Background on MaineCare Cuts for "Non-Categorical" Adults

Severe cuts in services will soon be imposed and new enrollment has been frozen for the so-called "noncategorical" group of people receiving MaineCare. This paper provides background on these cuts.

"Noncategorical" MaineCare members are adults, aged 21 - 64, who do not have minor children at home, who are not disabled and whose income is below the poverty level ($9,570 for family of 1; $12,830 for 2). The cuts would not affect those MaineCare members who are in the more typical MaineCare eligibility categories: children, pregnant women, parents with minor children at home, those 65 and over, people with disabilities, people with HIV, or in certain other, smaller MaineCare categories.

What is the "non-categorical waiver" in the MaineCare program?

In the fall of 2002, Maine was granted a section 1115 waiver from the federal Centers for Medicare and Medicaid Services to expand MaineCare eligibility to non-disabled childless adults, aged 21 to 64, living below the federal poverty level. Because childless adults do not fit into an explicit Medicaid category (such as "disabled", "parent with child," "child" or "aged"), they require a federal waiver in order for Maine to cover them in the Medicaid program. This is why they are often called "non-categorical".

A section 1115 waiver allows the state to continue to receive federal matching funds to pay for extensions of eligibility or covered services that would not be otherwise allowable under the Medicaid statute. For this waiver population, as for most Medicaid populations, Maine receives roughly $2 federal matching dollars for each state dollar it expends. However, to obtain this section 1115 waiver, Maine had to agree with the federal government that all expenditures under the waiver must be "budget neutral" to the federal government. A cap on federal spending is set in each waiver to ensure that we do not exceed this limit. Any expenses in excess of this budget neutrality cap are the sole responsibility of the State.

Maine�s spending cap for this waiver is set at the amount of Disproportionate Share Hospital (DSH) payments that have been allocated but not spent for other purposes by the State.

What, specifically, are the cuts?

No one should consider this an adequate health benefit package. Critical services, including community support services, residential services for those with mental illness, durable medical equipment, podiatrist, and others are proposed to be cut from the benefit package for the non-categorical population. This change will be accomplished by non-emergency administrative rulemaking, giving time for a public comment period in the process.

What is the financial problem driving these proposed cuts?

It is not so much the state budget, as the cap on federal Medicaid dollars that drives the proposed cuts. As described above, under the terms of Maine's waiver, the total number of federal dollars that Maine can spend on the non-categorical population is capped � and, like the rest of MaineCare, federal funds pay for two-thirds of service costs and state dollars fund the remaining one-third. With the waiver, anything over the cap must be funded entirely with state dollars.

The current crisis is due to the fact that expenditures are nearing the federal cap and the caseload for this group continues to rise beyond expectations. Today, at any one time, about 24,000 people are enrolled in MaineCare through the non-categorical eligibility category and their need for health care is great. As a group they have significant health problems, so they cost more to cover than initially thought. These cuts to enrollment and benefits are being imposed to avoid reaching the federal cap.

What does this mean for Maine's health care system?

Failing to meet people's health care needs - particularly the needs of those below the poverty level who have no means to pay for health care themselves - will take an incalculable human toll. The need for health care does not go away, even when the funds for coverage do. When people are unable to access the services they need, their health conditions will worsen, resulting in even greater demands on the health care system. The proposed cuts will, therefore, negatively impact the financing of the health care system as well. As those who are frozen out of enrollment or who need services that have been cut seek care in emergency rooms, their costs will be passed on to the private health insurance carriers, causing increases in premiums in an already stressed system.

What can be done to help alleviate the problem?

Policymakers, advocates, health care providers and administrators must work to assure that:

State funds, even if unmatched by federal Medicaid dollars, must be considered to protect those at greatest risk from any cuts, as we weather the immediate crisis and redesign the program to work within the cap. Before the waiver provided Medicaid coverage to this group, some health services were provided with 100% state dollars. After the noncategorical waiver was received, unmatched state programs for health care were reduced in anticipation of the new Medicaid coverage. We must consider, again, unmatched state dollars to help this population weather the effort to stabilize this program.
Every penny available under the federal dollar cap is spent for this group, reinstating services or opening enrollment as soon as possible.
The damage is limited as much as possible by shifting as many people as possible to disability, pregnancy or other Medicaid categories so they can retain full coverage.
Those left uninsured or needing uncovered services are given the information and help they need finding other sources of health care.
All reasonable avenues to improve the federal cap are fully explored with the federal government.

What about the noncategorical expansion?

The income eligibility limit for noncategoricals was scheduled to expand from 100% to 125% of the federal poverty level on April 1st 2005. The purpose of this expansion was to further reduce cost-shifting from bad debt and charity care as part of the Dirigo Health Reform initiatives. As enrollment is frozen, the expansion has been put on hold.