June 13, 2025
The recently passed FFY 2025 budget reconciliation bill (the "One Big Beautiful Bill Act") contains significant Medicaid (MaineCare) policy changes, including a mandatory work requirement provision for Medicaid expansion members and the removal of good faith waivers for Payment Error Rate Measurement (PERM) and Medicaid Eligibility Quality Control (MEQC) audits with error results above a certain low threshold. This document provides an overview of the potential impacts to Maine's Medicaid program.
Impact of Work Requirements for Members with Substance Use Disorder (SUD)
Under this proposal, as detailed in our previous briefing document (PDF), state Medicaid agencies would be required to demonstrate that current and prospective Medicaid members have, during the month prior, met work, volunteer, or educational requirements, or qualify for an exemption.
MaineCare previously estimated that approximately 86,000 members would be subject to the work requirement, and upwards of 31,000 members could lose coverage during the first year of implementation, not necessarily because they aren't meeting work requirements, but rather due to verification barriers.
With this update, the State emphasizes that the proposed implementation timeline will be difficult to meet. It will take time for the Centers for Medicare & Medicaid Services (CMS) to provide the detailed guidance Medicaid programs across the country will need to implement the requirements. Maine will also face time-intensive and costly systems upgrades. The State recommends that the Senate allow for flexibility in the implementation timeline or delay the required implementation date to December 31, 2027.
In addition, the State has concerns about the impact of the proposal on Maine's opioid use epidemic, given that prospective members must meet work requirements prior to enrollment. The ability to qualify for an exemption or meet work requirements may be especially challenging for individuals with SUD:
- In 2021, Maine had among the highest rates of expansion members treated for SUD across all states. Today over 31,000 expansion members receive care for a substance use disorder through MaineCare.
- Members with SUD and/or those receiving certain types of SUD treatment are technically exempt from the proposed work requirements. However, prospective members must demonstrate they have SUD or are in treatment at the time of application, prior to getting the very Medicaid coverage needed for an official diagnosis and to begin treatment. Therefore, qualifying for this exemption in practice will be difficult.
- Individuals with SUD also face additional difficulties in finding employment due to functional limitations or employer concerns.
- Current Medicaid expansion members in treatment for SUD may also be at risk of losing coverage and access to care, due to challenges with verifying and reporting their exemption status. These risks are compounded by the significant administrative, systems, and cost challenges expected to accompany the rapid implementation of a Medicaid work requirement.
Both nationally and in Maine, Medicaid expansion has significantly improved access to SUD treatment. The implications of members with SUD facing barriers to exemptions or to meeting work requirements are especially stark given the continuing opioid use epidemic, the rise in multi-substance addiction, and rates of overdose deaths, which have dropped with the help of Medicaid, but could rise again. Substance use affects many families and all Maine communities.
The State of Maine recommends that work requirements allow prospective members to first obtain coverage, and with it, the documentation needed to verify a medically frail diagnosis, including SUD, and to begin treatment. One option would be to allow self-attestation of medically frail status upon application, with formal documentation required during subsequent work requirement verification.
Removal of good faith waivers related to Payment Error Rate Measure (PERM)
Payment Error Rate Measure (PERM) is a federal audit that assesses payment accuracy for Medicaid and CHIP claims by reviewing provider records, claims processing, and eligibility determinations to identify errors. Medicaid Eligibility Quality Control (MEQC) is a related process that reviews eligibility determinations to identify vulnerable or error-prone areas.
Our understanding of the H.R. 1 language is that, starting October 1, 2029, HHS would be required to recoup the federal match associated with Medicaid payments exceeding a 3% error threshold and would no longer be permitted to waive recoupments for agencies participating in a corrective action plan. Based on national data cited below, the majority of Medicaid programs are well above the proposed 3% error threshold.
Removing the good faith waiver would create significant and uncertain financial exposure for Medicaid programs. The majority of states would face significant, mandatory recoupments without sufficient time to identify and correct underlying issues through corrective action plans.
| PERM Reporting Year 2024 | Medicaid Error Rate | CHIP Error Rate |
|---|---|---|
| National | 5.09% | 6.11% |
| Maine | 2.41% Target set by CMS: 12.97% | 5.45% Target set by CMS: 15.51% |
*CMS does not calculate an MEQC error rate, so it is unclear how the proposal would apply; however, from our most recent MEQC cycle, Maine internally calculated an error rate of 1.4%.
PERM and MEQC audits assess compliance with regulatory requirements. CMS consistently notes that PERM or MEQC findings should not be interpreted as measures of fraud. The majority of PERM errors are related to documentation, not fraud. In 2024, approximately 74% of improper Medicaid payments (PDF) were due to insufficient documentation.