January 23, 2011

Maine Voices: State should pay its hospital bill

If lawmakers don't approve Gov. LePage's $69 million in back Medicaid debt, the feds will dock the state $20 million more.

AUGUSTA — Gov. LePage has proposed taking quick action on one of his central campaign themes, paying down a portion of the nearly $400 million debt the state has accumulated with Maine's hospitals.

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If hospital beds are to be filled with patients needing treatment, the bills have to be paid – and Gov. LePage's proposal would be a good way to do that.

2009 Press Herald file

Steven Michaud
is president of the Maine Hospital Association (www.themha.org), headquartered in Augusta.

The supplemental budget he has proposed includes $69 million for the hospital debt. This funding draws down another $180 million in federal funding for a total of $250 million. The Legislature should support him and adopt the supplemental budget quickly.

Paying the debt is good news for Maine's 39 nonprofit community hospitals. This is also good news for Maine's taxpayers. If the state pays its debt sooner rather than later, Maine taxpayers will save approximately $20 million.

The state and federal Medicaid program (MaineCare in Maine) provides health coverage for low-income citizens. The program is primarily administered by the state government. The state and federal governments decide who gets coverage, for what services and the state ultimately sets reimbursement rates.

In Maine, hospitals are reimbursed roughly 75 percent of their costs for providing services to Medicaid patients.


Unfortunately, the state has not even paid this low amount. For years, the state has been making weekly estimated MaineCare payments to hospitals. These estimates were supposed to be followed by end-of-year "settlements."

These "settlements" represent the state's fulfillment of its obligation to pay providers for services rendered. In other words, they are the final bill.

Settlements don't increase the rates at which care is reimbursed; they are not bonuses. Settlements are simply bills for the care hospitals previously delivered to MaineCare patients.

The state simply has not made these settlement payments.

That is not to say that this issue has not received attention in the past. The former administration and Legislature settled similarly sized debts from the 2003-2006 period. Unfortunately, the underlying problem did not get solved.

For 2007 through 2009, the debt owed to Maine's hospitals is approximately $250 million. The state is normally obligated to fund one-third of the costs of Medicaid, including the hospital debt, and the federal government would fund two-thirds.

However, as part of the federal stimulus legislation, the federal government agreed to pay a larger share of Medicaid costs – for a little while. The enhanced federal rate began phasing down beginning Jan. 1.

If the debt is paid before March 31, the state would need to fund approximately $69 million of a $250 million payment. If the state waits a mere 92 days (until after July 1) the state would need to fund $89 million of the debt. This is a $20 million late fee.

Gov. LePage has prudently argued for paying the debt sooner rather than later.

Some have suggested that this payment should be delayed until the Legislature adopts its 2012-13 biennial budget. However, the biennial budget won't be adopted until May or June and payments pursuant to that budget won't begin until after July 1. Waiting 92 days and paying a $20 million penalty just doesn't make sense.

All of Maine's community and psychiatric hospitals are nonprofit. Their mission is to provide high-quality affordable care to the communities they serve with a fundamental goal of improving community health status. In Maine, hospitals ensure access by playing a much broader role in the delivery of health care services.

While nonprofit, hospitals are also big organizations. They employ tens of thousands of Mainers and they generate hundreds of millions in economic activity.


Because of their size, they are too often viewed as immune to budgetary pressures caused by the settlement debt and recession. That is not true.

The average operating margin of Maine's hospitals is a mere 1.2 percent, down from 2.0 percent last year.

Maine hospitals pay over $80 million in taxes to the state (yes, hospitals pay taxes) and these taxes are up almost 400 percent since 2002.

Uncompensated care, which is the sum of both "bad debt" and "charity care," was over $330 million in 2010 and is up almost 65 percent in five years.

We understand how difficult budget times are for the state. We're hopeful that legislators on both sides of the aisle will support this budget and help their local hospitals. 

— Special to the Telegram


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