Long-term Growth vs. Short-term Gimmicks: Maine’s Economy and Gov. Mills’ Second Biennial Budget

MEDICAID & MEDICARE

In one of her first acts as governor, Mills implemented an expansion of MaineCare, Maine’s Medicaid program, after it was approved by voters in November 2018. MaineCare is an important public health insurance program that provides medical care to more than 320,000 Maine adults and children living in or just outside of poverty. However, its growing budget has crowded out other spending priorities, threatening Maine’s long-term fiscal stability. 

As a percentage of its budget, Maine spends more on Medicaid than any other state in New England. In 2018, the percentage of state budget funds dedicated to MaineCare accounted for 34% of Maine’s total expenditures, or slightly more than one-third of all state spending. Spending on MaineCare increased by 6.4% from 2017 to 2018, then 5.3% more between 2018 and 2019, meaning that MaineCare spending has increased by more than 11.7% in the two years since voters approved Medicaid expansion at the ballot box.

Since the beginning of 2019, the expansion population has grown to more than 73,000 Mainers, of which more than 84% are childless, able-bodied adults. The Office of Fiscal and Program Review (OFPR) noted that MaineCare cases had been decreasing as January 2019 approached. That trend continued for traditional Medicaid populations until the advent of the COVID-19 pandemic in early 2020. Even during the pandemic and its aftermath, the caseload of the expansion population has grown significantly faster than traditional Medicaid patients, a nearly 50% higher rate of growth.

In September 2020, a representative from the OFPR confirmed to the Legislature’s Joint Committee on Appropriations and Financial Affairs that Medicaid expansion has been the largest cost driver within Medicaid over FY20.

OFPR reports that overall MaineCare spending rose by $280.1 million, or 9.1%, from FY19 to FY20. Approximately $250 million of that increase—or 88.3%—came from Medicaid expansion. Over those two fiscal years, taxpayer liabilities for Medicaid expansion exceeded $361.5 million. Amid a confluence of public health and budgetary crises, there is no doubt that the traditional Medicaid population should be the priority to receive MaineCare benefits before childless, able-bodied adults.

MaineCare is a healthcare program designed for the most vulnerable Mainers, not for those with no dependents and who are able to work. These adults should be participating in the labor force, and participating in the private market for health insurance. State leaders, to shore up potential budget gaps and minimize harm to the most needy, should instruct DHHS to freeze new cases with a goal of entirely removing all childless, able-bodied adults from the program.

A Kaiser Family Foundation study from 2009 showed a direct relationship between unemployment and Medicaid case rates, finding that with every 1% increase in the unemployment rate, the Medicaid caseload rises three-quarters of a percent. There is no substitute for a healthy economy, and while Maine should provide a safety net for those who truly cannot support themselves, providing benefits to able-bodied adults without children (especially those under 50 or 60) could have a significantly detrimental effect on labor force adaptability. 

Limiting access to healthcare during a pandemic seems harsh, but it is important to understand that the state’s response to the pandemic, in the form of economic and societal shutdowns, carry their own suite of costs on individual well-being. Mental health is clearly linked to economic independence. Lawmakers must look beyond the short-term thinking of the last 12 months and chart a vibrant future for Maine.

By capping enrollment in Medicaid Expansion at current levels (around 70,000 cases), Maine taxpayers could save an estimated $50-100 million on MaineCare over the next biennium. This could be partially achieved by imposing MaineCare work requirements which Governor Mills deauthorized before implementation early in her term. Given that more than 80% of the expansion population is made up of able-bodied, childless adults, and over 70% of those are between the ages of 19 and 49, simply by limiting expanded MaineCare eligibility to those who are aged 50 and older, Maine could save nearly $70 million. By removing all childless, able-bodied, working-age adults from MaineCare, taxpayers could save nearly $250 million over the biennium.

Including federal dollars, which account for nearly two-thirds of the state’s spending on Medicaid, Maine offers $300 more per Medicaid recipient than the average U.S. state and the average of other rural peer states like Vermont, New Hampshire, South Dakota, Arkansas, and Iowa. Maine taxpayers could save nearly $32 million over the biennium by aligning benefit rates for all Medicaid recipients with those of other rural states. If only instituted for the expansion population, leaving overall eligibility rules unchanged, taxpayers could save $5 million.

To shore up funds for Maine’s most needy citizens, lawmakers should continue to redirect funds from the Fund for a Healthy Maine (FHM) to essential MaineCare services. Seeded by payments from the multi-state tobacco settlement, the Fund has received more than $1 billion in total, and spent more than $215 million since its creation in 1998. It received over $65 million in FY21 alone.

FHM largely funds efforts to discourage smoking among adults and children, but with little discernible results. Rates of smoking and tobacco use overall have been falling steadily since the 1970s, and will continue to do so, with or without state-funded marketing campaigns. These funds should go to where they can do the most good: providing direct healthcare to Maine’s most vulnerable populations. 

There are many paths to budget savings through Medicaid reform. The missing variable is political will. By tackling some of the suggestions laid out here—restricting eligibility to the truly needy, aligning benefit disbursement rates to peer states, and making better use of existing funds—Maine lawmakers could deliver savings to taxpayers in excess of $250 million over the biennium, and ensure the state is not holding back the productive potential of working-age adults.