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Analysis: LePage Hospital Payment Plan Best for Maine Taxpayers
04/08/2013   Reported By: A.J. Higgins

The ongoing four-month debate over the best way to pay off nearly $485 million in Medicaid debt owed to Maine's hospitals may be winding down. An analysis from the non-partisan legislative fiscal office shows that of the competing Democratic and Republican plans to repay the hospitals with state liquor revenues, it is actually Gov. Paul LePage's bill that initially shows the greatest return for Maine taxpayers. A.J. Higgins reports.

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For weeks, Democrats and Republicans have sparred over competing plans to repay nearly a half-billion dollars in state Medicaid debt owed to 39 Maine hospitals. One of the major differences between the the plans is how the state would come up with its share of the bill - $181 million.

The Democrats' plan, offered by Senate Democratic Majority Leader Seth Goodall, would require the successful bidder of a state liquor sales contract to provide the funding upfront. Republican Gov. Paul LePage would rather use liquor proceeds to repay a revenue bond.

Appropriations Committee House Chair Peggy Rotundo says new independent analysis of both plans indicates LePage's plan would provide an additional $32 million in revenue to the state.

"As I, at least, look at these various scenarios and think about what the best value is for the state, which I know is what we all care about, it looks clear to me that the upfront payment doesn't make sense," Rotundo says.

Rotundo's committee, and members of the Legislature's Veterans and Legal Affairs Committee, received the update on the hospital repayment proposal from Grant Pennoyer, director of the Legislature's non-partisan Office of Fiscal and Program Review.

In addition to comparing the plans, the lawmakers also reviewed some details for a third plan that would involve the state's direct management of the liquor business. The plans all assumed a 2 percent growth rate over the 10-year life of the proposed liquor contract. Revenue bond costs were pegged at $31.2 million.

With the upfront payment plan, Pennoyer said the state's liquor revenue over 10 years would amount to nearly $353 million. With no upfront payment and a management lease, state revenues would increase to nearly $385 million. Pennoyer said his findings indicated that a revenue bond was the best deal for the state.

"In this analysis, it looks like, certainly, there would be an overall improvement in total state revenue with a state revenue bonding option," Pennoyer says.

State Sen. Emily Cain is an Orono Democrat on the Appropriations Committee. Cain says she has some concerns about the state operation of the liquor business, since it has not done so for 10 years. But Pennoyer estimated that full state operation of liquor sales would bring in about $381 million, or $4 million less than a contractual agreement.

Cain says the two figures are close enough to merit further discussion. "We also have this question of: Is the state the best entity to do this? And I think that's a fair question," she says. "And I think that this analysis today gives us the opportunity to begin that conversation by setting aside the upfront payment option and really focusing on what are the different elements that go into the leased, versus the state-operated."

Members of the Legislature's Veterans and Legal Affairs committee will now take the information from the Office of Fiscal and Program Review and fold it into the information they have accumulated during hours of review over the competing hospital repayment options, with the intention of turning out a committee bill to accomplish that goal.

Adrienne Bennett, the governor's press secretary, says LePage doesn't care whose name is on the final bill. "Democrats want to fight over who gets credit or who doesn't get credit then, so be it," Bennett says. "We all know that the governor put forth a comprehensive plan that works, and it's the best deal for Maine."

The hospital debt currently owed to Maine hospitals goes back nearly four years. According to OFPR, Maine hospitals have received $3.7 billion in Medicaid payments over the past 10 years.


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