LePage administration files plan for Medicaid cuts with feds; federal permission remains uncertain

AUGUSTA, Maine — The LePage administration Wednesday laid out what it says is a clear-cut legal argument for allowing Maine to make cuts to its Medicaid program despite a provision in the Obama administration’s health care reform law that prohibits states from scaling back existing Medicaid services.

Maine’s Department of Health and Human Services on Wednesday filed paperwork with the federal Centers for Medicare and Medicaid Services requesting approval for Medicaid cuts that Republican lawmakers approved this spring and Gov. Paul LePage signed into law as part of a supplemental budget package.

“We fundamentally believe this is a very straightforward request that is absolutely within the state’s prerogative to make,” Health and Human Services Commissioner Mary Mayhew told reporters at a news conference.

Meanwhile, Democrats repeated Wednesday that they thought the cuts violated federal law, and a Health and Human Services official from former President George W. Bush’s administration said he thought it’s unlikely the Obama administration will allow Maine to make its desired cuts.

The LePage administration is requesting what is known as an amendment to its Medicaid State Plan that makes about $20 million in Medicaid cuts to balance the state budget. The cuts, planned for Oct. 1, would eliminate coverage for 19- and 20-year-olds, tighten income eligibility requirements for low-income parents and scale back Medicaid access for elderly residents who also qualify for Medicare benefits.

The cuts would affect nearly 36,000 Maine residents, according to the state Department of Health and Human Services, though Mayhew noted that the cuts would leave Maine’s Medicaid coverage levels above minimum levels required by the federal government.

The Medicaid plan amendment requires federal approval and it’s far from certain Maine will receive it.

The Affordable Care Act, the Obama administration’s health care law, prohibited states from scaling back existing Medicaid services before the law’s major Medicaid expansion in 2014. Medicaid is a joint state and federal program that provides health insurance for low-income and some disabled people.

While the Supreme Court in June largely upheld the health care law as constitutional, the court ruled it unconstitutional for the federal government to penalize states for not participating in the Medicaid expansion.

The LePage administration read that part of the ruling as a sign it could make Medicaid cuts through a routine Medicaid plan amendment.

Attorney General William Schneider told reporters Wednesday that Maine participated in voluntary Medicaid expansions paid for by the American Recovery and Reinvestment Act, the economic stimulus package passed in 2009. The funding for those expansions dried up, he said, but the Affordable Care Act froze the Medicaid program at those voluntary levels.

“The maintenance of effort provision is part and parcel of the Medicaid expansion that was struck down,” Schneider said, referring to the health care law provision that prohibits cuts to existing Medicaid programs. “The maintenance of effort provision also violates fundamental constitutional principles by imposing a post-acceptance, retroactive condition that gives Maine no choice and turns a voluntary program into a mandatory one.”

But the LePage administration faces conflicting interpretations of the Supreme Court ruling from the federal administration that will decide whether Maine’s cuts are permissible.

Health and Human Services Secretary Kathleen Sebelius, the former Democratic governor of Kansas, wrote in a letter to governors last month that the Supreme Court ruling affected only the Medicaid expansion and had no effect on the maintenance of effort provision that bars Medicaid cuts.

And the U.S. Congress’ nonpartisan research arm, the Congressional Research Service, issued a memo about a week later agreeing with Sebelius’ interpretation, saying the health care law’s maintenance of effort requirement was unaffected by the court decision.

Schneider said Wednesday that the conflicting interpretations at the federal level don’t worry him. Maine’s circumstance is unique because of its participation in previous Medicaid expansions, he said.

“I think we’ve laid out a very logical, legally sound argument, and I anticipate they will approve it,” Schneider said.

But given the way the Obama administration is reading the Supreme Court ruling, that seems unlikely, said Thomas Barker, who served as general counsel under Health and Human Services Secretary Michael Leavitt during President George W. Bush’s administration.

“I would be willing to bet that the attorney in the general counsel’s office at HHS will continue to apply the [maintenance of effort] requirements,” he said. “They would have the support of the Congressional Research Service report to back them up.”

While the federal government normally responds to requests for state Medicaid plan amendments within 90 days, Mayhew said she’s requesting an expedited ruling from the federal government so Maine can implement its cuts by Oct. 1.

If the federal government needs additional time to evaluate the state’s request, Mayhew said she’s asking federal officials to pay Maine’s state share of Medicaid expenses while they consider it.

“If their final decision does not result in approval of the State Plan Amendment, an arrangement would be made to pay the federal government back through a reduction of our matching dollars once all legal issues have been resolved,” Mayhew said.

Barker, now a partner at the Washington, D.C., law firm Foley Hoag, said that part of Maine’s request also seems unlikely to meet with federal approval.

“I’ve never heard of a state asking for that before,” he said. “I think that’s a little bit of a stretch.”

While Schneider and Mayhew said they’re confident the federal government will approve the state’s Medicaid amendment request, Schneider repeated Wednesday that Maine would challenge the federal government in court if the request isn’t granted.

And Mayhew said the Department of Health and Human Services hasn’t yet developed alternative plans to balance its budget if the requested Medicaid cuts aren’t allowed.

“We would have to look throughout the department and within the Medicaid program,” she said.

Democrats on Wednesday continued to oppose the LePage administration’s plans to scale back Medicaid services.

Sen. Dawn Hill of York said the administration “has manufactured a budget crisis, and the truth is that we have other options for how to balance the budget besides taking away health care.”

First District Rep. Chellie Pingree, who wrote to Sebelius last month to ask her to block the state’s proposed Medicaid cuts, said Wednesday she still believes that cutting Medicaid services “is not only bad policy, but it violates the law.”

In a statement issued late Wednesday, LePage asked Maine’s congressional delegation to encourage Sebelius to approve the state’s Medicaid cuts.