TAX-AND-MATCH AND TRUST

To avoid a dreaded tax-and-match Medicaid funding plan that the governor’s office sought to help close the budget gap, Maine hospitals have offered simply to give the state the amount the state hoped to pry, indirectly, from the federal government. A straightforward solution, if the shortfall would be going away by the end of the fiscal year. Given that this is unlikely, the plan will return in the next legislative session, so the state and the hospitals have more work to do.

The tax-and-match plan is not especially complicated compared with other accounting tricks to get federal government funds to the states. It would increase a tax on hospitals, use that money to leverage the favorable 2-to-1 federal Medicaid match, return the tax money and more to the hospitals while leaving some of the funding with the state. Under the numbers from the Department of Human Services, this plan would have given the state $3.5 million to put against its shortfall, provide hospitals with $10 million in added funding and send $1.5 million to increase reimbursements to some medical specialists.

The members of the Maine Hospital Association doubt the numbers from DHS, do not trust the “match” portion of the plan to continue and feel like targets. As one representative testified this fall, “Hospitals are beautiful targets for taxing. The administrative burden of taxing hospitals is far less than taxing other providers. Hospitals can’t pick up and move to another state and hospitals will not refuse to accept Medicaid patients if they don’t like the reimbursement rates.”

The willingness by hospitals seemingly to give up $10 million annually and pay the $3.5 million to avoid tax-and-match speaks loudly. Lawmakers are willing to accept this alternative, and understandably so. Enough of them recall the $110 million problem created by the last Medicaid tax-and-match program, which the federal government decided not to continue funding, a decision that arrived after Maine government had become addicted to the hospital tax money.

It became a painful process of withdrawal even during relatively flush times. But, hospitals being easy targets and the shortfalls not likely to disappear, what happens next year and the year after? If other states are drawing down Medicaid dollars through this or a similar method, as DHS reports, and doing so would expand Maine’s health coverage without costing additional state dollars, count on this issue to return.

When it does, the state should have at a minimum the assurance from the Centers for Medicare & Medicaid Services that all parts of its plan are acceptable now and for the foreseeable future, that the plan reflects what other states are doing to capture this Medicaid money and that hospitals would have the option of waivers to, in effect, be held harmless by the tax maneuver. From the state, the hospitals would need statutory pledges to cap the tax rate at a level no higher than yields the maximum return from the federal government.

Hospitals still won’t like it with these assurances, and given their expensive experience in the 1990s, it is hard to blame them. But this would at least begin the discussion at a more productive place than occurred this fall.