By David Farmer,Staff Writer

AUGUSTA – If a supplemental state budget does not receive a two-thirds majority in the state Legislature, a big loser could be MaineCare, which could be broke as soon as April, according to the state controller.

That could translate into more problems for doctors, hospitals and counselors waiting on the state to pay its MaineCare bills as it labors to recover millions overpaid to service providers.

The troubles began in February 2005 when problems with a new computer system crippled the state’s Department of Health and Human Services’ ability to pay its MaineCare bills in a normal way.

The state reacted by fronting service providers money in interim payments based on how much they had been paid in previous years. About $493 million was sent to 4,500 service providers.

Trying to reconcile those payments with the actual amount owed to the service providers has left MaineCare short of cash.

Three weeks ago, the department set weekly caps on how much it could pay MaineCare service providers, hoping to stretch resources, and it stopped most of the interim payments being sent out.

Alone, those moves won’t be enough to solve the problem.

Money for 2007 included in the state’s supplemental budget, unanimously approved by the Appropriations and Financial Services Committee on Tuesday, could be used this year. But unless the budget passes the House and Senate with two-thirds support, the funds won’t be available in time.

According to Ed Karass, the state controller, if that happens, MaineCare could run out of state money in April or May, leaving only federal dollars to pay service providers. Without new state money to draw down matching federal dollars, that money will also run out before the end of the fiscal year on June 30.

“Worst case,” Karass said, “the General Fund money runs out on 1 April, and they’ll have to start capping the (weekly payments) at lower costs,” which means payments will be delayed.

It also means that each week the cap is lowered, liability will increase as bills go unpaid.

In the fall, DHHS began working to bring its books into order by reaching out to the service providers who had received interim payments. In some cases, the money sent out exceeded what the providers were owed.

So far, the state has been able to recover about $106 million that had been overpaid and hopes to eventually recover the entire $493 million distributed in interim payments.

“If recovery continues at its current pace, there won’t be a problem,” said Brenda Harvey, the acting commissioner at DHHS. Harvey became acting commissioner in January, inheriting the computer problems and cash flow crunch from her predecessor, Jack Nicholas, who left the post unexpectedly in December 2005.

“We haven’t broken the champagne out yet, but we’re cautiously optimistic. We don’t know what we don’t know, but it’s hard to imagine that we’ll ever be where we were last January and February.”

In many cases, money doesn’t flow back to the state as a check. Instead, the excess interim payment is used to offset new claims that have been approved, so the actual balance sheet for MaineCare is in better shape than it looks on paper, Harvey said.

In the darkest days of the computer problems, DHHS was sending out about $20 million a week in interim payments to keep businesses that work with the state running. The payments were trimmed to about $3 million a week as problems with the computer system have been fixed. Three weeks ago, interim payments were stopped to all but a few service providers, Harvey said.

Kirsten Figueroa, deputy commissioner of finance for DHHS and the person leading recovery efforts, said the agency began reaching out to businesses last fall and has created a three-phase plan to get its money back.

The first phase was a pilot project during the last quarter of 2005. The second phase began in January and includes working with about 2,000 of the 4,500 service providers who received interim payments. According to Figueroa, phase two should recover about $300 million total. Phase three, which will begin later this year and include smaller service providers, should recover about $75 million.

If collections from overpayment fail to meet expectations or the budget deal brokered earlier this week falls apart, the state would be forced to push its obligations for MaineCare into the next fiscal year, meaning service providers already dealing with a bookkeeping nightmare might see their payments delayed again.

“The controller has the authority to establish an accounts receivable up to $36 million,” Harvey said. Money from the state’s reserve accounts would allow DHHS to pay its bills. Once new funding becomes available July 1, Harvey said, the reserves would have to be repaid.