Wednesday, April 16, 2014
Mainers received good news last week. State legislative leaders from both parties publicly agreed that it’s time for Augusta to pay Maine’s 39 hospitals the $484 million they are owed. Hospitals have been laying off employees and postponing the purchase of new equipment to treat patients because our state government has not fully paid its bills for years.
As the graph below shows, this enormous hospital debt started accumulating in 2000 and accelerated during 2002-08. In order to “balance” the State’s annual budget as required by law, our elected officials simply chose not to fully pay the hospitals for services provided to Maine’s unusually large number of Medicaid (MaineCare) enrollees. MaineCare is our biggest and most costly welfare program, providing health care services to 341,000 Maine residents – 27% of our entire population. MaineCare spending consumes approximately 21% of all state government outlays.
As the State Legislature debates the details of using the revenues from liquor sales to pay off the $484 million hospital debt, they might consider how the national credit rating agencies view this issue.
During my two years as State Treasurer, the rating agencies regularly asked how Maine was planning to control spending in our Medicaid program. They further asked when state government was going to pay off the accumulated hospital debt resulting from the Medicaid spending.
In reaffirming Maine’s Aa2 credit rating on May 17, 2012, Moody’s Investors Service issued a negative outlook because of, in part, our unaffordable Medicaid program:
“The negative outlook reflects Maine's recurring challenges on the spending side of its budget, primarily in the Department of Health and Human Services (DHHS) which includes Medicaid…”
For many years, Moody’s has been critical of state government for not paying its bills, “a large portion of which is related to Medicaid reimbursements due to hospitals.”
On May 25, 2012, Standard & Poor’s also reaffirmed Maine state government’s AA credit rating. In doing so, it commented on our unsustainable Medicaid program and the resulting hospital debt:
“We understand MaineCare, the state's Medicaid program, continues to face operational and fiscal challenges… State officials also indicate they remain committed to making Medicaid payments to hospitals and other providers on a timelier basis, reducing the liability, which totals nearly a half a billion dollars…”
On January 22, 2013, Fitch Ratings downgraded Maine’s credit to AA. In addition to other factors, the Fitch report cited “(tax) revenue underperformance exacerbated by growing Medicaid costs.”
Maine state government has a long history of trying to keep our abnormally large and overly generous Medicaid program afloat. Medicaid spending is crowding out our ability to adequately fund other essential programs and services, like road and bridge repair. The credit rating agencies understand that Medicaid spending is preventing Augusta from building up our so-called Rainy Day Fund to cushion against future economic downturns. Moody’s and Standard & Poor’s will probably update their assessments of Maine’s credit ratings in May.
All of this is important because it directly impacts the lives of Maine families. Paying off the $484 million hospital debt and right-sizing our unsustainable Medicaid program will have a long-term positive impact on our state finances. Beyond the views of the credit rating agencies, such fiscal discipline will help lower taxes and attract business investment and jobs to Maine. Job creators favor states that pay their bills and live within their means.
Maine has 35 years of evidence that spending more, taxing more, regulating more, and borrowing more does not result in more jobs and fatter paychecks for our citizens. Within the next few months, our state legislators have a chance to help build a more business-friendly environment in Maine by paying the hospitals the $484 million they are owed, and by right-sizing our unaffordable Medicaid program. This will preserve our critically important health care safety net for the disabled, elderly sick, and working poor. And, it will help our fellow Mainers find jobs during these extremely difficult times.
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.