reducing the number of uninsured people

Facing simultaneous federal funding reductions and increasing state costs for health care, Gov. Janet Mills’ plan to fill those budget gaps drew mixed feedback during a hearing Tuesday, with many commending the way the proposal would help continue care while others criticized its short-term scope. 

“It seems like there are still a lot of unknowns at this point,” Rep. Amy Arata (R-New Gloucester) told Todd Haber, acting deputy commissioner of finance for Maine’s Department of Administrative and Financial Services, during a joint hearing of the Appropriations and Financial Affairs and Health and Human Services Committees. 

“There are some unknowns with H.R. 1,” responded Huber, referring to President Donald Trump’s signature spending package that significantly reduced federal funding for health care and other safety net programs, “and I think that’s true throughout the budget proposal.” 

Even once enacted, a budget is a forecast, and the hearing on Tuesday underscored that the full scope of fallout from the federal changes is not clear. Direct federal reductions in cash are compounded by expected increases in state administrative costs, uncompensated care for already financially strained providers and rising health care premiums for Mainers. 

However, federal policy is not the only reason there is financial strain. MaineCare costs had already been rising, and how the state handles those expenses has been the center of recent state funding debates. 

The supplemental budget proposed by the governor earlier this month would add $275 million to the $11.65 billion biennial budget for fiscal years 2026 and 2027. About half of the additional spending is proposed to go toward MaineCare, the state’s Medicaid program, which has been an increasing share of the overall state budget.  

Last year, the Democratic majority approved funding to fill an urgent MaineCare budget gap without Republican support, as the minority party refused to fund the cost increase without structural changes to the program. That’s the Republicans’ continued position. 

“It seems like the Democrats down here are content with being both the arsonists who created the problem as well as the firefighters who are pretending to solve it,” Minority Leader Trey Stewart (R-Aroostook) said during a recent Maine GOP video on the party’s vision for the future.

How Maine’s health department handles MaineCare is now under heightened scrutiny after a routine audit found potentially improper payments to dozens of providers. While not determined to be fraud at this point, the Trump administration has compared Maine to Minnesota, which has drawn national attention for its handling of fraud in public programs and saw aggressive, weeks-long immigration operations after allegations against immigrant-run providers in that state.

The U.S. Office of Inspector General requested Maine refund its estimate of $28.7 million for the federal share of the improper payments. Some lawmakers asked Huber Tuesday why that figure is not in the budget plan, to which he said it’s up to Maine’s health department to determine if the payments were improper and whether the federal share is owed back, which would be recouped from providers.

Speculating on when such costs may be due to the federal government, Huber said, “It would probably not be within this biennial budget.” 

What’s the funding for?

Trump’s “One Big Beautiful Bill” significantly shifted MaineCare costs to the state: tens of millions of dollars for administration, verification systems and technology, plus reduced match rates and federal program funding. That amounts to an estimated $5 billion cost increase to MaineCare over a 10-year period, according to Maine’s Department of Administrative and Financial Services. 

Mills has proposed filling that gap with two pots of money: the general fund, largely made up of taxes and fees, and the Budget Stabilization Fund, a limited sum that Mills grew to its current statutory maximum of about $1 billion dollars during her tenure.

Tax collection makes up about half of state revenue. The majority of Maine’s tax dollars come from personal income, closely followed by general sales. The governor increased some revenue going into that fund by raising taxes on cigarettes and cannabis and adding a tax on streaming services last year. However, she’s consistently shot down other Democrats’ attempts to change the income tax code, though some community members reupped such calls during the hearing Tuesday.  

About 40% of the state’s revenue is from federal funds, mostly for health care, which are now facing reductions. 

Mills has suggested one-time money for some one-time expenses, such as $4.9 million for technology and compliance upgrades for the state’s Department of Health and Human Services to implement unfunded mandates from the federal spending law. Complying with new work, volunteer and education eligibility requirements for Medicaid is among the largest share of these technology costs, Huber said. 

That funding would come from the Budget Stabilization or “rainy day” fund, which the governor had previously refrained from touching. As outlined in state law, it “may be expended only to offset a General Fund revenue shortfall,” with a few exceptions, such as financing death benefits and food banks during emergencies. 

But most anticipated MaineCare cost increases are perennial and will outlive Mills’ tenure, as she terms out later this year and is running for U.S. Senate. 

Unlike the federal government, Maine is required to balance its budget. That means cost increases will mean the state under the next governor will have to consider cuts — such as reducing services, eligibility or reimbursements for the program long-term — or raising revenue another way, such as through taxes. 

The federal spending law also shifted costs for the Supplemental Nutrition Assistance Program to the states. Mills plans to put $14.7 million from the general fund to address those MaineCare and SNAP cost shifts in the current biennium, though impacts will continue beyond those two years. 

The general fund is also Mills’ preferred source to cover ongoing MaineCare cost increases that are separate from federal changes. In addition to the biennial budget passed last year, she’s proposed another $116 million in her supplemental plan, with $62 million for 2026 and $54 million for 2017. That’s only about 4% of the total cost of the state’s Medicaid program.

While some health care providers commended what the proposal funds, they critiqued what it doesn’t. 

The federal spending bill excluded certain abortion providers from Medicaid reimbursement for non-abortion services. Mills’ supplemental proposal would add $2.25 million from the general fund for reproductive health care to offset federal cuts, after the state also increased funding for such services last year.  

“Sadly, this initiative doesn’t provide long lasting financial security to our 63 clinic system,” said Laura Harper, senior associate at Moose Ridge Associates on behalf of Maine Family Planning. Harper urged lawmakers to instead provide ongoing funding. 

“It’s time limited and assumes that lawmakers in Washington won’t use the same tactics once again,” she said of the governor’s proposal.

Others criticized the budget proposal for failing to invest in long-term stability in other ways, including not addressing the persistent state-private employee pay gap and not including cost-of-living adjustments for providers, which had also been a key part of the last budget debate. 

“We recognize the growing demand for health care services places a strain on budgets,” said Sarah Calder of MaineHealth, later adding, “But our ability to continue delivering high value care depends on timely and adequate reimbursement from all payers.”