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  Unfortunately several programs to do just that were repealed or rolled back this year, including the health systems advisory council, the state health plan, checks on prescription drug pricing fraud, and the certificate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.

1 comment:

  1. This may be a small part of the mainecaere problem, but I believe a change needs to be made to close what I perceive is a loop hole being used by a contractor operating two job corps facilities in limestone and Bangor. The current practice when a student arrives on one of these facilities is to have them sign up for mainecare, most of the students at these facilities are from states other than maine. Those students that are not from maine are told to establish maine resident, this is wrong and is only part of the problem, we need to stop having a flood of welfare people moving to maine.