DHHS chief Mayhew says budget gap only totals $78 million

AUGUSTA — The projected budget shortfall for the state’s Health and Human Services Department will be significantly less than originally projected, the department’s commissioner said Friday.

DHHS Commissioner Mary Mayhew told lawmakers on the budget-writing Appropriations Committee that the updated forecast incorporates six months of data from the current fiscal year, leading to a $30 million reduction to the amount lawmakers will have to cover to balance the budget.

News of the reduction comes 10 days after Finance Commissioner Sawin Millett informed lawmakers of a $119 million revenue shortfall for the current budget biennium. Of that, $108 million came from the state’s Medicaid program, MaineCare. The new forecast puts that figure at $78 million.

Additional information released by DHHS on Friday shows that more than one-third of the Medicaid shortfall comes from budgeted savings that the department now says are unlikely. The department planned to save more than $80 million by implementing cost-saving measures into the program. That figure was reduced by about $28 million in the new forecast.

The remaining two-thirds of the shortfall result from increased use of the program by MaineCare recipients which, along with continuing increases in health care costs, has made the program more expensive despite a decline in enrollment. In particular, there has been higher-than-forecasted use of hospital outpatient care, laboratory services, pharmacy services, residential services, rehabilitation services and home- and community-based care.

Shortfalls, particularly in DHHS, are nothing new, with the agency posting balance sheets less than expected for the past 10 years. But this year — with Gov. Paul LePage declaring he will not issue a supplemental budget proposal, DHHS facing fierce scrutiny from Democrats for high-profile program failures and a MaineCare expansion fight at center-stage in the current legislative session — the shortfall discussion has been as politically charged as ever.

News of the shrinking shortfall didn’t change that.

“Regardless of the new projected shortfall amount, the fact remains that we have a budget gap that is caused mostly by DHHS cost overruns. In order to prevent this in the future, we need to get spending under control by making structural changes within the DHHS budget,” said Senate Minority Leader Michael Thibodeau, R-Winterport, in a prepared statement.

Appropriations Committee member Rep. Mike Carey, D-Lewiston, countered Thibodeau in an interview, citing figures presented by Mayhew on Friday that predicted growth in MaineCare spending of 0.8 percent in 2014 and 1 percent in 2015. That’s down from 2 percent growth in 2013 and more than 12 percent growth the previous year.

“For two years in a row, growth is expected to be just 1 percent, which is less than inflation,” Carey said. “In terms of the amount of money the program is using, growth is going down.”

Either way, members of the Appropriations Committee were happy to hear they had a smaller hole to fill.

“We’re very happy to hear the shortfall is going to be less,” said Rep. Kathleen Chase, R-Wells, the ranking Republican on the committee. “Any time an Appropriations member is told they don’t have to fill as big a hole, that’s a good thing.”

Chase said conversations about how to close the budget shortfall are ongoing, but Appropriations’ first priority is finding $40 million in savings to prevent another huge reduction in state revenue-sharing aid to municipalities.