House Speaker Mike Saxl’s plan to offer cheaper health care coverage to employees in small businesses could save Maine tens of millions of dollars a year while improving care for hundreds of thousands of Maine residents. The plan is so good it sounds illegal; in fact, the speaker is still waiting to find out whether it is.

LD 1784 contains a lot of important language about aggregating small-business employees, negotiating fees with hospitals and doctors, encouraging private insurers to bid on providing insurance for these customers and offering the state as a backup insurer if no bids come in. But the plan turns on the simple assumption that Maine can reduce the price of insurance to residents by persuading the federal government to pick up a large part of the bill, through Medicaid.

Can a state, without adding tax dollars, arrange to have private business divide the cost of employees’ health care costs between the business and the federal government? Can it demonstrate, as required, that the resulting coverage does not actually cost more because it offsets larger medical costs later? And if Maine can persuade the feds on both accounts, how long will it be before all other states try the same thing and overwhelm the federal

government’s ability to pay?

Speaker Saxl asked the first question to Cindy Mann, a former government Medicaid official and now a senior fellow at the Kaiser Commission on Medicaid and the Uninsured. Her reply was that, “As a general proposition, there is no bar that prevents employer contributions, fees or other voluntary payments to be used as a state match for Medicaid purposes, assuming the employer payments would be made to the State (or the State Board.)” Even more tempting for health care reformers, she adds that, “States have options under two

provisions in Medicaid law … to disregard income in order to extend eligibility under Medicaid to individuals who otherwise would not qualify for Medicaid.”

That is, states might collect a portion of health care costs from a business or citizen, based on a sliding fee scale not to exceed 5 percent of income for people earning 300 percent of the poverty level, match it with federal Medicaid money and provide affordable health care coverage. If the federal government is indeed willing to go along in paying for health care in Maine, the savings would be enormous, raising doubt about the second question, cost neutrality. The top level of 300 percent of poverty is an income of about $53,000 a year for a family of four, not poor by any Maine measure, meaning that a significant percent of the Maine population would qualify for the subsidy.

Unless, that is, other states take a look at what Maine does and decide their residents too would like to save a billion or two from their health care bills and apply to do the same. At that point, the Bush administration either decides to fund the largest health care program in history or it tells Maine that it no longer can use Medicaid for this purpose. Given the dismal state of health care coverage, especially for small employers, the risk provides an interesting choice for Maine lawmakers.

It would be prudent, however, to ask the Centers for Medicare and Medicaid Services not only for assurances that what this bill proposes to do is allowed but what similar version might be allowed and how Maine might be assured that it could count on it still being allowed once all the other states apply. With those assurances in hand (and in writing), lawmakers should send a thank-you note to Washington and proceed with the plan.