Paying off welfare debt was the right thing to do for Maine hospitals

By Governor Paul R. LePage

    Many Mainers know what it is like to juggle their bills until pay day arrives, but imagine having to wait four years. That’s what Maine’s 39 community hospitals did: they had to wait four years to get paid a half-a-billion dollars for Medicaid services they provided dating back to 2009.

    But this week, our administration made good on a campaign promise I made in 2010: we paid the hospitals. After all those years, we finally paid our bills.
    Mayo Regional Hospital in Dover-Foxcroft was owed $4.6 million. C. A. Dean Memorial Hospital in Greenville was owed $1.3 million.
    That’s more than $5 million in outstanding welfare debt owed to the hospitals in Piscataquis County alone, just part of the nearly $490 million that was due statewide.
    This debt was bad for business – not just for our hospitals, but also for our state. As the welfare bills went unpaid, many hospitals had to lay off employees and reduce benefits, borrow against lines of credit to meet payroll and other obligations, dip into savings and forgo interest delay payments to local vendors and eliminate services. Capital improvements, such as building additions and renovations, as well as the purchase of new equipment, were put on hold.
    Edward Hannon, Mayo’s FORMER president and CEO, told me, “The settlement of this obligation will allow us to make more timely payments to local businesses for services they provide to our hospital. Payment will also allow Mayo to make vital investments in the medical technology, information systems and hospital facilities required to uphold the quality of care that has Maine’s hospitals ranked as the best in the country. When the debt is paid, Mayo will be able to invest.”
    The hospitals that were required to care for patients on welfare deserved to be paid. Not only was it the right thing to do, but Maine’s economy demanded it.
    As a candidate in 2010, I stood outside of Central Maine Medical Center in Lewiston and said that if I became Governor, I would make paying these bills a priority. During my first budget, I pushed to address the significant welfare debt by paying money owed for years 2004 to 2008. I also worked to see that a new system for payment got implemented—a system that now pays most hospitals in real time.
    In January of this year, I took the next step in making good on my promise: I proposed a plan to pay the remainder of the hospital debt that I inherited when I took office.
    Once the legislation to pay the hospitals was enacted, the state issued a revenue bond secured by future liquor sales to pay Maine’s $184 million share of the bill, triggering $306 million in federal matching funds. This ensured the state could capitalize on the federal matching rate before it falls even further.
    As part of this plan, the state will retain operational control over liquor sales starting in the summer of 2014, when the 10-year private contract expires. That contract has cost Maine hundreds of millions of dollars, but my plan will be a far better deal for the state and consumers.
    We will contract out distribution and warehousing through a competitive, transparent bid process, and under the state’s new management, we can actually grow this business. The plan calls for lower prices on spirits so Maine can better compete with New Hampshire.
    These actions make right two very costly wrongs of the previous administration: the shortsighted, bargain-basement sale in 2004 of one of the state’s most reliable revenue streams—our liquor business; and the decision to stop paying our hospital bills so politicians could keep growing welfare.
    More importantly, these actions allow Maine to move forward. Because we’re finally erasing our old debt, I agreed in May to issue over $100 million in voter-approved bonds for transportation, conservation, clean water and construction at our state’s higher education institutions.
    In total, nearly $600 million will be directly invested into Maine’s economy.
    Hospitals do more than heal. They are economic drivers, not just in their communities where they are often the largest employer, but also in our state, where they hire, build, educate and care for our loved ones.
    For years, we listened to rhetoric from politicians promising to pay the hospitals — even as they kept fighting to expand Medicaid and accumulate more welfare debt. But actions speak louder than words. This week, we finally did it. We paid the hospitals.
    It was, quite simply, the right thing to do.