AUGUSTA – Maine’s hospitals received good news Tuesday as the state Legislature enacted a supplemental budget that lessened cuts included in Gov. John Baldacci’s initial proposal.

On another front, the state may get as much as $400 million in federal Medicaid money as part of the federal stimulus package, according to staff in Sen. Olympia Snowe’s office. That’s well more than the $98 million Baldacci was counting on.

“It’s a victory,” said Mary Mayhew, spokeswoman for the Maine Hospital Association, of the state’s supplemental budget. “The compromise is definitely an improvement.”

She said she was encouraged by the Legislature’s decision to reject outright Baldacci’s proposal to cut funding to critical access hospitals and the commitment made in the language of the bill to repay debts owed to all Maine hospitals.

Cuts were made to how much hospital-based physicians are reimbursed for delivering MaineCare services, but not as deep Baldacci had proposed.

MaineCare funding

Hospital-based physicians will now receive payments equal to about 50 percent of the cost of delivering MaineCare services, where they used to receive about 90 percent, Mayhew said. Baldacci’s proposal would have paid those doctors about 30 percent of the cost.

But Mayhew was probably most encouraged by the Legislature’s decision to prioritize paying the approximately $400 million of state and federal money owed to Maine hospitals for MaineCare services delivered in the fiscal years of 2005 and 2006.

“This is unusual, that hospitals are waiting four years to be paid this amount of money,” she said.

Mayhew said there is also a stimulus component if hospitals are able to pay off vendors and retain staff as a result of getting paid.

Snowe agrees. The Maine Republican has worked closely with Senate leaders and the Obama administration to include provisions in the massive economic stimulus package to increase Medicaid aid to states.

“We have an obligation to help (states) on the Medicaid front,” Snowe said during a committee hearing Tuesday.

The Senate bill includes about $87 billion in Medicaid funding for states, according to Snowe’s staff. That would result in more than $400 million in funding for the state over a two-year period, depending on which appropriation formula is used, a Snowe spokesman said.

But Snowe attached strings to the spending proposal to target the aid to those who need it most and to maximize the effect of the stimulus.

Prompt payment

“The provisions I championed ensure states cannot expand benefits, and ensure prompt payment to providers,” she said. “Delays in payments can threaten (hospitals) continued operation, limit their ability to invest in new technology, or hire new employees; just the type of activity we want to encourage.”

Using the one-time influx of federal money to pay back hospitals makes good sense, said state Rep. Sawin Millett, R-Waterford, the top House Republican on the Appropriations Committee.

“This is incredibly important,” he said on the House floor Tuesday. “You can go back home and talk to your folks that run hospitals and show them that we made a good faith effort to honor our debts and to do so in a current fashion.”

David Farmer, spokesman for the governor’s office, said the administration is still hesitant to count on federal money.

“There’s not a penny in the bank yet,” he said. “It’s all very fluid, because of the nature of what’s going on in Washington, but the priority would be the hospital settlements.”

The supplemental budget approved by the Legislature closes an approximately $166 million deficit in the current fiscal year. The governor will sign the bill into law later this week, Farmer said.