One of the biggest fights at the State House this year was over a supplemental budget bill that went almost entirely to cover an unexpected $118 million deficit in the state’s Medicaid program.

But lawmakers could be looking at another shortfall when they return for their next session in January, and perhaps for years to come once federal cuts from the One Big Beautiful Bill kick in.

In short, the future of a publicly subsidized health care system that provides coverage to about 1 of every 4 Mainers is tenuous.

The recent deficit in MaineCare, the state’s version of Medicaid, emerged after years of state budget surpluses and a massive infusion of federal funds, which masked the problem.

Even after a 2019 expansion added 112,000 childless adults earning under 138% percent of the federal poverty line to the MaineCare rolls, the Legislature has expanded eligibility and services for pregnant women, children, people with disabilities and those seeking gender-affirming care.

Cost per member who used MaineCare services has increased 33% during that time and continues to rise, even though enrollment has actually decreased by 28,000 since a high in 2023.

Sen. Joe Baldacci, D-Bangor, who serves on the Legislature’s health insurance committee, said he’s been a big supporter of expanding MaineCare, because it’s “proven to save lives.” But he acknowledged that funding will be a perennial issue.

“I think the majority of us in Augusta have a commitment to health care because we know how important it is to people’s lives,” Baldacci said. “I think we’re all — to be honest — in an uncertain time. We have to gauge it one fiscal year at a time, and we may have to make changes or adjustments.”

Rep. Ken Fredette, R-Newport, said MaineCare is not sustainable in its current form, and he’s frustrated that Democrats, who control the House, the Senate and the Governor’s office, have not engaged with Republicans on controlling costs.

“Republicans were not in favor of (expansion), not because they don’t want people to have health care — that’s not what the issue is — the question is doing it in a financially responsible way,” said Fredette, who served as House Republican leader under Republican Gov. Paul LePage and currently sits on the Legislature’s budget-writing committee.

The stark difference between the two parties’ priorities when it comes to MaineCare played out this spring during debate over the supplemental budget.

Republicans wanted to cap enrollment and add work requirements for able-bodied beneficiaries, while Democrats argued the state needed to pay for already-promised services. The bill passed without any Republican support.

A spokesperson for the Department of Health and Human Services said last week that Maine’s recent deficit was caused by several factors — rising health care costs and reimbursement rates, hospital payments (or cost settlements), increased utilization, and increased enrollment.

MaineCare Director Michelle Probert said last week she was still working on cost projections for next year, so it was too soon to say whether lawmakers will be asked to provide more funding. But she noted that MaineCare was flat-funded in the current two-year budget and health care costs are expected to keep rising.

“To be most realistic, states, health plans and employers should project for increases year over year unless any of those entities are planning on really restructuring the benefits that they offer or the people they’re serving,” Probert said.

HOW DID WE GET HERE?

Maine launched its Medicaid program in 1968 — about three years after President Lyndon Johnson created the federal framework.

It was rebranded as MaineCare in 2002, right around the time that Gov. John Baldacci, a Democrat, established DirigoChoice, an ambitious effort to expand coverage to all Maine residents by 2009.

Baldacci’s program never reached that goal and was dismantled after President Barack Obama signed the Affordable Care Act in 2010, increasing affordable health care options for people who did not qualify for Medicaid but were priced out of private insurance or didn’t have an employer-supported plan.

While Medicaid guidelines are set by the federal government, states have flexibility to develop their own rules around eligibility, benefits and payments. And those decisions ultimately impact the state budget.

In 2005, MaineCare covered about 20% of residents, consuming less than 20% of the general fund, while providing about 25% of the state’s total health care spending, according to KFF, a national nonprofit health policy research, polling and news organization.

In 2017, Maine voters approved the largest expansion in MaineCare history, which was expected to add about 130,000 low-income adults from age 19 to 64 with incomes below 138% of the federal poverty line. That’s just under $22,000 annually for an individual.

The federal government would pay 90% of the costs and Maine would add a projected $50 million a year in state spending, an estimate that proved to be low.

But that expansion was thwarted by the governor at the time.

LePage had repeatedly vetoed multiple legislative efforts to expand MaineCare prior to the 2017 referendum and then refused to implement it after voters approved it.

At the time, nearly 267,000 people already were enrolled in MaineCare, which consumed nearly $1.1 billion of the state’s general fund, or about 16% of the biennial budget.

Democratic Gov. Janet Mills made the expansion her top priority when taking office in 2019, prompting LePage to reiterate his concerns.

“The Democrats in the Legislature haven’t yet found sustainable funding for Medicaid expansion,” LePage posted at the time on X, which was known as Twitter. “Today’s Executive Order doesn’t have a way to pay.”

That November, Mills touted the expansion in a Press Herald Op-Ed, saying that “spending remains within projections” and that it would bring “$700 million in federal matching funds through state fiscal year 2021.”

A few months later, the COVID-19 pandemic hit, causing the federal government to increase Medicaid funding to states to ensure that no one lost coverage during the crisis.

That intervention appears to have hidden the true increasing costs of MaineCare, which saw a 50% increase in enrollment from 2019 to 2023 because of the expansion and pandemic-era requirements that states provide continuous coverage to enrollees regardless of income.

“The enhanced match during COVID absolutely was extremely helpful to states and certainly took away or made states not as aware, especially outside of Medicaid and Department of Health and Human Services, not as aware of the true costs of increases associated with higher enrollment,” said Probert, the MaineCare director.

MAINECARE SERVICES STILL EXPANDING

Aggressive federal action, which included direct aid to states and help for private businesses, created a series of surpluses during the pandemic. In Maine, those were largely socked away in the rainy day fund and returned to taxpayers in the form of rebates.

In 2022, lawmakers spent more than half of the state’s projected $1.2 billion surplus on rebates, sending $850 checks to most residents. They approved another round of $450 checks the following year for heating assistance.

Meanwhile, the state’s budget stabilization, or rainy day fund, continued to grow. It now sits at just over $1 billion, which is the statutory limit of 18% of the previous year’s general funding revenue.

The expanded federal payments for Medicaid expired in December 2023 and states were forced to redetermine eligibility.

But up to that point, and continuing after, lawmakers continued to expand MaineCare coverage to more people and covering more services.

In 2022, they increased MaineCare dental coverage for adults over the age of 21. They also covered all pregnant women with qualifying incomes eligible for MaineCare regardless of citizenship, increased postpartum coverage to 12 months and expanded MaineCare to cover donated, pasteurized, breast milk.

In 2023, MaineCare was expanded to cover children and young adults under the age of 21 in families with incomes up to 300% of the federal poverty level. The previous income limit was 208% for kids under the age of 19.

The program also has expanded to cover the cost of treating gender dysphoria, licensed chiropractic services and electric breast pumps.

It’s difficult to pinpoint the overall cost impacts of these expansions, since some were folded into the budget.

Jennifer Tolbert, a health policy and Medicaid expert at KFF, the national health care nonprofit, said MaineCare costs seem to be driven by inflation as well as costs associated with people 65 and older and people with disabilities.

“I think what we see in Maine is more a reflection of overall population characteristics and not something particularly unique to the MaineCare program,” Tolbert said. “Some states may have done a better job in planning for that impact and transition than other states. I’m not saying Maine did a bad job with that. I don’t know what caused the Medicaid deficit, so I can’t speak to that.”

But, Tolbert said, expanding benefits for certain groups, which Maine has done, “does add up.”

WHAT LIES AHEAD?

Today, MaineCare has nearly doubled in costs since the 2019 expansion with a budget of over $3 billion that now accounts for 26% of the biennial budget.

People with disabilities represent 15% of enrollees but account for 43% of expenses. Those 65 and older make up 15% of enrollees and 21% of expenses. And adults under 65 and children account for 70% of enrollees, but just 35% of expenses.

At the same time, record inflation has been hitting people across the globe. From 2020 through the first half of 2025, consumer prices in New England increased about 21%, according to U.S. Bureau of Labor statistics. That has impacted both health care services and devices.

On top of that, reimbursement rates have gradually increased to help health care providers recruit and retain staff by raising wages.

For example, some home and community-based services have seen median rate increases as high as 74%, while some personal care services increased by as much as 24% and private nonmedical institutions have had increases of up to nearly 36%.

This year, lawmakers provided a 1% cost of living adjustment for direct care workers.

The bill for all this apparently came due this year at a precarious time. That’s why lawmakers had to address a $118 million deficit this spring.

MaineCare drew more than $1 billion from the state general fund for the first time in 2024 and that grew to $1.4 billion in 2025, even though enrollment decreased.

But even though the budgeted costs have increased dramatically, that might not cover everything, which could force lawmakers to address another deficit.

And this will all be compounded by drastic cuts to Medicaid are coming at the federal level after the 2026 midterms, adding to the uncertainty for state policymakers. If the state wants to continue providing the same level of services to the same group of eligible Mainers, it will have to make cuts elsewhere or find a way to raise more money.

Despite fiscal challenges, Probert said she’s proud of what MaineCare provides, saying that the cost of service per member has risen less than the national average, while expanding the program at the direction of state lawmakers in a “thoughtful and conscientious way.”

“That’s a demonstration we have been conservative,” Probert said. “However, there’s been a lot going on in the broader world that has definitely put cost pressures on the program as a whole and that has implications, not just in Maine but nationally, for how we make sure we’re funding Medicaid programs in a sustainable way.”

If another major deficit does emerge when lawmakers return to Augusta next year — only months before Democrats and Republicans ramp up campaigning for governor and legislative seats — the debate over MaineCare’s future is likely to escalate.