Maine hospitals concerned about charity care expansion and Medicaid cuts

By Rose Lundy, The Maine Monitor

A new law expands who is eligible for charity care in Maine while federal Medicaid cuts are expected to push tens of thousands off public insurance.

A law signed by Gov. Janet Mills earlier this month will make more people in Maine eligible for free care at Maine hospitals, a move advocates say will ease the financial burden of medical care on low-income Mainers. 

The changes, which will take effect next July, come as federal Medicaid cuts are expected to push thousands of Mainers off public insurance over the next few years. 

The two actions together are like “gasoline on the fire” for hospital budgets, said Jeffrey Austin, vice president of government affairs for the Maine Hospital Association.

“Maine is forcing hospitals to absorb more of the pain from the D.C. cuts than we should have to,” he said. “It’s the absolute wrong policy at the wrong time.”

The new law increases the income threshold at which hospitals are required to provide free, medically necessary care from 150 percent of the federal poverty level ($23,500 for an individual this year) to 200 percent, or $31,300.

It also simplifies the application process, expands the program to any state resident, requires hospitals to notify people who qualify and caps payments for Mainers making up to 400 percent of the federal poverty level ($62,600 for an individual in 2025) at 4 percent of income. 

Federal regulations require nonprofit hospitals to provide some level of “charity care” to keep their tax-exempt status, according to health policy research organization KFF, which also found that for-profit hospitals often provide similar levels of “charity care,” in part because they can take a tax deduction for these expenses. 

Maine hospitals provided nearly $60 million in charity care in 2023, according to a Maine Monitor analysis of the most recent data from the Maine Health Data Organization.

The impact of the state and federal changes will be felt across the health care system, said hospital executives. Paul Bolin, executive vice president and chief people and administrative officer for Northern Light Health, said hospitals may have to address increased costs by cutting services.

“If (charity care) increases, we need to find ways to cut costs,” Bolin said. “Right now — we’ve been pretty clear and transparent about it — our expenses exceed our revenue. Adding to those expenses without increasing the revenue provides more stress on the system.”

Northern Light Health last week revealed it had cut 90 positions by not replacing employees who left and previously closed Inland Hospital in Waterville in May. Other hospitals are struggling, too. Central Maine Healthcare, which operates hospitals in Bridgton, Rumford and Lewiston, is in acquisition talks with Prime Healthcare Foundation of California.

Mount Desert Island Hospital closed its birthing unit at the beginning of this month, one of four Maine hospitals to do so this year alone, and two Aroostook County hospitals said they would merge their management for a year to “remain viable.”

Sen. Rachel Talbot Ross, one of multiple Democrats who sponsored the bill, said in her testimony that the measure would ease the financial burden of medical care for Mainers, calling medical debt a problem that is “pervasive” and “devastating,” and often forces people to delay or forgo health care.

Consumers for Affordable Health Care, a Maine advocacy organization, found in a survey that nearly half of the state’s households have medical debt and nearly a third have been contacted by a collection agency for a medical bill within the past two years.

Maine hospitals opposed the legislation. While charity care makes up about 0.6 percent of revenue, Jeffrey Austin, with the Maine Hospital Association, said this is still significant when considering the net margin for hospitals last year was negative 0.3 percent. Hospitals are basically breaking even, he said, so $60 million in charity care can make a big difference.

Charity care is often looked at in conjunction with bad debt, which is when hospitals provide services but are never paid. The two together are considered “uncompensated care,” which is when care is provided but no payment is received from patients or insurers. 

In 2023, uncompensated care at Maine hospitals totaled $218 million.

Hospitals expect this number could increase if more Mainers lose their insurance coverage.

About 34,000 Mainers are expected to lose coverage from MaineCare, the state’s version of Medicaid, after President Donald Trump signed a bill passed by Congress limiting eligibility and imposing work requirements for some groups, according to recently released estimates from the state Department of Health and Human Services. MaineCare currently covers nearly 400,000 people, or nearly a third of the state’s population. 

The Center for American Progress, a liberal think tank, estimated that uncompensated care in Maine could increase by $86 million in 2034 as a result of the legislation passed by Congress.

After Maine voters approved MaineCare expansion in 2017 and it was finally implemented when Gov. Mills took office two years later, uncompensated care costs dropped from $255 million in 2017 to $177 million in 2022.

Lisa Harvey-McPherson, vice president of government relations for Northern Light Health, tied the decline in uncompensated care to the expansion, which she said Maine hospitals supported. With Medicaid cuts at the federal level, she said she expects costs to swing back up, while the state’s new law expanding charity care could make it worse.

Last year, Northern Light Health recorded about $12.1 million in charity care and about $26 million in bad debt.

There are many moving parts with legislative action at both the state and federal level, Harvey-McPherson said, which makes it difficult to predict what the exact impact could be, but the cumulative effect could be “significant.”

“Now we’re injecting uncertainty with negative impact into this infrastructure of health care services in Maine, which is pretty fragile now,” she said.

This story appears as part of a collaboration to strengthen investigative journalism in Maine between the BDN and The Maine Monitor. Read more about the partnership.