AUGUSTA – Maine’s new governor is committed to correcting the state’s health care crisis, but at least one group says John Baldacci’s proposed biennial budget is steering health costs in the wrong direction.

The Maine Hospital Association said Wednesday the governor’s plan to flat-fund Medicaid payments at the 2002 rate will have harmful effects on all hospitals, intensifying already rampant cost-shifting and accelerating the upward spiral of health care costs.

In presenting his belt-tightening budget, Baldacci explained that 2003 and 2004 Medicaid reimbursement rates would include no adjustment for inflation.

Simply failing to adjust for inflation would entail a $15 million hit to Maine hospitals, the MHA estimates, but other cuts aimed at equalizing inpatient and outpatient reimbursement rates bring the total impact closer to $60 million over the next two years.

“A quarter of Maine’s hospitals are already operating in the red,” said MHA spokesman Mark Ishkanian, “And the rest are barely breaking even. The governor’s budget will make things much worse for all Maine hospitals.”

Hospitals unable to recoup their expenses when treating Medicaid patients have no choice but to pass the cost on to other users in the form of higher charges, he said. In turn, insurance companies covering those patients respond by raising insurance premiums, with the ultimate effect of pricing insurance beyond the reach of more Maine people. The state estimates that about 165,000 Mainers already have no health care coverage.

“This doesn’t solve the problem,” Ishkanian said, referring to the state’s budget crisis. “It just shifts it from one arena to another.”