Baldacci, hospital association optimistic on state funding

This story was published on July 07, 2007 on Page C1 in all editions of the Bangor Daily News

AUGUSTA – Despite a major bump in its implementation, the two parties to a highly publicized pre-election agreement last fall – Gov. John Baldacci’s administration and the Maine Hospital Association – profess to be generally unconcerned.

Tight revenue for Maine state government, as one fiscal year ended June 30 and a new one began July 1, virtually assures that $82 million being counted on for bolstering the state’s compensation system for hospitals won’t be immediately available, according to state fiscal experts.

The state’s new two-year budget includes a provision to direct a lion’s share of any surplus money – known informally in Appropriations Committee circles as the “Cascade” – toward boosting payments to hospitals for their costs of serving Medicaid patients under the program known as MaineCare.

Most recent revenue trends, however, suggest that the Cascade – when fiscal 2007 is finally costed out – may be merely a trickle.

As outlined by the Legislature’s fiscal office in an update last month, “This ‘tight’ financial picture does not bode well for any significant funding for hospital payments accruing through the so-called ‘Cascade,’ the transfers of excess revenue and lapsed appropriation balances at the close of each year to various reserve accounts.”

In the biennial budget, hospitals were given favored status as Cascade claimants. But now the amount to be claimed looks to be limited.

“While an advanced look at June General Fund revenue is encouraging for a year-end positive variance, the amounts available for hospital payments will not come close to the $82 million,” the monthly newsletter of the Office of Fiscal and Program review said in late June.

Availability of $82 million was first envisioned publicly on Oct. 11, 2006, when with much fanfare a settlement deal between the Baldacci administration and the hospitals was announced.

Under the plan as spelled out at that time, the state would raise hospitals’ weekly payments by including $82 million in state funds for hospitals in state fiscal years 2008 and 2009. That would produce $221 million in combined state and federal funding, a joint statement by the parties said.

During those same two years, the state would include $20 million to pay for 2004 hospital settlements. That would produce a total of $54 million in state and federal money, according to the Baldacci administration and the hospital association.

The agreement calls for another $102 million in state money – for a total of $275 million in state and federal funds – to be budgeted for fiscal years 2010 and 2011 so that all remaining MaineCare hospital settlements would be covered.

To date, the administration and Legislature have come up with the $20 million for 2004 hospital settlements. Looking ahead, despite doubts about the Cascade, officials in the Baldacci administration and the hospital association express optimism that funding will be found.

“We’re optimistic that the agreement will be maintained,” hospital association spokeswoman Mary Mayhew said.

Baldacci administration budget chief Rebecca Wyke said the governor would probably come forward with a supplemental budget request when lawmakers reconvene. That is not scheduled until January.

In addressing hospital settlements last October, Baldacci was taking up an issue that had occasionally dogged his Democratic re-election bid.

“We applaud the governor’s hard work to come to this agreement with Maine’s hospitals,” said Steven Michaud, the association’s president.

But a purported resolution did not keep election rivals from questioning the timing.

Chandler Woodcock, the governor’s Republican opponent, had already challenged Baldacci’s assertion that he balanced the budget while the state owed millions to hospitals, and he stepped up his criticism.

“The recent announcement by John Baldacci that he has reached an agreement with the Maine Hospital Association to resolve all outstanding MaineCare debt owed to Maine hospitals is election-year politics at its worst,” Woodcock said in a statement.

“The agreement is meaningless until the Legislature actually appropriates the money,” Woodcock added.

Said independent candidate Barbara Merrill, “It’s interesting that he decided to do that on the eve of the election.”

According to the joint statement in October, the state could accelerate scheduled payments if revenue surpluses allow.

“I am pleased that we have been able to move forward in assuring appropriate payment to Maine’s hospitals in a timely fashion,” Baldacci said last fall. “We have a shared commitment to the people covered under the MaineCare program and to the providers who care for them.”

Nine months later, more talks between the Baldacci administration and the hospital association are scheduled.