AUGUSTA – Maine’s rural hospitals will be protected by an amendment to Gov. John Baldacci’s health care reform bill, the plan’s principal architect told a packed legislative committee room Thursday afternoon. Trish Riley said the amendment would quell concerns over potential negative effects of the reform on small hospitals.

“This plan does not call for the closure of rural hospitals,” Riley said twice.

Baldacci’s plan aims to make health insurance available to all Mainers within four years. Its potential effect on hospitals, however, has raised a storm of protest from hospital officials. That criticism was the strongest argument raised at Thursday’s public hearing on the governor’s bill, LD 1611, before a special joint committee of the Legislature.

Steven Michaud of the Maine Hospital Association said the statewide hospital budget formula proposed in the governor’s plan would result in a major hole in the combined budgets of the state’s hospitals – between $600 million and $800 million by the end of 2005.

Michaud also stated opposition to a proposed 3 percent cap on increases in hospital charges. Coming on the heels of a $50 million loss to hospitals because of cuts in state Medicaid funding, he said, the cap is both unnecessary and unreasonable.

A summary of the Baldacci plan describes both cost-containment measures as “voluntary,” but the bill allows direct state regulation of hospital budgets if a collaborative effort fails to achieve the targeted spending levels.

“We do not believe there is anything voluntary about legislation that promises regulation should you fail to meet an unrealistic standard, ” Michaud said. “If the hospital system redesign is really voluntary, you should be able to remove it [from the bill].”

Michaud also opposed an annual cap on new medical building and equipment projects.

Jim Parker, general manager of the largest private insurance company doing business in Maine, Anthem Blue Cross and Blue Shield, testified against the bill, saying the nonprofit, state-run Dirigo insurance plan at its core would undermine Maine’s “highly competitive” small group insurance market. The Dirigo plan would provide subsidized coverage for small businesses and individuals.

Parker argued that a proposal to extend the approval process for rate increases would slow companies’ ability to respond to market changes.

He also said the plan offers little incentive for small business owners to participate, because of a 60 percent employer premium share.

Despite the possibility that the Baldacci plan is nothing more than “overreaching government intervention,” Parker said, he looks forward to working with the committee members next week to change the bill.

Maine Medical Association executive director Gordon Smith also opposed the bill, especially the statewide budget, on the grounds that it would hurt physicians financially.

He criticized other elements as well, including a “tacky requirement” that doctors post the price of common procedures in their offices.

“We’d all love to solve this intractable problem [of the uninsured],” Smith said. “With five or six substantial amendments, we could support this bill.”

Supporters of the reform bill included consumer advocates, the Maine Small Business Alliance and many small business owners, including people who work for themselves.

Heather Alexander, a self-employed graphic designer from Portland, said her monthly insurance premiums have gone from $50 a few years ago to almost $200 now with a $5,000 deductible.

“My health care plan includes a lot of prayer that I don’t get sick,” she said.

Readfield business owner Gary Kelty urged lawmakers not to be intimidated by insurance industry threats to leave the state if the Dirigo plan is enacted. “Dirigo is our insurance against insurance companies leaving,” he said.

Several current and former legislators also spoke in support, including Senate Majority Leader Sharon Treat, D-Gardiner.

“We’re not going to have the perfect answer, because in reality there is no perfect answer,” Treat said. “But this is a very good plan. As legislators, we need to make sure it works, that the numbers add up, that its goals are attainable. We’ll fix the glitches, sort out the claims and the counterclaims, and in the end, we’ll vote out a bill.”

The hearing, which was attended by hundreds of people, was expected to last well into the evening.