Maine DHHS and Maine Hospital Association Announce Agreement to Improve Reimbursement & Support Health of Maine People Through MaineCare Rate Reform

$90 Million Investment in Evidence-Based MaineCare Payment System Would Maintain or Increase Payments to Every Medical Center in Maine & Improve Care for Maine People

AUGUSTA— Today, the Maine Department of Health and Human Services (DHHS) and the Maine Hospital Association announced an agreement to reform hospital reimbursement rates to improve the health of Maine people.

Under the proposal, which will be included in the forthcoming supplemental budget proposal, every medical center in the state is estimated to receive roughly the same or higher reimbursement, based on information available in the fall of 2023. This proposal applies to all hospitals except for four psychiatric hospitals that are categorized differently under Medicaid.

Hospitals would become the latest major service area to undergo MaineCare’s award-winning process to ensure payment methodologies are data-driven, fair, consistent, informed by the public, and sufficient to promote access to quality care. The MaineCare rate reforms support high-quality health care for more than 400,000 Maine people and fair and sustainable reimbursement to Maine's health and social services providers, including hospitals.

Under the agreement announced today, hospitals would see improved reimbursement because the payments will better align with Medicare – a more consistent and fair approach to paying for outlier costs that relate to patient need – improved outpatient rates to encourage more community-based care when possible, and improved transparency and uniformity for similar hospitals across the reimbursement system as a whole. The agreement maximizes the available funding under federal payment limits and is subject to approval by the U.S. Centers for Medicare and Medicaid Services.

“This agreement helps MaineCare to move away from outdated and arbitrary rates and toward a uniform and fair system at a time when existing sources of ongoing revenue alone are not enough,” said DHHS Commissioner Jeanne Lambrew. “We thank the Maine Hospital Association and its members for their partnership in developing and supporting this proposal that meets our shared goal of improving the health and quality of care for Maine residents.”

“This proposal provides our members with needed Medicaid rate increases at a critical time,”said Steve Michaud, President of the Maine Hospital Association. “Drawing down additional federal Medicaid dollars helps hospitals and their caregivers, eases the burden of escalating costs on Mainers and businesses who are paying for care, and helps the Maine economy at the same time. We thank the Department of Health and Human Services for its partnership in developing this plan that supports the health of Maine people.”

Specifically, the set of initiatives in the supplemental budget:

  • Support MaineCare rate reform for hospital inpatient and outpatient services by investing $90.3 million in federal and state dollars in State Fiscal Year (SFY) 2025, starting July 1, 2024;
  • Finance most of this rate investment by increasing the hospital tax rate from 2.23 to 3.25 percent, raising $29.5 million in SFY 2025, starting January 1, 2025, to complement the Federal share of these MaineCare (Medicaid) payments; and
  • Add $2.5 million of General Funds to the $6.3 million already in the FY24-25 biennial budget to help with rate reform, including for a transitional payment to assist York Hospital, which has a unique grandfathered funding structure, in moving to the new system consistent with all other acute care hospitals in the state. This payment to York Hospital is targeted, based on data shared with hospitals, to total $5.6 million annually for the next five years.

As part of rate reform, the plan would repeal both the tax on and supplemental payment to critical access hospitals effective December 31, 2024 while adjusting cost reimbursement from 109 to 104.5 percent starting on July 1, 2024.

Additionally, the budget proposal would direct that net hospital tax revenue be directed to the “Medical Care – Payments to Providers” program in the Department of Health and Human Services to be used for MaineCare hospital payments.

The agreement builds on MaineCare payment improvements to behavioral health providersFederally-qualified health centers, and for inpatient psychiatric and substance use care, which was implemented in July 2023 with a similar transition payment to Northern Maine Medical Center.

The Department’s sweeping and unprecedented plan to transform MaineCare (Maine’s Medicaid program) rate setting from a fragmented, often outdated and arbitrary approach into a coherent, streamlined and data-driven system is well under way. The plan is a culmination of Governor Mills’ directive to DHHS on her first day in office to expand MaineCare and develop a plan to make the health coverage program for low-income people more accessible, affordable, and sustainable.