July 17, 2018
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Why hospitals say LePage’s plan to fund Medicaid expansion won’t work

Robert F. Bukaty | AP
Robert F. Bukaty | AP
In this Feb. 13, 2018, file photo, Gov. Paul LePage delivers the State of the State address to the Legislature at the State House in Augusta, Maine.
By Christopher Cousins, BDN Staff

The Maine Hospital Association called a suggestion by Gov. Paul LePage that it pitch in to fund Medicaid expansion “absurd” and rejected his claim that the hundreds of millions of dollars in uncompensated care it provides every year is because of what the governor called “bad business decisions.”

The dispute comes as the debate over how to extend taxpayer-funded health care to 70,000 more Mainers is set to resume Monday with the lawmakers voting on LePage’s veto of a bill that would provide funding for the first year. Though LePage has not produced a formal proposal, he has been touting the idea and has the authority to submit new bills whenever the Legislature is in session.

On Thursday, LePage said during a radio interview that increasing the hospital tax could cover the cost of expansion and that if more Mainers received taxpayer-funded Medicaid, hospitals could reduce or eliminate bad debt and charity care.

“If you increase the hospital tax from 2 percent to 4 percent, you’re eliminating charity care and bad debts. Now everyone will be covered,” LePage said. “It’s a wash.”

Jeffrey Austin, a lobbyist for the Maine Hospital Association, which favors Medicaid expansion, called that notion “absurd” and said the concept was already tried in the Affordable Care Act through increased federal Medicaid reimbursements, but Maine didn’t sign up.

“We do expect some reduction in the millions of dollars hospitals lose on charity care,” Austin said.

LePage’s eleventh-hour proposal, informal as it may be, represents the first time his administration has proposed a way to fund Medicaid expansion. It’s a dispute that has stagnated for years but is now fueled by a 2017 referendum approving expansion and a Superior Court judge ruling last month that the state must proceed with implementation. LePage appealed that decision to the Maine Supreme Judicial Court, which has scheduled arguments for July 18.

Complicating the matter is a more than $54 million bill enacted by the Legislature to pay for the first year of expansion. It was vetoed by LePage and is among dozens of vetoed bills that will receive final votes Monday.

Though it faces a challenging path to enactment, the governor’s proposal represents a change from the stance he took shortly after the November 2017 referendum, when he said he wouldn’t support any plan that includes tax increases.

House Democrats have blocked numerous LePage bills from consideration, and though it’s likely a new tax on hospitals would have the same fate, a spokeswoman for House Speaker Sara Gideon, D-Freeport, said she has no comment until there is a formal proposal.

According to data provided by the Maine Hospital Association, too many hospitals are already teetering on insolvency, and increasing the hospital tax — which currently stands at 2.23 percent of their gross revenue — would make the problem worse.

In 2016, according to a recent report by the association, the tax funneled $103 million to the General Fund — though about $81 million of that was returned to hospitals through what are known as supplemental pool payments. Austin said the net “loss” for hospitals was about $22 million and that the remaining sum is supposed to help fund Medicaid — though he said that’s hard to track.

“They can say they dedicate it to Medicaid, but if they simultaneously pull out General Fund dollars, it’s kind of a sham,” said Austin, who went on to question the logic of the state returning some of the revenue to hospitals in pool payments.

“The state doesn’t tax K-12 schools to pay for K-12 schools,” he said. “Why do providers of health care have to finance Medicaid?”

Regardless, the amount of hospital tax paid is dwarfed in comparison with the amount of charity care, which is care provided to low-income Mainers with no expectation of payment, and bad debt, which comes when patients don’t pay, absorbed by Maine hospitals. The association said those amounted to $570 million in 2016, more than double the $227 million figure from 2006.

Between 2012 and 2015, uncompensated care totaled more than 5 percent of all charges levied by hospitals. LePage claims that hospitals aren’t being aggressive enough about chasing debtors and blamed their losses on “bad business decisions.” Austin pushed back.

“After awhile, it costs more to keep trying to collect than it does to actually collect,” he said. “It’s rational business sense to stop losing more money chasing people who aren’t able to pay.”

Austin said that with between 17 and 20 Maine hospitals operating with negative profit margins between 2012 and 2016, increasing the hospital tax to fund Medicaid would make the problem worse — especially since reimbursement rates in the Medicare program were already reduced in the Affordable Care Act to fund Medicaid.

“We’ve already given,” Austin said.

LePage’s office wouldn’t commit to making a formal proposal regarding the hospital tax.

“The governor does not have a specific proposal but would like to have the conversation with leadership about alternative, sustainable methods of funding expansion,” spokeswoman Julie Rabinowitz said. “The Democrats have not been willing to have that conversation.”

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