Maine's Medicaid System Struggles to Reimburse Hospitals

Maine's Medicaid System Struggles to Reimburse Hospitals
January 30, 2013

Benjamin Domenech

Benjamin Domenech (bdomenech@heartland.org) is a senior fellow at The Heartland Institute. Domenech... (read full bio)

Delayed payments to hospitals continue to be a problem when it comes to Medicaid reimbursements -- a problem which could be exacerbated under President Obama's health care law.

Medicaid's costs are difficult to predict, and many states were unprepared for the significant rise in costs seen in 2008-2009, when the recession made many more people eligible for Medicaid. In Maine, this has led to delays in payment and reimbursement for as much as three years:

Hospitals in Maine, concerned that further deficit-reduction agreements in Washington could erode funding for Medicaid, are demanding hundreds of millions of dollars in back payments from the state for treatment of patients in the program. 

States across the nation have long been slow to reimburse hospitals for treating needy Americans in the Medicaid program, but hospitals usually haven't quibbled, knowing they would be paid eventually. But now, a coalition of 39 Maine hospitals is demanding $484 million in Medicaid payments owed for bills dating to 2009. 

Maine's three-year delay is extraordinary, but other states have grappled with monthslong delays, said Bruce Siegel, head of the National Association of Public Hospitals and Health Systems, which advocates for safety-net institutions that treat the uninsured or underinsured.  The Maine hospitals have launched radio and newspaper ads to press the state to pay—"the first time we've seen hospitals having to run public ads on this issue," Dr. Siegel said. 

"When the state doesn't pay its bills, hospitals can't pay theirs," says one ad from the Maine Hospital Association. The hospitals say the delay in payments hurts their credit ratings and forces them to defer pay raises and put major building projects on hold. Lawmakers agree they need to reimburse the hospitals, but a budget deficit is complicating the process.

Yet when it comes time to save money by restricting the services offered through the program, politicians see pressure from interest groups:

The proposed reduction to the Low Cost Drugs for the Elderly and Disabled Program is part of Gov. Paul LePage's effort to address a $90 million shortfall in the Department of Health and Human Services budget ending June 30.  The shortfall has been blamed largely on higher-than-planned costs for MaineCare, the state's Medicaid program, after federal economic stimulus money ran out two years ago.

However, MaineCare general fund expenditures are projected to be about $30 million less than in the last fiscal year, said DHHS Commissioner Mary Mayhew.  The Legislature's Appropriations and Health and Human Services committees heard testimony all day Monday on cuts proposed in LePage's supplemental budget for the year ending June 30. 

"We heard strong opposition to the governor's cuts throughout the day," Rep. Peggy Rotundo, D-Lewiston, the Appropriations Committee's House chairwoman, said in a prepared statement. "We will be looking for fair and reasonable alternatives that won't shift costs to our cities and towns."

Maine is hardly alone in their experience, in large part because Medicaid has expanded far beyond its original intended role as a support for the poorest of the poor and the sickest of the sick.

Benjamin Domenech

Benjamin Domenech (bdomenech@heartland.org) is a senior fellow at The Heartland Institute. Domenech... (read full bio)