Thursday, December 15, 2011

Were did Maine's budget deficit come from?

December 15, 2011

Yesterday I sent you a "snapshot" of the services to be eliminated in Governor LePage's proposal to cut about $220 million from the Department of Health & Human Services. People are asking me, "where did the shortfall come from?"  

While we don't have the complete answer yet, it appears that, as the Kennebec Journal reports today, most of it is from computer "system defects" involving billing and "miscalculations" about federal funds and budgeting in the Administration's budget passed just a few months ago. In a "Capitol for a Day" event yesterday the Governor apparently blamed most of the deficit on "rampant fraud" according to the Kennebec Journal.  The Governor's claim is just not true.  Fraud exists in all sectors of the economy and government programs are not immune, but facts are facts and this shortfall has nothing to do with fraud. Also, not much of the overrun is due to new people signing up for services (3 percent).

It is true that both private insurance and Mainecare face higher and higher health care costs and we have to act to reduce wasteful spending and inefficient medical care.  Unfortunately several programs to do just that were repealed or rolled back this year, including the health systems advisory council, the state health plan, checks on prescription drug pricing fraud, and the certificate of need process. A focus on real health care cost controls linked to quality, as already put in place by the state employees health program, would be a good start to a long-term sustainable fix to ongoing budget shortfalls.  

Today's Kennebec Journal's editorial, which I reprint below, makes the point that short-term math mistakes and computer problems should not be used to justify permanent elimination of needed services. We also should consider whether it makes sense to allow a future tax cut passed this year to go into effect.  The budget passed in June enacted the largest tax cut in Maine history, and one that was skewed towards those who make the most.  This cut has not gone into effect, and will cost close to the $200 or so million we are short in DHHS. Starting in Jan. 2013, the new tax changes (which I did not vote for) give an average annual income tax reduction of:
  • $2,810 to the wealthiest 1% (over $360K adjusted gross income)
  • $123 to the middle 20%
  • $7 to the bottom 20% (including minimum wage earners)
Also starting in 2013, they give an average windfall of $43,500 to those inheriting estates worth over $1 million. Fixing inequalities in the tax system makes sense; adding inequality and adding to our budget problems does not. For more on the tax issues, read Rep. Seth Berry's blog.
Here is today's KJ and Morning Sentinel editorial:

Gov. Paul LePage claims that an explosion in demand for MaineCare services is the real reason for a deficit in the program, justifying his proposal for deep cuts that affect 65,000 people.

The numbers provided by his administration, however, don't support his case.
In a letter to lawmakers, the Department of Health and Human Services documented a $120 million hole in the budget that was passed in June. It's true that increased demand for services accounted for some of the shortfall, $6.5 million or about 3 percent of the total.

Errors account for much more of that deficit, however, errrors such as the state's failure to account for room and board for patients in assisted living and group homes, ($19.3 million) or for "system defects," which delayed payment on some of last year's bills into the current two-year budget cycle, missing out on enhanced federal matching funds ($29.6 million).

None of this means that the bills don't have to be paid, but it should influence how the Legislature goes about paying them.

If these errors are one-time events -- and we hope that they are -- it doesn't make sense to treat them as permanent structural costs that require a systemic fix.

But that is what LePage proposes to do, cutting some services to all MaineCarerecipients and eliminating coverage completely for thousands, both young and old.

In his radio address last week, LePage referred to MaineCare as "welfare" and complained that it created a cycle of dependency. It is hard to see how a nursing home patient who will lose podiatry or physical therapy coverage is a "welfare" recipient, or how cutting those services would make that person more independent.

It also doesn't explain why these people should bear the burden of mistakes that were made in the upper reaches of government. The governor, once again, appears to be pushing ahead informed more by anecdotes about welfare cheats than the real problems his "solution" would cause.

Lawmakers will hear plenty about those problems in the public hearings that started Wednesday and are expected to last throughout the week. The testimony should give them pause to think about whether the governor's proposal is the best way to solve this problem.

The governor's letter about the cause of the deficit, however, should give them more than enough information to know that the problem that needs solving is not what the governor says it is.

Babies, veterans and frail elderly all hit by Maine Governor's service cuts

Day One of Hearings on Maine DHHS Cuts - December 14, 2011

Maine Governor LePage has proposed very large cuts (about $220 million) to programs in the Department of Health & Human Services, which he says must be made immediately due to "miscalculations" in the budget passed just months ago, and reduced funding from the federal government. Almost none of the overruns are due to new people signing up for services. 

Hearings are being held this week on the proposal, and we are still trying to get a clear picture from the Administration as to the cause of the shortfall and the impact of these proposals.

I am not one to engage in exaggeration.  As a lawyer I try to be very precise and factual with the statements I make.  I find this plan to cut services shocking.  In all my many years of service in the Legislature, I have never seen anyone propose such cuts, which will be devastating to thousands of our neighbors and family members. Here are just a few of the impacts, from information provided at the hearing held today.  Here is a link to some of the testimony. You can listen in on the hearings and work sessions here.
  • The Maine Veterans' Homes will have to permanently close all 6 of its assisted living units, serving 178 veterans.  Where will they go? Why aren't we taking care of our155,000 veterans?
  •  More than 6,000 people will be either homeless, put into nursing homes, or dumped on families without any services or care.  These are people who cannot live on their own because they are frail elderly (over 4200) or seriously disabled, including people with mental illness. Robert Small of Hallowell, a former Hall-Dale coach and teacher, provided written testimony that because of several strokes he cannot live on his own.  Is this how we treat the teachers of our children?
  • 20,000 seniors will lose all of the help they get paying for copays, premiums and  prescription drugs that aren't covered by Medicare (for example because of the famous "donut hole.") Seniors on average take 5 medicines a day according to AARP's testimony.  52,000 people total will lose some or all of help with Medicare and/or prescription drug costs.  Do you think some elderly could die if they cannot pay for their drugs? I do.
  •  7,000 young adults, ages 19-20, will lose their health care. 29,000 working parents will lose health care.  Child care vouchers will be cut in half.  How can a single mom work if she has no child care for her toddler?  Would you allow her to bring her child to your business to hang out during her work hours? Head Start funding is to be eliminated, too.
  • More than 4,000 jobs will be lost at a time when Maine and the US already suffer from long term high unemployment.  Where will these productive Maine workers be able to get a job?  
  • Even though physical therapy is far, far cheaper than surgery, PT will be cut. How will that save money? How will someone get back to work and not be a drain on our social services if they can't get physical therapy? How does this make sense?
This is just a snapshot of a few of the impacts of the proposed cuts.  Some of the proposals are not legal (the federal government rejected the Governor's request for a waiver a few months ago to stop the prescription drug assistance).  Other cuts will costs the state hundreds of thousands of dollars in federal matching funds - for some programs we get an almost 2 to 1 match from the feds.  One of the cuts actually transfers thousands of dollars from these safety net services to the "Rainy Day Fund" - for what?  A future slush fund? One of the cuts takes money from the tobacco settlement that is used to fund prevention - which works - and puts that money in the general fund.
There has to be a better way to run this state, and I am not willing to support this poorly thought out proposal when there are alternatives.  I want to be part of the solution and am ready to roll my sleeves up to figure out the best plan.  But I am not willing to mortgage our future by hurting our children, nor treat our elderly and our veterans and people who have disabilities like they are worthless.  That is what the Governor's cuts do.