Maine's LePage eyes hospital tax for Medicaid expansion

Maine Gov. Paul LePage is eyeing a tax hike on the state’s hospitals to fund voter-approved Medicaid expansion that was supposed to take effect this week.

Julie Rabinowitz, press secretary for the Republican governor, said Maine’s current hospital tax rate is at 2.23% and Maine could increase it to 6% based on regulations from the federal Centers for Medicare & Medicaid Services.

The LePage administration has been blocking efforts to expand Medicaid since 59% of Maine voters approved the proposal in a referendum last November. He vetoed legislation last week to fund the expansion with surplus monies and tobacco settlement funds.

“Since Maine hospitals stand to benefit the most from the expansion of Medicaid, this is a more than reasonable means of financing that program’s expansion costs,” said Rabinowitz in a statement Thursday. “The governor believes that Medicaid expansion will decrease both the amount of charity care and bad debt carried on hospitals’ books, and that will offset the increase in the hospital tax to pay for Medicaid expansion.”

Rabinowitz said LePage is willing to discuss funding the Medicare expansion with legislative leaders and is also open to finding other sustainable sources of funding that don’t involve budget surpluses. The legislature is slated to reconvene Monday to try and override LePage’s veto. The 2017 ballot measure required that Medicaid expansion for newly eligible enrollees begin July 2.

Maine Hospital Association lobbyist Jeffrey Austin said the state’s hospitals “strongly oppose” any increased tax since they already pay $100 million a year in taxes. He noted that hospitals already saw their Medicare reimbursement cut from the Affordable Care Act in order to reduce the state's share of expansion costs.

“Over half of Maine hospitals are losing money,” said Austin. “Forcing more financial burden on Maine hospitals is not sustainable.”

A June 4 ruling by Maine Superior Court Judge Michaela Murphy ordered the state to file a Medicaid expansion plan by June 11. The Maine Supreme Court granted the LePage administration's request for a temporary stay on June 20 and is slated to hear oral arguments on the case in mid-July.

A November Moody’s Investors Service report called Maine’s Medicaid expansion a credit negative because it would create increased budget risks with the enrollee population rising by an estimated 70,000. Moody’s analyst Julius Vizner wrote that Maine’s annual Medicaid costs would increase by at least $55 million when fully implemented in 2021.

Maine last expanded Medicaid in 2002 before the LePage administration curtailed eligibility in 2011 citing stresses on liquidity and reserves. The state repaid overdue MaineCare payments to hospitals in 2013 from proceeds of a bond that securitized other state revenue and increased state debt.

Maine’s general obligation bonds are rated Aa2 by Moody’s and AA by S&P Global Ratings.