Thursday, December 5, 2013
There has been a lot of talk lately about whether or not the State Legislature will pay 39 Maine hospitals $484 million they are owed for services provided to Medicaid patients. After 12 years of this growing debt, on Monday, Democrat legislative leaders agreed with their Republican counterparts and Governor LePage to finally pay the hospitals what they are owed.
This is good news for the thousands of patients treated by our hospitals every day, and for the 30,000 Mainers who receive paychecks from the hospitals every two weeks. The $484 million debt has caused some hospitals to lay off workers and others to postpone the purchase of updated equipment to treat patients.
Currently, there are two competing plans to pay back the hospitals, both using future revenue from the instate sale of liquor. Maine is one of 17 states that, by law, controls the sale and distribution of spirits within its borders. The people of Maine essentially “own” the revenue generated from liquor sales, approximately $45 million last year.
The Democrat proposal renegotiates a ten-year contract, expiring on June 30, 2014, with a private company given the right to wholesale sell and distribute liquor in Maine. The new contract would require an upfront payment of roughly $186 million from the winning bidder. That amount would draw an additional $298 million from Washington to pay the total $484 million owed the hospitals. The private company would presumably borrow the $186 million upfront payment, adding the interest cost to the overall contract.
The Republican/Governor’s proposal borrows the $186 million upfront payment by the State selling liquor revenue bonds to investors. Washington would contribute $298 million the same as the Democrat plan in order to pay off the total $484 million hospital debt. The revenue from the liquor sales would pay the annual interest (and principal back) to the bondholders at, likely, a much lower tax-exempt rate than possible by a private company.
Right now, there appears to be two main differences between the competing proposals: News reports indicate that the Democrat plan might be contingent upon expanding our Medicaid program, called MaineCare. The Republican/Governor’s plan requires revenues from liquor sales be used to pay off the hospital debt, rather than allow the funds to be directed to other programs such as the already unaffordable Medicaid program, called MaineCare.
As our elected officials decide on the final details of whichever plan they choose, I hope they keep in mind that the dramatic overspending in our Medicaid program over the past dozen years created the hospital debt. It doesn’t make sense to further expand this unsustainable program that Augusta is, now, struggling to right-size.
The graph below shows the 69% surge in Medicaid enrollment while our state population inched ahead only 3%. Funding for Medicaid is crowding out our ability to maintain our roads and bridges; to properly care for the most vulnerable among us; and to adequately fund other core government services.
Over the next several weeks, let’s encourage our state government officials to do what’s right for all of the good people of Maine. They deserve a government that helps the working poor, disabled and elderly sick, and also one that they can afford.
Bruce Poliquin is the former Maine State Treasurer and a 2012 Republican primary candidate for the United States Senate. He has 35 years of experience owning and managing businesses. Bruce is a proud third-generation Franco-American Mainer and Harvard University graduate. Visit BrucePoliquin.net for his most recent commentary and analysis on media outlets throughout the State about the important issues facing Maine families and their jobs.