There is nothing unreasonable about Maine paying its hospital debt independent of expanding MaineCare.
MaineCare is Maine’s version of Medicaid. It provides health care to low-income persons. It is jointly funded by the state and federal governments.
Maine hospitals are owed $484 million for service they provided to MaineCare beneficiaries.
The federal government pays a percentage of the cost of a state’s Medicaid program based largely on a state’s per capita income. The federal share ranges from about 50 percent to more than 70 percent. The lower a state’s income, the more the federal government pays.
The federal government paid about 72 percent of the cost of MaineCare in 2011, or more than $1.72 billion. Maine spent about 17 percent of its General Fund on MaineCare in 2011.
Pursuant to this matching formula, the federal government will pay $298 million of Maine’s hospital debt if Maine pays $186 million.
This debt is mostly a result of Maine’s effort to reform health care and insurance beginning in 2003.
The reform expanded state-provided MaineCare from covering 200,000 Mainers in 2002 to covering 361,000 in 2011. That’s 27 percent of our population and ranks Maine the state with the fourth highest percentage of its population receiving Medicaid.
It did so by raising the amount of income a person could earn and still qualify for MaineCare. The reform also created a state-subsidized insurance plan, DirigoChoice, for consumers like small businesses and self-employed people who didn’t qualify for MaineCare, but had trouble getting private insurance. It established mechanisms to contain costs such as by increasing coverage and reducing charity care.
Unfortunately, the reform effort did not live up to aspirations. DirigoChoice cost more and attracted fewer enrollees than anticipated. Its funding mechanism, beginning with the savings offset payment, was problematic.
Meanwhile, the state got behind on paying for its share of MaineCare. When the state didn’t make its payments, the federal government didn’t make the matching payments. The recession made the situation worse. In January, credit rating agency Fitch downgraded Maine’s credit rating, in part based on persistent budget gaps and the shortfall in the MaineCare program. That could force Maine to pay higher interest rates on new debt.
Against this backdrop, the Affordable Care Act encourages states to expand Medicaid coverage by promising to pay 100 percent of the cost of covering new beneficiaries for the first three years, about 93 percent of the cost of the expansion for the first nine years, and at least 90 percent of the expansion permanently. It creates mechanisms to contain costs like health insurance exchanges. The Kaiser Family Foundation predicted that Maine would save $690 million over the next 9 years if all states expand Medicaid.
Not everyone agrees with those predictions. In any event, that money isn’t really saved. Costs are shifted from the state to the federal government. But the money ultimately comes from the same source: taxpayers. And taxpayers may not be able to afford the bill.
The ACA is supposed to reduce cost by increasing coverage, reducing inefficient, uncompensated care, improving health, and spreading the cost and reduced risk over a larger pool. That sounds like what Maine tried in 2003.
Maybe bigger is better. Maybe MaineCare didn’t work because it wasn’t big enough. Maybe the ACA will achieve economies of scale that MaineCare could not. Maybe it’s too big to fail. Maybe Maine would be foolish not to take as much federal aid as it can get.
Maybe principles like individual responsibility, taking care of your own, not going into long-term debt to fund short-term needs, and practicing austerity in response to over-extension are obsolete relics of a bygone age.
Maybe. But it is not unreasonable to be wary.