Gov. Paul LePage announced Tuesday that the state is poised to repay Maine hospitals hundreds of millions of dollars in past Medicaid debt, bringing closure to an issue that has simmered in Maine for decades and was counted as one of the most significant accomplishments of the recent legislative session.
According to State Controller Terry Brann, Maine’s hospitals will be paid some $490 million they are owed in past Medicaid debt this month. That sum represents the state’s share of $183.5 million plus a federal match of $306.7 million. LePage and lawmakers have long discussed the debt being approximately $484 million; the higher number reflects the most recent audit.
Brann said he expects the payments to be made by mid-September and that the state is in the process of providing data to the federal Center for Medicaid Services to ensure the federal portion of the debt is paid on time.
The state’s bond, which will total about $220 million including an interest cost of 3.79 percent, will be repaid with revenues from the state liquor contract, which are expected to increase next year when the contract is renegotiated and renewed. This form of bond is different from a general obligation bond, which is granted on the state’s credit and repaid in most cases from the General Fund, which derives primarily from tax revenues and supports most of state government.
LePage made paying the hospital debt one of the top goals of his administration. Though there was initial disagreement between Republicans and Democrats about how to do it, the two parties eventually agreed to LePage’s approach.
“With the sale of the liquor revenue bond, Maine hospitals are now just weeks away from being repaid more than $484 million in welfare debt owed to them,” said LePage in a press release. “This is good news for these employers and their local communities.”
(As a side note, LePage’s use of the word “welfare” to describe Medicaid and a number of other social services has long been a point of contention for Democrats and others who say the term belittles the recipients, some of whom have little or no control over their personal circumstances.)
Assistant House Minority Leader Alex Willette, R-Mapleton, hailed the sale of the revenue bond in a prepared statement.
“The beauty of this plan was that it took the state’s liquor revenue out of the hands of future Legislatures and dedicated it to paying off Maine’s debts,” said Willette. “Democratic legislative majorities over the years have made lots of bad decisions with the state’s finances, so I’m glad to see us take this major step toward fiscal responsibility.”
House Minority Leader Kenneth Fredette, R-Newport, agreed.
“Those who don’t study history are doomed to repeat its mistakes, and paying off our old Medicaid bills should serve as a reminder of how fiscally disastrous our medical welfare program can be when expanded,” said Fredette. “Government overspending has very real consequences for future generations and for everyone who pays taxes.”
According to an exhaustive analysis done in March by BDN reporter Matthew Stone, Medicaid debt to Maine hospitals has been accruing since the early 1980s. That’s when the state started making weekly “prospective interim payments” to hospitals that were based on estimates of the yearly total. While the system was designed to decrease the lag between a hospital providing care for a patient with Medicaid and being paid, it proved over time to be flawed as health care costs rose and the state significantly expanded Medicaid services. Medicaid enrollments in Maine rose 78 percent between 2002 and 2011 and spending more than doubled between 1997 and 2012. The debt grew significantly in the 2000s and peaked at $546.4 million in 2008. Today, Maine ranks fourth in the country for its percentage of residents — 27 percent — covered by Medicaid.
After a legal battle in the courts, Gov. John Baldacci began paying the old debt in 2006 and LePage followed up in a 2011 supplemental budget bill, paying hospitals for services they provided through the middle of 2009. The liquor contract revenue bond being sold this week will bring the state and federal governments current and due to changes in the way hospitals are paid for Medicaid services, the debt isn’t expected to mount again.
Here is a breakdown, provided by Brann, of what each of Maine’s hospitals will be receiving: