AUGUSTA, Maine — After weeks of intensive review of the Department of Health and Human Services’ Medicaid payment records, the agency is projecting a budget year 2013 shortfall of $82.5 million, down from the original $89 million.

“It certainly is good news,” said Sen. Richard Rosen, R-Bucksport, co-chairman of the Appropriations Committee. “I know that some on the committee were hoping the numbers would be better, but it is a decrease.”

The Medicaid eligibility computer system was not communicating properly with the bill-paying system for most of this budget year. DHHS identified 24,500 individuals who were ineligible for Medicaid but were listed as eligible in the system.

DHHS found that 7,000 of those individuals used their cards when they no longer were eligible, which precipitated $6.8 million in improper payments of state funds and $3.7 million in improper payments with federal funds.

The shortfall reprojection takes into account the paying of those improper payments and the payback to the federal government.

“It is a number that is based upon the data that we have available today,” said DHHS Commissioner Mary Mayhew. “I am optimistic, given what I have seen over the last several months, about this number. It’s a budget, but we have to be mindful that this is an entitlement program and demand for services change.”

She said the amount of analysis her agency has done, backed by state Office of Information Technology staff and the state controller’s staff, has been “incredible.” She said DHHS has a much better understanding of the Medicaid program and all of its parts than it did before all of the studies were completed.

Democrats on the Appropriations Committee are seeking further review of the numbers.

“I will rely heavily on the Office of Fiscal and Program Review to do a thorough review of what we have received and report back to us. Then I will be willing to go forward using the numbers,” said Sen. Dawn Hill of Cape Neddick, the only Democratic senator on the Appropriations Committee.

Hill said there have been so many problems with DHHS’ projections that Democrats want the security of an independent review before accepting them. She expects it will be done before the panel negotiates a 2013 supplemental budget.

Finance Commissioner Sawin Millett said he is convinced the DHHS projection is as close as can be made when dealing with an entitlement program that has to pay benefits to anyone who qualifies. He said the payments made in error and the federal share of those payments will be paid by the state.

“These payments were made to providers that checked and the person’s card was valid, even though they were not eligible for benefits,” Mayhew added.

Rosen said the committee will start its work on the 2013 supplemental budget after the revenue forecasting committee does its work at a special meeting Monday. The committee is expected to reproject revenues upward since Maine Revenue Services uncovered a mistake caused by human error in which more than $14 million was not booked properly in January.

“They projected revenues down after looking at numbers that we now know were wrong,” Rosen said. “They will adjust for that in their meeting.”

Mayhew said she is confident DHHS is taking the appropriate steps to make sure computer systems are working properly and providing accurate data for future projections. That could mean the need for additional staff to oversee the department’s data systems.

“I am not ready to say what I will propose,” said Jim Smith, the state’s chief information officer. “We may need people with different skill sets; we may need more people, but I am still developing that work plan.”

Mayhew said the process of developing a zero-based budget also will help ensure the numbers are based on actual costs. She said what is called the medical assistance program, or MAP account, spends $2.4 billion but shows very little detail about how the money is spent.

“We will get to a level of detail [we do not have now] that we need to explain what is happening in [various] programs,” she said. “It should make for better budgeting.”

Millett agrees. He said agencies already are working on the two-year budget that will be submitted to the new Legislature in January.