An Act to Update and Improve the MaineCare Reimbursement
Maine Legislature, Session 132, LD 2177
Committee: Health and Human Services
Sponsors: GATTINE
Amends: 22 MRSA §1708, 22 MRSA §1720, 22 MRSA §3173-J, 22 MRSA §7403

Legislative Document
No. 2177
H.P. 1465
House of Representatives, January 27, 2026
An Act to Update and Improve the MaineCare Reimbursement 
System
Submitted by the Department of Health and Human Services pursuant to Joint Rule 203.
Reference to the Committee on Health and Human Services suggested and ordered printed.
ROBERT B. HUNT
Clerk
Presented by Representative GATTINE of Westbrook.
Be it enacted by the People of the State of Maine as follows:
Sec. 1.  22 MRSA §1708, sub-§3, as amended by PL 2021, c. 29, Pt. R, §1, is further 
amended to read:
3.  Compensation for nursing homes.  A nursing home, as defined under section 
1812‑A, or any portion of a hospital or institution operated as a nursing home, when the 
State is liable for payment for care, must be reimbursed at a rate established by the 
Department of Health and Human Services pursuant to this subsection section 3173-J.  The 
department may not establish a so-called "flat rate."  This subsection applies to all funds, 
including federal funds, paid by any agency of the State to a nursing home for patient care.  
The department shall establish rules concerning reimbursement that:
A.  Take into account the costs of providing care and services in conformity with 
applicable state and federal laws, rules, regulations and quality and safety standards;
B.  Are reasonable and adequate to meet the costs incurred by efficiently and 
economically operated facilities;
C.  Are consistent with federal requirements relative to limits on reimbursement under 
the federal Social Security Act, Title XIX; and
D.  Ensure that any calculation of an occupancy percentage or other basis for adjusting 
the rate of reimbursement for nursing facility services to reduce the amount paid in 
response to a decrease in the number of residents in the facility or the percentage of the 
facility's occupied beds excludes all beds that the facility has removed from service for 
all or part of the relevant fiscal period in accordance with section 333.  If the excluded 
beds are converted to residential care beds or another program for which the department 
provides reimbursement, nothing in this paragraph precludes the department from 
including those beds for purposes of any occupancy standard applicable to the 
residential care or other program pursuant to duly adopted rules of the department;
E.  Contain an annual inflation adjustment that:
(1)  Recognizes regional variations in labor costs and the rates of increase in labor 
costs determined pursuant to the principles of reimbursement and establishes at 
least 4 regions for purposes of annual inflation adjustments; and
(2)  Uses the applicable regional inflation factor as established by a national 
economic research organization selected by the department to adjust costs other 
than labor costs or fixed costs; and
F.  Establish a nursing facility's base year every 2 years and increase the rate of 
reimbursement beginning July 1, 2014 and every year thereafter until June 30, 2018.  
For the state fiscal year beginning July 1, 2018, the base year for each facility is its 
fiscal year that ended in the calendar year 2016.  For state fiscal years beginning on or 
after July 1, 2019, subsequent rebasing must be based on the most recent cost report 
filings available.  The department may provide a mechanism for subsequent 
adjustments to base year costs to reflect any material difference between as-filed cost 
reports used in rebasing and subsequent determinations of audited, allowable costs for 
the same fiscal period.  The department's rules must provide that, beginning in the state 
fiscal year beginning July 1, 2018, the rates set for each rebasing year must include an 
inflation adjustment for a cost-of-living percentage change in nursing facility 
reimbursement each year in accordance with the United States Department of Labor, 
Bureau of Labor Statistics Consumer Price Index nursing homes and adult day care 
services index.
Any rebasing done pursuant to this paragraph may not result in a nursing facility 
receiving a reimbursement rate that is lower than the rate in effect on June 30, 2018.
G.  Subject to appropriation, establish that nursing facility reimbursement will be 
rebased for rates effective January 1, 2028, and thereafter rebasing must occur in 
accordance with section 3173-J.
Rules adopted pursuant to this subsection are routine technical rules as defined in Title 5, 
chapter 375, subchapter 2‑A.
Sec. 2.  22 MRSA §1720, as enacted by PL 2005, c. 242, §1, is repealed.
Sec. 3.  22 MRSA §3173-J, as amended by PL 2023, c. 238, §1, is further amended 
to read:
§3173-J.  Rate-setting system for development and maintenance of sustainable, 
efficient and value-oriented MaineCare payment models and rates 
reimbursement of MaineCare-covered services
This section establishes a rate-setting system for the development and maintenance of 
MaineCare payment models and rates reimbursement of MaineCare-covered services that 
comply complies with the requirement in 42 United States Code, Section 1396a that rates 
be consistent with efficiency, economy and quality of care; that are is adequate to support 
MaineCare member access to services; and that are is equitable and data-driven.
1.  Definitions.  As used in this section, unless the context otherwise indicates, the 
following terms have the following meanings.
A.  "Alternative payment model" means a health care payment model that uses 
financial incentives to promote or leverage greater value for patients, purchasers, 
payers or providers and that connects at least a portion of reimbursement to 
performance on defined quality measures.
B.  "MaineCare section of policy" means a set of MaineCare-covered services, as 
categorized by the department through the adoption of rules that specify the parameters 
for coverage.
B-1.  "Payment model" means the method that the department uses to reimburse 
providers for health care services, including whether the reimbursement is paid on a 
fee-for-service basis or another basis such as per member, per month or an estimated 
basis that is cost settled.
C.  "Rate determination" means a process conducted by the department to establish the 
payment model, associated reimbursement rate methodology, base and, if applicable, 
the rate amount or payment model for a MaineCare section of policy or for a specific 
covered service, whether through adoption or adaptation of a benchmark rate or 
payment model from another payer or development through a rate study.
D.  "Rate study" means an analysis conducted by the department or its contracted 
vendor to develop a recommended rate payment model, associated reimbursement 
methodology and resulting base rate amount and payment model based on the service 
model and cost components for the service amounts for current or potential MaineCare-
covered services. A rate study relies on data collected as part of the analysis conducted 
by the department to inform the cost of providing services and resulting rates rather 
than relying on a benchmark of existing rates or payment models used by other payers.
E.  "Reimbursement methodology" means the method for determining the rate or 
reimbursement amount under the payment model. Examples of reimbursement 
methodologies include using standardized assumptions for determining service cost 
components, such as staffing levels, wages based on required qualifications, benefits 
and program administration, to determine a reimbursement rate per unit of service; 
using cost-based reimbursement, under which the MaineCare program determines the 
percentage it will pay of reported allowable costs; and adjusting reimbursements for 
patient acuity or the relative duration or intensity of the service.
2.  Rate-setting system principles and processes.  The department shall establish 
MaineCare provider payment models, including reimbursement rates, including those paid 
through fee-for-service and alternative payment models.  The rates must be established 
methodologies and rate amounts, where applicable, in accordance with the following 
principles and processes and adopted through rulemaking as described in subsection 3. 
Changes to rates required by the Federal Government to assist with emergency or 
extraordinary circumstances or rate reductions required by the Legislature for the purpose 
of responding to projected MaineCare budget shortfalls are not subject to this section. The 
department shall:
A.  Develop annually a schedule of rate determination by MaineCare section of policy 
in consultation with the MaineCare Rate Reform Expert Technical Advisory Panel 
established under subsection 5 as follows:
(1)  Post the rate determination schedule on its publicly accessible website;
(2)  Provide an opportunity for the public to review and comment on the rate 
determination schedule and make available a summary of these comments on its 
publicly accessible website; and
(3)  Conduct off-schedule rate determinations as the department finds appropriate;
B.  Conduct or contract for, every 4 years, a comprehensive benchmarking report to 
compare MaineCare rates for all services to those paid by Medicare, at least 5 
comparison Medicaid states and any appropriate Maine commercial payers.  The 
department shall provide public notice of the initiation of the comprehensive 
benchmarking process, provide an opportunity for the public to review and comment 
on the draft report and make available a summary of these comments alongside the 
final report;
C.  No less frequently than once every 5 years, conduct a rate determination process 
for each MaineCare section of policy or for a specific covered service, in accordance 
with the following procedures:
(1)  Provide public notice of initiation of the rate determination for a MaineCare 
section of policy or for a specific covered service;
(2)  Consider and, when appropriate, adopt alternative payment models that use 
financial incentives to promote or leverage greater value for the MaineCare 
program. This consideration must include a review of research on any available 
national models or best practices regarding payment models for reimbursement 
related to the service;
(3)  Determine whether a Medicare rate is available for the service and whether the 
Medicare rate represents the most appropriate benchmark and payment model 
covers a specific service and whether the Medicare reimbursement methodology is 
appropriate for a specific covered service;
(4)  In the absence of a an appropriate Medicare rate comparison, determine 
whether a rate from a review non-Medicare payer source sources, including, but 
not limited to, commercial health care rates payers in the State or other states' 
Medicaid rates, is available for the service and whether this alternate payer rate 
represents the most appropriate benchmark and payment model agencies. The 
department shall determine an appropriate percentage of the benchmark rate for 
the service, taking take into consideration the findings of the benchmarking report 
conducted in accordance with paragraph B;
(5)  Conduct a rate study for every service for which a benchmark rate or payment 
model in accordance with an appropriate reimbursement methodology or 
comparison under subparagraph (3) or (4) either is unavailable or is inconsistent 
with the goals of efficiency, economy and quality of care to support member 
access. Each rate study must include the following:
(a)  A review of data, which must include:
(i)  An assessment as to whether the delivery of service and associated 
requirements have changed since the previous rate study, if available, to 
determine if the rate payment model or reimbursement methodology needs 
to should be revised;
(ii)  The collection of data applicable to the rate determination on provider 
costs and cost-related aspects of the delivery of service and associated 
requirements through existing cost reports, provider surveys and other 
available data sources; and
(iii)  Research on any available national models or best practices regarding 
cost-related aspects of the delivery of service and associated requirements; 
and
(b)  Developing or updating rates payment models or reimbursement 
methodologies by considering the following:
(i)  The appropriateness of adoption of a change in payment model or 
reimbursement methodology consistent with the purposes of this section;
(ii)  The current rate assumptions and their appropriateness given current 
provider costs, best practices or changes in the delivery of service and 
associated requirements;
(iii)  The findings for related services of any comprehensive benchmarking 
report under paragraph B; and
(iv)  The degree to which services are dependent on MaineCare 
reimbursement, including, but not limited to, cost factors, such as average 
wage, that may be reflective of restraints of MaineCare reimbursement 
versus costs of the broader marketplace; and
(6)  Upon completion of the rate determination process, present the department's 
rationale and recommendations for rate the payment model, associated 
reimbursement methodology, and resulting base rate amount and payment model 
amounts, if applicable, for public comment prior to the rule-making process; 
convene a meeting of interested providers and other interested members of the 
public to discuss the recommendations and hear comments; and respond in writing 
to comments with an explanation of whether and how feedback was incorporated 
into the final rate determination; and
D.  Ensure that base rate amounts and other components of the reimbursement 
methodology developed under paragraph C are updated to keep pace with changes in 
the costs of delivering the service by:
(1)  For rates benchmarked to Medicare rates according to paragraph C, 
subparagraph (3), referencing Medicare rates for the most current year available, 
updated at least annually, and reviewing the current established percentage 
benchmark, as appropriate, taking into consideration the findings of the most recent 
benchmarking report conducted in accordance with paragraph B;
(2)  For rates benchmarked to an alternate payer source in accordance with 
paragraph C, subparagraph (4), updating rates to the most current year of data for 
that payer source at least once every 2 years and reviewing the current established 
percentage benchmark, as appropriate, taking into consideration the findings of the 
benchmarking report conducted in accordance with paragraph B; and
(3)  For base rates determined through a rate study in accordance with paragraph 
C, subparagraph (5), and subject to available funds as set forth in subsection 4, 
providing an annual cost-of-living adjustment effective on a consistent date to be 
established by the department for each service that has not received a rate 
adjustment within the 12 months prior to the effective date of the cost-of-living 
adjustment and for which the department determines benchmarking in accordance 
with paragraph C, subparagraph (3) or (4) is not appropriate or advisable.  In 
establishing and implementing cost-of-living adjustments, the department shall:
(a)  Use inflation indices determined established through rulemaking to reflect 
a reasonable cost of providing services for different categories of services 
rather than reflecting other factors, such as private sector price increases or 
cost-shifting from different payers; and
(b)  Maximize use of a single, consistent and general cost-of-living adjustment 
index for services for which the costs of direct care staffing are the primary 
driver of overall cost increases, consistent with the cost-of-living adjustment 
applied to the minimum wage laws, in order to ensure that the cost-of-living 
adjustment reflects increases to provider costs for delivering the service rather 
than other factors, such as private sector price increases or cost-shifting from 
different payers under Title 26, section 664, subsection 1. The department 
shall:
(i)  Apply this adjustment to services provided by essential support 
workers as defined in section 7401, subsection 3; and
(ii)  For any services for which the department applies an adjustment equal 
to the increase in minimum wage, apply the adjustment to the 
reimbursement rate between 6 and 12 months after the minimum wage 
increase goes into effect.
3.  Rulemaking for establishment of rate payment model and reimbursement 
methodology.  In addition to the requirements of Title 5, chapter 375, rulemaking for 
MaineCare provider reimbursement rate methodologies must comply with the following. 
The department shall:
A.  Establishment of a rate Conduct rulemaking to establish a payment model and 
reimbursement methodology for a new MaineCare section of policy or specific new 
service within a MaineCare section of policy or make changes to an existing rate 
payment model or reimbursement methodology must be adopted through rulemaking 
in accordance with the Maine Administrative Procedure Act. Rules adopted pursuant 
to this subsection must describe the payment model and reimbursement methodology 
but do not need to include codes, modifiers, reimbursement rates or any other 
information that the department includes in its centralized master index of rates posted 
on its publicly accessible website pursuant to subsection 7. Rulemaking is not required 
for the addition or deletion of new billing codes or to specify rates for specific billing 
codes if there is no change in the overall payment model or reimbursement 
methodology and the rates are posted in accordance with this section. Changes in rates 
resulting from application of the reimbursement methodology, including adjustments 
as a result of changes in the value or amount of components of the reimbursement 
methodology or changes to billing codes, do not require rulemaking as long as the 
reimbursement methodology remains the same; and
B.  For services the department benchmarks to Medicare or other available payer rates 
for reimbursement, the department shall adopt a rule specifying the percentage, 
frequency of benchmark updates for alternate payer sources and other aspects of the 
benchmark methodology. Additional rulemaking is not required for rate changes tied 
to the adopted benchmark methodology, or for the addition of new billing codes, unless 
the department changes the benchmarking percentage or methodology.
C.  No later than July 1, 2023, the department shall adopt a rule specifying the 
appropriate cost-of-living adjustment methodology for different types of services in 
accordance with subsection 2, paragraph D, subparagraph (3). Additional rulemaking 
is not required for rate increases tied to annual cost-of-living adjustment increases 
unless the department changes the cost-of-living adjustment methodology.
Rulemaking is not required for rate adjustments tied to annual cost-of-living adjustment 
increases unless the department changes the cost-of-living adjustment methodology.
Rules adopted pursuant to this subsection may incorporate by reference any part of a code, 
standard, rule, regulation or schedule or any other source considered appropriate by the 
department.  Notwithstanding any provision of law to the contrary, rules adopted pursuant 
to this subsection are not subject to Title 5, section 8056, subsection 1, as long as the rules 
identify the incorporated matter by title or source, as appropriate.
Rules adopted pursuant to this subsection are routine technical rules as defined in Title 5, 
chapter 375, subchapter 2‑A unless rules to adopt MaineCare reimbursement rates are 
designated as major substantive rules in another section of law.
4.  Funding.  The department may use funds from the MaineCare Stabilization Fund 
established in section 3174‑KK in order to fund the rate reimbursement adjustments made 
in accordance with this section when funding may be needed in addition to appropriations 
associated with separate initiatives. Adjustments to reimbursements made using the 
MaineCare Stabilization Fund are not considered permanent until ongoing appropriations 
and allocations funding the adjustments are made.
Reimbursement adjustments are subject to the availability of appropriations. The 
department may reduce reimbursement adjustment amounts, including otherwise specified 
cost-of-living adjustment amounts, in proportion to available funding, including 
elimination of a scheduled adjustment if funding is unavailable.
If sufficient funds are not appropriated for reimbursement adjustments in accordance with 
this section and there are not sufficient funds available in the MaineCare Stabilization Fund 
for this purpose, the department may prioritize the following, proportional to any funding 
for reimbursement adjustments that may be available:
A.  Reimbursement adjustments resulting from any rate determinations for MaineCare 
sections of policy or services that do not yet have reimbursement established through 
a rate determination under this section; and
B.  Reimbursement adjustments for services for which there is evidence of issues 
related to member access.
5.  MaineCare Rate Reform Expert Technical Advisory Panel.  The MaineCare 
Rate Reform Expert Technical Advisory Panel, referred to in this subsection as "the panel," 
is established for the purpose of advising the commissioner by providing technical, 
nonpartisan, 3rd-party expertise to inform the department's planned schedule and actions 
on rate assumptions, payment models and other related technical matters. The panel may 
not propose rates or methodologies.  The commissioner or the commissioner's designee 
shall serve as chair.
A.  The panel includes the following members:  
(1)  A representative from the Maine Health Data Organization;
(2)  A representative from the Department of Professional and Financial 
Regulation, Bureau of Insurance;
(3)  A representative from the Department of Professional and Financial 
Regulation;
(4)  A representative from the department's division of licensing and certification;
(5)  A representative from the Office of Affordable Health Care;
(6)  A representative from the Department of Labor; and
(7)  A representative from the Department of Administrative and Financial 
Services.
B.  The panel shall:
(1)  Review annual schedules of MaineCare sections of policy scheduled for rate 
determinations under subsection 2, paragraph A;
(2)  Review common assumptions and recommendations from rate determinations 
under subsection 2, paragraph C;
(3)  Review findings from benchmarking reports to inform the appropriateness of 
MaineCare rate reimbursement levels across services; and
(4)  Advise on other related technical matters, as appropriate.
C.  The panel shall meet at least twice once per year and as otherwise convened by the 
commissioner.  Meetings of the panel are public, and the panel shall provide public 
notice of each meeting and an opportunity for public comment.
6.  MaineCare Advisory Committee.  The MaineCare Advisory Committee, required 
by 42 Code of Federal Regulations, Section 431.12 and further described in department 
rules, and referred to in this subsection as "the committee," shall participate in the 
department's rate-setting system in accordance with this subsection.
A.  The committee must include a permanent rate system subcommittee that allows 
broad participation by the full spectrum of types of MaineCare providers.  Participation 
in the rate system subcommittee may not be limited by number or type of stakeholder 
in order to allow for participation by any stakeholder affected by MaineCare 
reimbursement policy and interested in participating in the work of the subcommittee.
B.  At each meeting of the committee or rate system subcommittee, if requested by the 
chair of the committee or rate system subcommittee, the department shall provide 
updates on the department's planned and completed activities under this section for 
discussion and advisement, including, but not limited to, the following:
(1)  Schedule and status of rate determination, planned and in progress, by 
MaineCare section of policy;
(2)  Status of and plans for comprehensive benchmarking studies; and
(3)  Contemplated rulemaking to establish rate methodology payment models and 
reimbursement methodologies resulting from rate determination processes.
C.  The rate system subcommittee may formulate and present recommendations to the 
committee pertaining to the department's activities under this section.
7.  Index of MaineCare rates by service code; publicly accessible website.  The 
department shall maintain and annually update a centralized master index of rates by 
service code and post this index on its publicly accessible website.  The index must may 
contain the following, as applicable:
A.  The service code, including any modifiers that affect reimbursement;
B.  The current year rate;
C.  The source for the rate, including, but not limited to, Medicare or alternate payer 
benchmark, rate study or other source, and the year and the author of the review, study 
or report that justified the rate;
D.  The year the base rate was last updated prior to the application of any subsequent 
cost-of-living adjustments;
E.  Whether the rate is subject to cost-of-living adjustments and, if so, the identity of 
the benchmark index;
F.  The section of MaineCare policy pursuant to which the rate was adopted; and
G.  The target date for the next rate review.
In addition to the index, the department shall post on its publicly accessible website all rate 
studies, benchmark reports and other materials used by the department to develop the 
reimbursement rates and payment models.
8.  Notice prior to implementation.  For planned rate changes that do not require 
rulemaking as described in subsection 3, the department shall provide notice prior to 
implementation, of no less than 30 calendar days for cost-of-living adjustments and no less 
than 7 calendar days for Medicare fee schedule changes or the addition of new service 
codes, to stakeholders who request to receive such notice.
Sec. 4.  22 MRSA §7403, as enacted by PL 2021, c. 398, Pt. AAAA, §1, is repealed.
SUMMARY
This bill updates certain definitions and rule-making requirements related to the 
establishment of a MaineCare payment model and the determination of MaineCare 
reimbursements for covered services.