Hospital debt debate heats up in Maine

AUGUSTA, Maine (AP) -- As a legislative committee took up competing plans to pay Maine's $484 million debt to the state's hospitals for past Medicaid debts, Gov. Paul LePage on Monday signaled for the first time a willingness to discuss expansion of Medicaid under the national health care law.

But LePage rejected Democratic efforts to link Medicaid expansion with paying the debt to Maine's nearly 40 hospitals.

The change in posture came as the Veterans and Legal Affairs Committee held a hearing on a pair of bills to repay the hospitals in a single chunk for its Medicaid debt, a measure LePage said will stimulate hundreds of jobs in health care and construction.

"Paying this debt is the right thing to do," LePage said during a rare appearance by a governor before a legislative panel.

"I have letters from nearly every hospital in the state with the same message that's being echoed. Hospitals have been forced to lay off employees and keep positions vacant. Hospitals have been forced to deplete savings and some are relying on lines of credit to stay open," LePage said.

"Hospitals have delayed payment to local vendors impacting the financial status of hundreds of small businesses in local communities. The hospital debt has delayed construction projects which create hundreds of critically important construction jobs to Maine's economy," he told the committee.

The Republican governor is proposing covering the debt now using bonds, which would be paid off with anticipated revenues from a restructured, 10-year liquor contract. Part of the new structure involves making Maine's prices of selected alcoholic beverages more competitive with New Hampshire's prices in an effort to siphon sales from Maine's neighboring state.

Even before the committee opened its hearing, legislative Democrats presented an alternative plan that showed movement on their part in the debt issue. Previously, Democrats opposed linking the hospital debt with the liquor contract. On Monday, they unveiled a plan to pay the hospitals in full by Sept. 30, 2013, using money from the financing on the state's liquor contract.

As under LePage's plan, the state's share of the overall debt would be matched by a federal match of $298 million.

But Democratic leaders said their plan is better because it would not require the state to borrow money through revenue bonds, a plan that they consider constitutionally shaky and that would cost taxpayers $40 million more in interest costs.

During a news conference before the start of the hearing, Senate President Justin Alfond, D-Portland, acknowledged the state's obligation to pay the hospitals. Under the Democratic plan, the state would require an up-front payment by the winning liquor contract bidder for the state's $400 million liquor business.

"By requiring this up-front payment, we are asking private industry to assume the risk, not taxpayers," Alfond said, adding that the plan comes with a guarantee that the hospitals receive their money by Sept. 30.

A component of the Democrats' proposal would have the state accept funds under the Affordable Care Act to expand Medicaid, known in the state as MaineCare. Democrats say it would extend health benefits to 70,000 Mainers.

Linking the hospital debt to Medicaid expansion is unacceptable to LePage.

"The Medicaid expansion is a totally separate issue" from the hospital debt, LePage said in a statement. "We need to pay our past debts. The minute we pay the hospitals, we'll talk about Medicaid expansion. But I won't negotiate the details of Medicaid expansion in the press."

Under the Medicaid expansion, the federal government would pay 100 percent of the costs in the first three years and 90 percent in the fourth. But LePage has been unwilling to go along with that because of uncertainty the federal funds would continue.

LePage says that paying the hospitals now would stimulate $700 million in economic activity in Maine.

"Our industry is resilient by nature and for the last seven years we have survived in a difficult market," Beth Sturtevant of the Associated General Contractors told the committee in support of LePage's bill. "Our New England neighbors have weathered the storm better than we have and some Maine workers have left the state to find work."

Maine Beverage Co., which has the current contract with the state to distribute and sell spirits, was neutral on both approaches.