AUGUSTA — Gov. Paul LePage achieved one of his top priorities of the 2013 legislative session Friday when he signed into law a bill that sets the stage to pay off the state's $183.5 million debt to hospitals.
The bill, passed late Thursday night by the Legislature, would use revenue from a renegotiated contract for the state's wholesale liquor business to finance revenue bonds to pay 39 hospitals for services they provided under MaineCare, the state's Medicaid program.
A refinanced contract could bring as much as $40 million in new cash flow to the state on an annual basis. Some of that revenue would be used to finance a lump-sum payment to hospitals.
Maine is one of only a handful of states that controls the importation and distribution of hard liquor. In 2004 the state leased those rights for 10 years to a private company for $125 million.
Steven Michaud, president of the Maine Hospital Association, said the repayment would pump an additional $300 million into the state's economy in federal matching funds.
He said the news of the bill's passage and that LePage had signed it quickly into law would remove "a huge, huge financial anchor from the necks of our members."
The one-time payment for past debts would help hospitals, many of which are depending on lines of credit to manage basic expenses such as payroll.
"It doesn't help you with ongoing problems, which they have a lot of right now," Michaud said. "But it clearly will have a favorable impact in terms of jobs, especially retention right now."
Michaud said the back payment would put some of the state's largest employers on more solid financial footing because they would no longer be incurring the costs of interest on that credit.
LePage signed the bill Friday with little fanfare and without ceremony.
“Paying our bills is the right thing to do," LePage said. "It’s just unfortunate that Democrats waited so long to make the right decision for the people of Maine.”
The Democrat-controlled Legislature earlier sent LePage a bill linking the debt repayment plan with legislation that would have allowed the state to accept federal money under the Affordable Care Act to expand MaineCare.
LePage vetoed that measure but said that if lawmakers separated the issues he would release $200 million in voter-approved revenue bonds.
As a good-faith measure, he also asked State Treasurer Neria Douglass to prepare those bonds for issuance via a letter sent May 23.
"As I have said all along, once we have our fiscal house in order, we will be in a position to release the authorized bonds," LePage wrote. "I hope (Douglass) will act quickly to ensure our economy can get back to work.”
Chuck Gill, a spokesman for Central Maine Medical Center in Lewiston, said news that the bill had been signed came as a relief. With the state's share and the federal match, his hospital will receive an estimated $45 million for unpaid services.
"Kudos to Gov. LePage," Gill said. "He's championed this effort all along and stuck with it until it got done." He said the infusion of cash was a big deal, but it wouldn't solve all of the financial issues facing hospitals, including about $58 million in MaineCare cuts. He said the federal budget sequester was costing CMMC about $500,000 a month.
"We have a lot of cuts on the horizon on the federal side, so we are all dealing with that," Gill said. "It sure helps, but it clearly doesn't solve all the problems. There are a lot of issues facing health care in America and hospitals here in Maine."
Gill noted that state lawmakers have passed laws that require the state to pay for its MaineCare costs as they are incurred. Democrats have been quick to note that the so-called "paygo" system was passed under former Democratic Gov. John Baldacci and it has kept the state's hospital debt from continuing to grow.
Democrats in the Legislature have said paying the hospital debt was a priority for them but making sure as many Mainers as possible have insurance coverage will ultimately bring down the overall cost of care and will reduce the amount of free care hospitals provide to those with little or no income.
Lawmakers late Thursday also passed a bill that expands eligibility for MaineCare to about 70,000 low-income individuals without children. The first three years of that program's costs would be paid by the federal government. The federal match gradually drops to 90 percent by 2020.
Republicans have been reluctant to endorse the expansion because, they say, it will eventually cost state taxpayers as much as $70 million a year.
The fate of that legislation remained uncertain Friday, although it should land on the governor's desk within the next few days.