A call by Gov. John Baldacci for 10 percent across-the-board budget reduction proposals translates to $178 million in the Department of Health and Human Services, a number Commissioner Brenda Harvey said forces her department to consider cutting anything that isn’t “the most basic needs of Mainers.”

The cuts, if they become reality, would impact the benefits of thousands of service recipients and reduce reimbursements for health agencies and hospital-based physicians.

Baldacci, facing a structural budget gap in the next biennium of $500 million or more, directed each department last month to submit proposals of how to achieve 10 percent reductions in spending. The Department of Health and Human Services lagged about two weeks behind the others with its submission, said Harvey, because it sought to make the cuts surgically, as opposed to lopping off entire programs. DHHS, including the Medicaid system, has a budget of more than $1.9 billion for the current year, which represents about 31 percent of state spending.

“Clearly, I think we’re done talking about doing more with less,” said Harvey Monday during an interview. “Now, we’re trying to do less with less. The question is how do we maintain the safety net?”

The cuts announced Friday are for the two-year budget that begins July 1, 2009. The proposals for 10 percent reductions, along with others from every other department, face a review process involving each commissioner and Baldacci before being considered by the Legislature in the next session.

Among the cuts under consideration within DHHS are the following:

• ­A tightening of eligibility requirements for services at private non-medical institutions, which would achieve $17.6 million in savings over two years. “It’s fair to say that it’s hundreds of people (who would be affected by this item),” said Harvey.
  
  
• The elimination of some services in the MaineCare program for people over 21 years old. These services are for people who meet eligibility requirements but are not guaranteed coverage by MaineCare, including parents who earn between 100 and 150 percent of the federal poverty level, childless adults and some people with disabilities. This measure, which would save $25.3 million during the two-year budget, would also eliminate some social services, podiatry, optometry, physical therapy and psychological care. “This would pare (MaineCare) back to a more commercial-like (health insurance) package,” said Harvey, who added that there are about 16,000 parents insured in this group.
  
  
• A cap on administrative costs across the department of 10 percent of spending, for a savings of $20 million.
  
  
• A reduction in reimbursements to critical-access hospitals and hospital-based physicians, which would save $18.4 million over two years. This item was considered and rejected by the Legislature during the last session, said Harvey.
  
  
• The institution of a wide range of approximately 150 cost-saving initiatives developed by DHHS staff members – ranging from changes in transportation programs  to elimination of contracted services – for an estimated $98 million in savings over two years.

Harvey said arriving at these proposals was “not only challenging but exhaustive,” especially since the 10 percent cut exercise came shortly after the department developed its initial spending proposal and just after Baldacci announced a curtailment process to cut statewide spending in the current budget by $150 million.

Ryan Low, commissioner of the Department of Administrative and Financial Services, said the $150 million curtailment equates to a 5.38 percent cut in money that was already budgeted. That’s particularly difficult, said Low, because there are only seven months left in the fiscal year over which to spread the reductions.

Agencies are developing plans of how to meet the curtailment order, which are due to Low by Thursday at noon.

Baldacci warned state departments on Oct. 10 that a curtailment order might be necessary because of declining revenues. Exactly how much those revenues have declined is not yet known. The Maine Revenue Forecast Committee is due to release its projections by Dec. 1.

“We felt it more prudent to start preparing for that now,” said Low. “It goes back to the overall message on the budget: We’re tightening our belts and have to make some difficult choices.”