Medicaid, Dirigo and health care gambling

Maine, the state that does not want gambling, is gambling big time now on health care. The game of chance has been brought on by huge overruns in state spending on Medicaid, the government insurance for the poor. The resulting state budget deficit has been the cause of a bitter struggle among the state’s political leaders, which concluded last Friday night when the Legislature’s Democrats, using their majority muscle, body slammed the minority Republicans to the political mat and passed the Democrats’ version of a supplemental state budget. A bad night in the ER can involve bleeding and barfing and gross, yucky stuff, but seems tame in comparison to some of the recent nights in Augusta.

The problem with that budget, besides the political bruises and pile of bile it left behind, is that it gambles more than Pete Rose. If the governor and the Democrats got it right, Maine may indeed be well on its way to universal health insurance and some control of health care costs in Maine. If they got it wrong, there will soon be more red ink in Augusta than there is cleavage on a busy day at Old Orchard Beach.

The largest gamble is the expansion of Medicaid eligibility to cover more of Maine’s low-income residents. This expansion, scheduled to occur in July, could add 70,000 Mainers to the Medi-caid rolls. Combined with the planned Dirigo Health insurance for other Mainers, the two could cut the number of Mainers without health insurance almost in half.

In order to expand Medicaid eligibility without blowing up the state’s budget, however, Medicaid costs will have to be controlled. There is only one catch; no one has ever done that effectively. Even without the proposed expansion, exploding costs for current Medicaid recipients have hit the current state budget like a smart bomb and blown a $200 million hole in it only eight months into the budget period. About half of that cost increase comes from an earlier expansion in Medicaid rolls.

The costs have proven hard to predict, too. In fact, the state’s ability to predict Medicaid costs accurately has traditionally been so bad that whatever process it used to do so could probably not predict daybreak.

Expanding Medicaid enrollment then also magnifies errors in predicting those costs; the magnitude of the error grows as the number of enrollees grows. That makes state budget planning more difficult.

The next gamble is that the federal government will allow the use of federal dollars to subsidize the Dirigo insurance policies for other Mainers. The Baldacci administration is counting on those dollars to fund the subsidies so the new insurance product can be provided to employees of smaller Maine businesses at a price they can afford. Fifty-three million dollars has been set aside for that purpose. The nightmare scenario is that the feds, faced with their own budget deficit approaching $500 billion, might say no and force Maine to pay the money back.

Tying the Dirigo plan’s success so tightly to Medicaid expansion represents another political and policy crap shoot. During the budget battle, the governor and the Democrats adamantly refused to postpone the July Medicaid eligibility expansion because they believe the expansion is inextricably linked to rollout of the Dirigo plan later this year. This linkage, however, represents a threat to the Dirigo plan’s future. If the Medicaid budget continues to run amok in the red the resulting budget deficits may strip the state budget of its ability to support the Dirigo plan, and perhaps strip Gov. Baldacci of political support for his Dirigo baby.

If all of that is not enough, the governor and the Democrats are also gambling that the recent process of closing the budget gap has not permanently ruptured the relationship between the two parties in Augusta to the point that they cannot work together. While few state policy issues compare in importance to health care, other crucial issues do loom, issues on which Democrats and Republicans must cooperate to achieve progress.

The reason Gov. Baldacci is willing to gamble on all of this – his relationship with Republicans, state budgetary ruin, etc. – is that he is rolling the dice for the future of health care in Maine. His Dirigo Plan may not be perfect, but it is the only plan that exists. If it fails, the health care free-for-all that currently functions as the state’s health plan will continue unabated to disaster, including financial disaster.

By comparison, Gov. Baldacci feels that risking untold millions in red ink along with the permanent ire of Republicans legislators is worth every bit of political mud wrestling and every sleepless night. He and other Dirigo plan supporters rightly fear that if they blink, if they pause in the march to implementation, the plan will be torn apart like a big carcass on the African plains. That, too, would be a disaster costing Maine untold millions in runaway health care costs.

The Baldacci administration and the Democrats are gambling that the Medicaid expansion and the Dirigo plan will ultimately bring in additional money and health care cost containment. That in turn would protect the state budget against the effects of the Medicaid expansion, and protect the state’s economy against the debilitating effects of runaway health care costs. If they are right, they will be applauded, all will be forgiven, and state governments around the country will be asking for the Dirigo recipe. If they are wrong, Baldacci and the Democrats will be guilty of having set the state’s budgetary tail on fire in the vain hope that the flames of Medicaid cost increases could be controlled before our fiscal assets get cooked.

At this point, the budget is done, the dice have been rolled, and all we can do is hope that Gov. Baldacci has not rolled craps. And we thought this governor did not support gambling in Maine.

Erik Steele, D.O. is a physician in Bangor, an administrator at Eastern Maine Medical Center, and is on the staff of several hospital emergency rooms in the region.