Paying for Health Care

Part 2 of Gov. John Baldacci’s next budget seemed to shock Maine hospitals when released last week. The governor is proposing to take money set aside in the first part of the budget for future hospital payments and use it, largely, to cover a Medicaid funding reduction from Washington and part of a hospital settlement from the state’s own underfunding of the hospitals over the last dozen years. This shuffling of too few funds to cover costs is unsustainable, which is why a less-noticed part of his message Friday was more important long term than the lack of payment.

Hospital officials shouldn’t have been surprised by the cash-shifting. Federal Medicaid reimbursements in the next biennium will be down $73 million because of Maine’s rising incomes. The settlement for hospital underpayments goes back to 1993 and is worth $108 million. Maine government doesn’t have that kind of money to spare, and if Republicans are successful in cutting $250 million in loans in Part 1 of the budget, there won’t be places left to cut to make up the hospital money.

The choice then is a tax increase on everyone to provide hospitals with more cash – which they are certainly owed – or asking the hospitals to wait to receive their payments over a couple of years, just as property-tax payers have been waiting since 1986 for the state to fund 55 percent of local education. This isn’t fair and it isn’t the way the state should operate, but that’s the situation after many years of budgets that have not matched Maine’s fiscal reality.

That’s why when the governor said Friday that he wanted to work with Maine hospitals to reform the current hospital payment system so that it provides incentives for quality of care, the hospitals and the public should see an opportunity. Maine hospitals that do well should be rewarded. Maine government should show that its computer systems are up to the challenge of measuring performance.

More broadly, this shortfall in hospital funding is just a small part of rising health care costs that are consuming state budgets nationwide. Medicaid is rising here at 8 percent annually, double the rate of income growth, and is rising 9 percent nationally. Governors and state legislators recently offered Congress some solutions for restraining growth in the Medicaid system, but states are largely on their own.

Maine should recognize the funding for hospitals in the Part 2 budget as the sign of further trouble in health care financing. It should support, either legislatively or through the governor’s office, work, for instance, to expand on the recent Commission to Study Maine Hospitals, focusing on providing faster, more accurate reimbursements to hospitals in exchange for quality and cost standards.

Keeping Maine hospitals healthy is strongly in the state’s interest, but from a range of perspectives Maine’s financing system is not adequate now and will fare worse in the future without major reform. Now is a good time to begin.