeks.

“At this point we don’t have confidence in the figures,” said Rep. Margaret Rotundo, D-Lewiston, a member of the Appropriations Committee.

Lawmakers also will press Mayhew about some of the budget overruns, she said. Rotundo said the overruns were blamed initially on increasing claims, but that turned out to be a minor factor.

“We are finding some areas where we have questions and it’s not clear to us why (the money) was not budgeted,” Rotundo said.


For example, the administration could have seen that the budget for private non-medical institutions was too small in the last fiscal year and had to be increased, she said.

Lawmakers must have confidence in the budget numbers before they discuss cuts that would affect the elderly, the disabled and the poor, Rotundo said.

Mayhew said the numbers, and the crisis, are real.

“I have had a team of folks doing an analysis of these numbers for several months now. I am more confident every time we review the numbers and the analysis,” she said.


Staff Writer John Richardson can be contacted at 791-6324 or at: [email protected]


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