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As federal Medicaid funding declines, states mull costs

September 26, 2018

AUGUSTA, Maine (AP) — Maine’s Republican governor has said federal regulators want to know how Maine would pay for Medicaid expansion. But it’s unclear just how that issue will play out in Maine, the first state to pass Medicaid expansion under Republican President Trump’s administration.

States must file routine paperwork to get federal Medicaid expansion funding under former Democratic President Obama’s signature health care law. The Centers for Medicare & Medicaid Services told The Associated Press on Tuesday that it works to ensure states pay for their share of an expansion with “proper” financing.

“If they cannot attest truthfully that they have a legitimate source for their funding, they have a problem,” said Sara Rosenbaum, a George Washington University health law and policy professor. But, she said, states don’t have to prove they have a certain amount of money to fund expansion down the road.

Last fall, Maine became the first state to pass expansion by referendum when nearly 3 out of 5 voters approved expanding Medicaid to 70,000 low-income residents. But the ballot measure lacked a way for Maine to cover its share.

A legal battle ensued as Gov. Paul LePage blocked expansion, and a judge will hear the latest arguments Thursday. LePage vetoed a funding bill and argued that surplus tax revenue or one-time tobacco settlement funds weren’t a “sustainable” way to fund Medicaid.

In November, voters in Idaho, Nebraska and Utah will weigh expanding Medicaid. While Utah’s ballot measure would raise the sales tax rate to fund expansion, Idaho and Nebraska lack a funding source.

States last expanded Medicaid in 2016, when federal funding picked up 100 percent of expansion costs.

Federal funding has since phased down, and drops to 90 percent in 2020. The 31 states that expanded Medicaid spent $6.7 billion of state funds on expansion in the fiscal year ending in 2017, and are set to spend $10.3 billion in the 2018 fiscal year, according to the National Association of State Budget Officers.

LePage has denied estimates that expansion will save Maine tens of millions of dollars. While Kentucky is mulling eliminating Medicaid expansion over a looming budgetary shortfall, a Louisiana health department report said Medicaid expansion saved the state $199 million in 2017.

LePage’s administration followed a court order requiring Maine to send federal regulators a Medicaid expansion plan needed to receive funding, but he then urged the Trump administration to deny it in a letter.

He pointed to the state top court’s recent opinion , which said there’s “no reasonable likelihood” that Maine’s plan will meet federal standards because lawmakers and courts haven’t settled the funding issue.

Pro-Medicaid expansion groups said they’ll argue in court Thursday that it’d be “unprecedented” for federal regulators to delve into the specifics of a state’s budget. Maine Equal Justice Partners argue that the state can rely on surplus tax revenues or existing Medicaid funds. It has called for a third-party to resubmit Maine’s expansion plan without LePage’s concerns.

“It should be approved quickly once it’s filed,” said the group’s lawyer, Charles Dingman.

LePage for months told lawmakers that they couldn’t pay for expansion by raising taxes, but this summer, he informally floated the unpopular idea of raising taxes on hospitals. A Maine Hospital Association lobbyist has said hospitals already pay $100 million in annual taxes.

But such ideas have found favor in other states.

Of the states that have expanded Medicaid, a third are funding expansion with fees on hospitals or insurance companies or taxes on cigarettes or liquor, according to Trish Riley, executive director of the National Academy for State Health Policy.

“The bottom line is that the majority are using general revenues,” Riley said. That includes states like Pennsylvania.

New Hampshire approved dipping into liquor revenue for Medicaid expansion, while Louisiana has hiked taxes and fees on health maintenance organizations and hospitals. Montana voters this November will consider raising the tobacco tax.

Virginia imposed a “bed tax” on hospitals to pay for Medicaid expansion, which passed in May.

It also joined states moving to require certain Medicaid recipients to work. The Trump administration approved such efforts in four states, but a federal judge blocked Kentucky’s plan.

Maine is one of several states awaiting Trump administration approval. But LePage told AP that he doesn’t expect an answer until next year.

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AP staff writers Melinda Deslatte in Baton Rouge, Louisiana, Marc Levy in Harrisburg, Pennsylvania, Alan Suderman in Richmond, Virginia, and Holly Ramer in Concord, New Hampshire, contributed reporting.

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