To begin a contentious week of hearings on the shortfall and proposed fixes in the budget of the Department of Health and Human Services (DHHS), Office of Fiscal and Program Review (OFPR) analyst Christopher Nolan and DHHS Commissioner Mary Mayhew and her staff gave more than six hours of testimony on Tuesday, December 13th concerning the departments’ structural deficits. Facing tough questions regarding the shortfall from the representatives of the Appropriations and Financial Services Committee, Mayhew defended the in-depth analysis that her staff, in conjunction with Deloitte Consulting and OFPR, has been doing for the past few months.
The conclusion that Mayhew offered at the monthly hearing: while fiscal year 2012, which runs from July 1st to June 30th, has seen some one-time payments which have increased the shortfall, more than half of the $120 million deficit is due to ongoing, structural overextensions in the program, and the 2013 budget deficit is projected to be nearly as large. She revealed that, without a supplemental budget, DHHS expects that allotted funding for FY2012 will run out the week of April 18th, 2012.
Representative John Martin (D-Eagle Lake) repeatedly challenged both the nature of the shortfall, and the accuracy of the current analysis; he cited previous monthly meetings where the shortfall had been estimated at $70 million or less. Coming to the Commissioner’s defense, Representative Andrew Cashman (R-Hampden) also stated for the record that Mayhew had been reticent to provide the $70 million dollar number at the previous meeting, and said at the time that a more concrete analysis was forthcoming. In response to Martin’s line of questioning, Mayhew said,
“the work that has been done has been helpful in refining our projections, and has led to a greater understanding of the projections.
Ours is a program of fluctuation based on increasing demand for services. We are limited to a point in time analysis of what we have seen and are currently spending. (…) What I can say to you today is that my charge to this group has been to challenge every assumption that they have made.
Through that exhaustive process, my confidence has increased in this shortfall analysis.”
When questioned by Representative Martin on whether these were structural or one-time deficits, Darryl Stewart, the deputy director of Financial Management Services at DHHS, explained that the shortfalls that DHHS was currently experiencing were not only structural, but that they were not new. In fact, since the expansion of Medicaid (known in Maine as MaineCare) eligibility in 2003, the program has run yearly deficits which, when combined, totals hundreds of millions of dollars.
DHHS and the previous administration were able to paper over these deficits for FY2010 and FY2011 using stimulus funds, which increased the Federal Medicaid reimbursement rate to over 80%. In addition to the end of stimulus funds, DHHS staff revealed that, due to ongoing issues with a variety of optional MaineCare services, the federal reimbursement rate had now dropped to 63.4%.
Structural concerns voiced by DHHS at the meeting included increasing enrollment and per-member utilization of services, under budgeted costs for optional MaineCare expenses such as private non-medical institutions, and expanding numbers of claims from previous years that must be processed. On increasing enrollment, Representative Margaret Rotundo (D-Lewiston) questioned whether these numbers were a normal increase, and if they were expected to continue. Deputy Director Stewart explained that the department had done a detailed analysis going back to July of 2007 to determine the rate of increase, that current enrollment figures were beyond that, and that they did not show signs of slowing down.
DHHS’s new computer system, which Commissioner Mayhew noted was on the cusp of receiving federal certification (which would increase Federal reimbursement for a variety of claims), was also the subject of discussion. According to DHHS staff, its ability to better track claims and a larger base of claim information has led to much more accurate reporting on the date of service for claims. This has increased the identification of claims whose service took place in previous years.
When questioned by Senator Roger Katz (R-Kennebec) about whether DHHS could simply give hospitals thirty days to submit claims, Stephanie Turner, Director of Purchased Services, explained that federal guidelines give hospitals one year from the date of service. In addition, the new software has allowed DHHS to end the hospital settlement process, whereby in previous years hospitals were paid a per-service fee, and then in a lump-sum payment, made whole for the actual cost of the procedure. Unfortunately, this real-time processing was not budgeted for, increasing the shortfall by an additional $13 million.
The committee meeting was only the beginning of a contentious few weeks in Augusta. The next three days, December 14th, 15th, and 16th, will see public hearings on the Governor’s supplemental budget which aims both to cover the shortfall, and attempt to solve the structural problems that have plagued DHHS for the last decade.