Hospitals wary of tax-and-match

Kevin Concannon’s des-cription of events this fall regarding the administration’s proposed tax-and-match scheme for Maine’s hospitals is simply wrong (Op-ed, Dec. 7-8). Because of the gross mischaracterizations contained in his commentary, the record must be clarified.

Tax and match is a scheme by which a state taxes hospitals and returns a portion of the tax to the hospital through increased Medicaid reimbursement which, in turn, triggers additional 2-for-1 federal Medicaid dollars. The intent of this is for most hospitals to receive more money back from the state and federal government than they paid in taxes and, most importantly, for the state itself to reap a windfall.

It was clear to us from the start the Department of Human Services [of which Concannon is commissioner] was not interested in a working relationship with the Maine Hospital Association. Prior to the release of their first proposal to legislative leaders, the association was phoned the night before and informed of the tax-and-match proposal. Our views were not sought … we were told how it was going to be.

When MHA requested a meeting to review the proposal and corresponding spreadsheets, we were denied that request. In fact, the department went so far as to prohibit a meeting arguing they did not want us to identify any weaknesses in their plan that could be used to defeat the proposal in the legislative session. That is not a collaborative relationship. That is a department that is founded on a mistrust of the provider community.

Moreover, the department had little patience for a comprehensive analysis of their proposal with their “one foot out the door” attitude – hurriedly throwing a plan together for purposes of a special legislative session. Our association could not afford to be so glib and careless given the serious long-term consequences for our 38 nonprofit, community hospitals.

Federal rules governing these types of funding schemes require there to be losers. The Maine Hospital Association was not going to blindly endorse a funding scheme that could cost our hospitals millions of dollars, risking their financial security.

In fact, our concerns were immediately justified. The department chose to broadcast their proposal to legislative leadership and the press prior to briefing us, proclaiming that only two hospitals would lose money. When finally given the chance to review the details, we had to inform the department their proposal was fatally flawed as it was based on inaccurate information regarding a federal law. Under their first proposal, nearly all hospitals would have lost money, not two, as the department had told the governor and legislative leaders. Our fears were confirmed. The department acknowledged the flaws and went again behind closed doors to produce a new plan.

During our eventual review of their next proposal, we brought in national experts who have vast experience in how the federal government reviews these tax-and-match schemes. As we did our homework, we posed additional questions to DHS about their analysis. They responded to our questions and offer for assistance by saying their plan was right and they intended to go forward with it unchanged.

We believed their proposal was poorly developed, likely to be rejected by federal regulators, and would not be of use in addressing the much larger shortfall projected for the ’04-’05 biennial budget. In selling their plan, the department distributed spreadsheets that created a misleading picture regarding benefits accruing to hospitals. In fact the department grossly understated hospital tax liability by using three-year-old data. Upon further analysis by experts, it became clear that DHS’ plan had other major problems. Maine’s federal Medicaid cap was cited, even originally by the department, as a potential hurdle preventing the reimbursement scheme from materializing. With DHS refusing to budge, there was no way we could make a plan work.

Our association represents 38 non-profit, community-governed hospitals, many of whom are struggling to continue to provide critical services to their communities in the face of lower reimbursements from both government and commercial insurance programs. MHA would not turn its back on millions of dollars of additional federal funds for the Medicaid program if we honestly thought this tax- and-match plan would create the net gain in funds that Concannon and his department claim. We simply could not believe the fiction novel written by DHS no matter how much they claimed it was true.

We’ve all been taught that if something sounds too good to be true, it probably is. The department’s proposal would have become a vessel of false hopes for hospitals. They’d be paying a new sick tax with the promised “match” being far smaller than the tax. Our concerns with DHS’ plans proved to be real and legitimate. Our work done analyzing the proposal was fair, accurate and necessary. To have Concannon spread falsehoods and characterize our efforts as “disingenuous” is not only wrong but it is a disservice to sound public policy development and has no place in Maine.

Hospitals are acutely aware of the difficult financial challenges facing lawmakers and the new Baldacci administration. We hope that if another tax-and-match plan is presented to the new Legislature, we will have been invited to work closely with administration officials in crafting a plan that stands the best chance of passing federal scrutiny.

Medicaid will surely be a large and inviting target for budget cuts next year. What happens if Medicaid is cut? The 2-for-1 loss of matching federal dollars will be devastating to a poor state like Maine. Medicaid beneficiaries will continue to be treated by hospitals. However, the hospital will be reimbursed even less for its services than it is today, shifting more costs to other hospital users whose insurance premiums will go up yet again.

We need a better approach to meeting the needs of all Maine citizens. Budget proposals that tax but don’t match, place in jeopardy much needed federal Medicaid 2-for-1 matching funds, or shift costs from one group of patients to another are troubling approaches to solving the budget crisis. We need to develop a solution that does not jeopardize the financial health of our hospitals so they can continue to meet the diverse needs of their communities. The challenge for the new administration and Legislature will be to find a way to balance the budget while keeping the health care system on which we all depend healthy.

Steven R. Michaud, of Topsham, is president of the Maine Hospital Association.