Republican weekly radio address
For weekend of January 24-25, 2009

Greetings, this is Josh Tardy, leader of the Republicans in the Maine House.

It’s budget season in the State House, and what a season it will be. First comes the so-called supplemental budget, which requires a spending reduction of $140 million to keep this year’s budget in balance. That most likely will be voted on next week. Then comes the main event – the new two-year state budget that will total over $6 billion and involves cutting hundreds of millions of dollars from projected spending levels. Meanwhile, legislative committees will begin work on more than 1,600 individual bills.

Budgets have a way of bringing many new problems to light. Sometimes they have boiled just beneath the surface and erupt only under financial pressure. I’d like to highlight one of those problems today, because it will affect thousands of state residents. I’m talking about the perilous financial condition of Maine’s rural hospitals.

Maine has 37 hospitals, and all are non-profit. Twenty of them are classified as acute care facilities. These are the big hospitals located in the state’s most heavily populated areas. Two others are psychiatric facilities. The third category includes what are known as Critical Access hospitals. There are 15 of them in Maine, mostly in the northern and western parts of the state, from Calais and Houlton to Rumford and Blue Hill. Others are in Mount Desert, Millinocket and Bridgton and eight other rural communities.

These Critical Access facilities are part of a program created by Congress in 1997 in recognition of the financial challenges faced by small rural hospitals. Congress wanted to make sure that folks in rural America had access to vital health care services. As small hospitals, they can have no more than 25 beds and usually cannot keep a patient for more than 96 hours. In exchange for these limitations, they are reimbursed by Medicaid at 117 percent of the allowable costs. In essence, they receive a bonus from the feds. Small as these hospitals are, they are vital lifelines for rural Mainers. They also provide care to untold thousands of poor residents who rely on Medicaid for health care treatment. This is a key point, because most doctors in private practice have stopped accepting Maine Care patients due to Maine’s extremely low reimbursement rates and bureaucratic problems, such as the state’s huge computer failure of recent years that put the entire Medicaid reimbursement system in jeopardy.

The 15 Critical Access hospitals in rural Maine operate on very thin margins, totaling $10 million in 2007. They’ve also been victimized by the state, which has expanded Maine Care to the point where it cannot even pay the bills for all the people it has put in the program. Rather than scale it back to an affordable level, the governor and his legislative just kept piling more people into the program. The results have been disastrous.

As of today, Maine hospitals are owed $423 million for Medicaid services provided as far back as 2005. For the 15 Critical Access hospitals in rural Maine, the state is behind on Medicaid payments by $42 million. The Bridgton Hospital, to take one example, is owed more than $7 million. The Down East Community Hospital in Calais is owed $5.7 million.

This is serious money for these small hospitals, and it has forced many of them to rely on lines of credit to stay in business. Some have nearly exhausted their credit lines and check every day to see how much is left. A good example is Blue Hill Memorial Hospital, which is owed $2.8 million for Medicaid services over the last four years. Just this week, the hospital’s CEO cut the equivalent of 34 full-time jobs, including physician practices, in hopes of avoiding bankruptcy. Obviously, when these hospitals can’t pay their bills, the local economy also suffers.

To make the situation even worse, retention and recruitment of primary care doctors is a growing problem facing these small rural hospitals.

When you consider the serious financial challenges facing Critical Access hospitals, it’s hard to comprehend the thinking of the Baldacci administration. In his supplemental budget, the governor proposed cutting the Medicaid reimbursement to these hospitals by 16 percent. He also proposed to cut the Medicaid reimbursement rate for doctors employed by these hospitals from 89 percent to 57 percent. These are savage cuts that could endanger the survival of these crucial health care centers. Only valiant, last-minute work by members of the Appropriations Committee staved off some of the most draconian cuts. But these hospitals still will lose millions of dollars in Medicaid reimbursements between now and the end of June, when we start a new fiscal year.

Looking at this sorry picture, it seems fair to conclude that the Baldacci administration would like to abandon rural Maine and leave rural Mainers to fend for themselves. Meanwhile, the governor and his advisors need to fix a Medicaid system that has grown too enormous to manage effectively. In 2008 alone, the state’s Medicaid debt to Maine hospitals grew by another $86 million. This situation is no longer acceptable or sustainable. It threatens the health and well-being of our residents, and it’s creating major financial risks for the taxpayers of Maine.

This is Josh Tardy. Thank you for listening.

###