During the recent legislative session, the King administration introduced an innovative plan that could have contributed funds towards the budget shortfall while at the same time strengthening the state’s Medicaid program. This plan, otherwise known as a “tax and match”, is an allowable provision of the federal Medicaid program and is already being used in many other states. It would produce an additional $19.5 million dollars for Maine hospitals, physicians and other health care providers.

The plan would place a “tax” of approximately one half of one percent on the gross patient revenues of Maine hospitals. That would yield a little less than $15 million. $10 million of that would be returned to the hospitals in the form of higher reimbursement rates for the services they provide to low-income people in Maine. That amount would be “matched” by an additional $20 million in federal funds.

The hospitals end up with $31 million. Although a handful of hospitals would lose revenue from the plan, the industry as a whole stands to gain in excess of $16 million. And those few hospitals that do lose money, all of them, save one, fare better under this plan than under the recently passed budget.

But that’s not the end of the story. The plan allows for $3.6 million ($1.2 million of state funds matched with $2.4 million of federal funds) to increase reimbursements for other health care providers, such as physicians, physical and occupational therapists. In Maine, these providers are currently paid at a much lower rate than what hospitals receive, even though they are just as essential in providing medical services. And there would still be $3.5 million remaining to put towards the budget shortfall.

There was a great deal of misinformation circulated about this plan, almost exclusively the work of its opponents. This was unfortunate and unnecessary. Early in the process, the Department of Human Services reached out to the Maine Hospital Association to gather their input. They identified some concerns about the plan and promised to provide us with their recommendations. But they never did.

Instead, MHA chose to confuse the issue by claiming that hospitals would have to pay more than what DHS estimated. This was disingenuous on their part because the proposed legislation specifically stated that hospitals as a whole would receive at least as much as they paid into the plan.

Moreover, our numbers are accurate. We based the amount paid and the amount matched on hospital gross revenues for 1999, the most recent year available to us. MHA compared our 1999 estimates to hospital gross revenues in 2002, a number to which only they had access. They came to the obvious conclusion that the amount paid in 2002 would be higher than in 1999. What they would not acknowledge was that the corresponding amount of federal match for 2002 would be proportionately higher as well.

MHA also tried, unfairly, to link this plan to the sick tax of the early 1990’s. Those old schemes failed because the amount of the match returned to the hospitals was based upon the amount of free care they provided, an ineffective measure of the amount of tax paid. Indeed, Medicaid subsequently disallowed these kinds of structures.

By contrast, the match under this new plan is based on each hospital’s total MaineCare revenues, a much more accurate measure of their business. This ensures that the match returned to the hospitals is consistent with the amount of work they do serving low and moderate-income citizens in Maine.

One of our goals during the budget deliberations of the past year has been to preserve the current level of services in and eligibility for the Medicaid program. Even though we have been successful thus far, the problem is not getting any easier. This tax and match plan was initially shelved; but, as the Bangor Daily News wisely noted in an editorial last month, any plan that offers additional funding to hospitals, increases reimbursement rates for health care providers and contributes money towards the state’s revenue shortfall deserves a second look.

The incoming governor and legislature will face a challenge even more difficult than the one resolved by the last, namely balancing the state budget while paying for costly health care for our most vulnerable citizens. The tax and match plan does both. While it does not represent a long-term solution to the rising cost of health care, the plan is a major source of revenue available to the state that can strengthen our health care system and add millions in federal funds to the Maine economy. It would be irresponsible of us not to do all we can to make it happen.

Kevin W. Concannon is commissioner of the Maine Department of Human Services.