January 15, 2013

Moody's warns Maine about credit downgrade

Its Medicaid shortfall and debt to hospitals could lead to a lower rating and increased costs to borrow.

By Kelley Bouchard kbouchard@pressherald.com
Staff Writer

Moody's Investors Service issued a warning Monday that Maine's continuing Medicaid budget problems could hurt the state's credit rating.

The bond-rating agency noted that the U.S. Department of Health and Human Services last week denied two of four Medicaid funding waivers sought by Gov. Paul LePage.

The Obama administration allowed funding exemptions that will save the state $4.5 million in Medicaid costs in the last four months of the fiscal year ending June 30. However, it denied other exemptions that would have saved a total of $23 million to help offset a Medicaid revenue shortfall that's topping $100 million, according to Maine officials.

Moody's issued the warning as a "credit negative," which doesn't change Maine's bond rating but warns of a potential downgrade.

A lower credit rating could increase interest rates that the state pays to borrow money when it issues bonds.

"Moody's declaration of 'credit positive' or 'credit negative' does not connote a ratings change," spokesman David Jacobson said in a written statement. "We are stating what the potential impact of these actions and decisions could be on an issuer's credit rating."

Maine's current rating is Aa2/negative outlook; Moody's added the negative tag in May, Jacobson said.

Aa2 is the third-highest of 21 ratings offered by Moody's. The average state rating is Aa1, which is one notch higher.

"While the health care deficit is a small portion of the state's general fund, it is symptomatic of the mid-year budget gaps the state has endured for the last few fiscal years," Jacobson said. "Maine's health and Medicaid expenses have been an ongoing budget challenge."

Jacobson also said the $186 million in Medicaid reimbursements that Maine owes its 39 hospitals also hurts the state's balance sheet and reserve levels.

Staff Writer Kelley Bouchard can be contacted at 791-6328 or at:

kbouchard@pressherald.com

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