Republican radio address
For the weekend of March 21-22, 2009

Greetings, this is Bob Nutting, state representative from Oakland.

As a member of the Appropriations Committee, I look at budget numbers all day long. There isn’t much that’s going to surprise me when it comes to state finances. But even I was shocked last Friday, March 13, when a fiscal bombshell exploded in the State House. The state’s MaineCare program reported a huge cost overrun for this fiscal year – $235 million. At a time when legislators are dealing with an $800 million structural gap in the next budget, nobody wanted to hear that MaineCare had sprung a giant leak.

MaineCare is the state’s name for Medicaid. It’s an entitlement program. Using a combination of state and federal money, it provides free medical and dental care to low-income residents. Approximately 270,000 Maine citizens are enrolled in the program, which runs on an annual budget of about $2.4 billion. Most of that money is supplied by the federal government, but the program costs Maine taxpayers more than $1 billion every budget cycle. To put it into perspective, Maine’s Medicaid program is the second largest in the country as a percentage of population. It is massive and growing, taking up 20 percent of the state budget.

In retrospect, no one should have been surprised that Medicaid usage was growing. The program is countercyclical. By definition, demand for Medicaid is highest precisely when states are least able to afford it because of shrinking tax revenues. But certainly nobody expected a cost overrun of such stunning magnitude. Three days earlier, we watched in the House Chamber as Governor Baldacci delivered his State of the State address. The governor didn’t even mention this massive shortfall in his speech. Instead, he tried to present an optimistic vision for the state.

No one faults him for optimism – it’s a winning political attribute, best exemplified by President Reagan. But during the governor’s biggest speech of the year, Maine residents deserve the facts, even if they are embarrassing to admit. Representative Josh Tardy, leader of the House Republicans, put it this way: “It’s hard to believe that the administration did not know we were wildly out of balance with just three months to go in the fiscal year.”

On a practical level, legislators should have been notified when the MaineCare budget first began to get out of hand. Just six weeks ago, the Legislature closed a supplemental budget that cut $140 million from this year’s spending, due to falling revenues. It would have been very useful to know at the time that the Department of Health and Human Services was seeing a sharp spike in MaineCare usage. Instead, we were blindsided by the news on Friday the 13th. In the aftermath of this fiasco, the administration scrambled to play down the damage.

If there is any upside to this episode, it’s that the federal stimulus money is backing up to the State House like a fully loaded Brink’s truck. Maine is slated to get about $900 million; and a third of that is set aside for health care, primarily Medicaid. Based on a complicated formula, most of the $235 million shortfall will be paid by Washington, with Maine on the hook for $65 million. State financial officials will extract $65 million from our stimulus windfall and deposit it in the General Fund. The General Fund will pay $65 million to Medicaid, and the feds will match it with $170 million.

That will fully cover the shortfall. And for now, everyone will walk away happy that we’ve dodged a budget crisis.

For now. The catch is that the stimulus money is a one-time financial shot in the arm. It ends in 2011, but our problems with MaineCare won’t go away. If anything, they will intensify. Health and Human Services officials already project overruns of $90 million next year and $65 million in 2011 at current federal matching rates.

We’ve reached a crunch point here where something will have to change. MaineCare has grown so large that it is now squeezing out budget money for other critical needs, including road maintenance and higher education. The $65 million we must pay just to cover the new deficit is more money than it takes to run the entire Department of Environmental Protection for a year. It is more than three times the cost of the Legislature. It’s larger than the annual budgets for the Department of Marine Resources and the Department of Inland Fisheries and Wildlife – combined.

We can begin by examining MaineCare’s extensive menu of benefits. Maine runs the second most expensive Medicaid program in the nation, costing us an average of $8,800 per recipient per year. We cover virtually everything, even transportation to a doctor’s office. In fact, our program is 90 percent more costly per person than the U.S. average. If Maine had average Medicaid spending and kept coverage for everyone already enrolled, the cost would drop by about $1 billion a year, saving Maine taxpayers more than $300 million. Imagine the permanent economic stimulus we’d get by reducing taxes $300 million every year.

The huge MaineCare cost overrun was a wake-up call. In the interest of fiscal sanity and program stability, the administration needs to work with the Legislature to bring this system under control. Only by reforming MaineCare can we assure services for those most in need, at a cost Maine taxpayers can afford.

This is Bob Nutting. Thanks for listening.