Would Expanding Medicaid Help Or Harm Mainers And The State's Hospitals?

Oct 26, 2017

Next month, voters will decide whether the state should expand Medicaid. At stake is health coverage for an estimated 70,000 Mainers as well as financial stability for hospitals.

In 2016, half of Maine’s hospitals were in the red. They didn’t have enough revenue to cover operating expenses. Expanding Medicaid would reimburse them for many patients who currently receive charity care. But opponents say expanding Medicaid is not the answer for hospitals’ financial woes, and would only repeat mistakes from the past.

Perched near the southern tip of Moosehead Lake, the Charles A. Dean Memorial Hospital in Greenville has cared for the community for 100 years — lumberjacks were among its first patients. And although the local industry has changed over the years, hospital president Terri Vieira says the 25-bed facility is still a vital part of the community. It’s the region’s largest employer, and it provides a critical safety net.

“We cover an emergency services area about the size of Rhode Island, with a big ol’ lake in the middle. So when you need emergency services, we’re really the folks who will come get you,” she says.

Joe Babbitt
Credit Patty Wight / Maine Public

Some of the people who come to the ER don’t have insurance. It’s that lack of coverage, says Dr. Joe Babbitt, that often leads to the medical crisis.

“It’s frustrating when someone comes in because they have something that’s serious, and you know that there was an opportunity to catch it earlier and treat it better, and cost or access was the barrier,” he says.

On the other extreme, Babbitt says he sees people come to the ER for issues that don’t require emergency-level care.

“Because they have no other affordable access to a more appropriate type of care, this is what they end up having to use. So it’s sort of at both extremes of seeing things that don’t need us, or seeing things that are too late for us to help,” he says.

Vieira says about 11 percent of patients don’t have insurance and enter into a payment plan. But some can’t even afford that, and so the service becomes charity care. It costs the hospital about $375,000 a year.

“There’s no real option for some of these folks,” she says.

That could change in November. Maine voters will decide whether the state should expand Medicaid coverage to adults with incomes up to 138 percent of the federal poverty level. That’s about $16,000 dollars for an individual and $34,000 for a family of four.

Charles A. Dean Memorial Hospital in Greenville
Credit Patty Wight / Maine Public

Vieira says expanding coverage would not only improve the health outcomes of those who gain coverage, it would also bolster the financial health of hospitals, especially rural ones, which would receive reimbursement for the care that they now provide for free.

“I would say it’s a real turning point for health care in the state of Maine,” she says.

A turning point because 19 of the state’s hospitals are operating on a negative margin, according to Jeff Austin of the Maine Hospital Association.

“Over half of our members, they’re losing money. And some, significantly, so it’s been tough going here for several years,” he says.

Over the past four years, the Legislature has reduced Medicaid reimbursement to hospitals by $60 million. Hospitals have also absorbed Medicare cuts under the Affordable Care Act, which were supposed to be offset by the ACA’s expanded Medicaid program. But when a court decision made expansion optional, that offset was lost to hospitals in nonexpansion states like Maine.

In addition, Maine hospitals currently provide more than $100 million worth of charity care each year.

“Medicaid expansion will not eliminate that burden in its entirety, but it can certainly help,” Austin says.

“Medicaid expansion is not the solution. Again, we tried it before in Maine,” says Brent Littlefield with the Welfare to Work PAC, which opposes Medicaid expansion. “Maine has tried Medicaid expansion in the past, back between 2002-2003. And we saw, as a result of that, a massive $750 million hospital debt.”

That expansion did contribute to millions of debt owed to hospitals, which Gov. Paul LePage paid back in 2013. But Austin says the circumstances are different this time.

“The federal share of expansion is simply much higher,” he says.

If expansion passes, the federal government will initially cover 94 percent of the cost. That ratchets down to 90 percent by 2020 and stays at that level. The Maine Center for Economic Policy projects that’s an injection of about $500 million from the feds per year. But Littlefield says there’s also a state cost.

“The current plan would have state taxpayers paying between $50 million-$100 million per year,” he says.

Littlefield says that would create a budget crisis. And he says he can’t empathize with hospitals’ charity care woes.

“All Maine hospitals are technically nonprofits. They have an agreement when they agree to become a nonprofit that they will not pay taxes, which in the case of Maine, if you add them up would be millions of dollars statewide,” he says. “They do not pay taxes in return for providing charity care. So there is money there for them to provide charity care. It comes from them not paying taxes.”

Nonprofit hospitals do get tax breaks. But in Maine, they pay a tax on net operating revenues to help fund Medicaid. If expansion doesn’t pass, Jeff Austin says hospitals will continue to provide charity care to patients.

“The costs associated with [charity patients’] care will come out in other ways. As hospitals renegotiate reimbursement rates with commercial insurance, or as hospitals experience losses in service lines, or lay off people,” he says.

Babbitt thinks there will be even more drastic consequences.

“The biggest worry is closing. And that’s not a hypothetical, I mean you can make a list of the small Maine hospitals that have closed in last 15 years,” he says.

Vieira agrees that some rural hospitals would likely close. C.A. Dean, she says, will not — but it may have to cut back.

“We may be in the position of looking at some services that we can no longer provide,” she says.

And that’s at a time, Vieira says, when the hospital needs to expand to cover gaps in care, like addiction and mental health services.