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Stakeholders Weigh in on Maine Hospital Repayment Bills
03/11/2013   Reported By: A.J. Higgins

After weeks of heated discussions around the linking of state liquor sales, hospital Medicaid debt and state borrowing, the LePage administration and Democratic leaders appear to be moderating their positions. Democrats have moved on the repayment of nearly a half-billion dollars into an amended liquor contract bill, while LePage is now indicating he may not oppose some expansion of Medicaid to provide health care to more Mainers. As A.J. Higgins reports, the negotiations played out today during a public hearing on competing bills.

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Gov. Paul LePage touts his hospital debt repayment plan today before a legislative committee.

Although they disagree on many aspects of state policy, Democratic leaders and Republican Gov. Paul LePage are now of one mind when it comes to the need to pay off the state's $484 million Medicaid debt to Maine's hospitals.

Although Democrats formerly wanted to separate linkage to a new 10-year-contract for state liquor sales and hospital debt, they now agree that liquor revenues must be part of the solution.

"The contract that was signed 10 years ago is abomination to the state, it is a tragedy to the state. We left too much money on the table," LePage said at an appearance before the Legislature's Veterans and Legal Affairs Committee.

LePage came to make the case for his bill that spells out how the state should proceed once the existing liquor contract expires next year. LePage wants to dedicate the profits from liquor sales to pay back a revenue bond that would be used to repay the state's $186 million share of the Medicaid debt owed to Maine hospitals. Federal matching funds would then be released to the hospitals to make them whole.

LePage says the state holds all the cards as it begins the new bidding process.

"I believe that we need to put an RFP out that puts a lot more money into the coffers of the state and less money out in the private sector," LePage said, "because the private sector on this particular contract - I looked at this contract as a fire sale. And frankly, you never called Mardens."

But Democratic Senate Majority Leader Seth Goodall has his own bill that would also use liquor earnings to pay the hospitals back. It differs from LePage's in two fundamental ways: First, LePage leaves open the option of the state exerting greater control of the liquor distribution and marketing process, Goodall's bill would require the state to contract with a private entity.

And Goodall says his bill would not require the state to borrow money, but it demands an upfront payment from the successful bidder to facilitate the hospital repayment.

"My amendment allows the bidder to choose between an initial payment of either $200 million to be paid no later than June 30th, 2014, or payments totalling $200 million to be paid no later than June 30, 2015, with $100 million dollars being paid before June 30th, 2014," Goodall said.

Supporters of both proposals spent most of the day sharing their concerns with the legislative panel. Jim Mitchell, a lobbyist representing Maine Beverage, which holds the current liquor contract, says the biggest problem with the governor's plan is the complicated fee-for-service arrangement.

"Those fee for service contracts to align incentives appropriately in order for the business to perform will not be simple," Mitchell said. "They ignore instead the central advantage of what drives economic efficiency: the profit motive."

John Menario is a former Portland mayor and a co-owner in the All Maine Spirits group that wants to bid on the Maine liquor contract. He says Goodall's proposal, which seeks a massive $200 million upfront payment, presents its own problems.

"Any time you put money up front, it's not a gift," Menario said. "The people who put it up expect it back, and they expect it back with interest. And quite honestly, it would be a sad day if this state makes the same mistake that they made eight years ago."

Sen. John Tuttle, of Sanford, the Senate committee chair on the panel, says the Veterans and Legal Affairs Committee might take elements from both bills and craft its own proposal.

Photos by Mark Vogelzang.


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