Congress needs to reach a compromise to extend the Federal Medical Assistance Percentage (FMAP) for Medicaid for six more months. If Congress fails to act soon, Maine will be forced to enact a new round of state budget cuts. Education, social service and health care jobs will be eliminated, thus further weakening Maine’s struggling economy.

Medicaid is a joint state/federal health program for low-income Americans. The Recovery Act increased the federal share of Medicaid through the end of 2010 to help states cope with their growing Medicaid budgets. Maine receives more than $2 in federal aid for every state dollar spent on MaineCare. Congress is now debating an extension of the enhanced rate for six months — January through June 2011.

Medicaid demand is growing across the country as people lose their jobs and health coverage. Some 19,000 people have been added to the MaineCare program during the last year alone. MaineCare is the largest per capita Medicaid program in the country, with some 290,000 enrollees, representing 22 percent of the Maine population.

Thirty states, including Maine, passed state budgets that relied on the FMAP extension to close budget gaps. State legislatures had good reason to believe the enhanced FMAP rate would continue as both the House and Senate have, at various times, passed the FMAP extension.

Maine faces a $100 million budget deficit in the next biennial budget that ends June 30, 2011, if the FMAP extension is not approved by Congress.

Health care is a vital part of Maine’s economy, and accounts for more than 84,000 jobs. Hospitals are often one of the largest employers in their local communities, contributing millions of dollars to the state’s economy each year. Maine hospitals also employ 78 percent of the primary care physicians because of low Medicare and MaineCare provider payments.

Maine’s hospitals, like hospitals nationwide, have experienced a sharp decrease in patient visits as people are forgoing care because of the economy. While hospital volume has dropped, MaineCare and free care are both growing. MaineCare growth is a problem because MaineCare pays hospitals far below the cost of care. Maine state government is also years behind in paying MaineCare hospital settlements. Maine hospitals are owed some $300 million; Central Maine Healthcare alone is owed $50 million.

Hospitals are now trying to cope with the loss of patient volume, increases in MaineCare patients and more free care. These new challenges come on top of prior MaineCare cuts and provider taxes included in two supplemental state budgets. The combined impact creates tremendous stress and most Maine hospitals are now operating at break even or in the red.

If the governor proceeds with the promised $100 million cuts to close the state budget hole created by the failure to extend FMAP, social services, education, health care and other services are likely targets for devastating new cuts. Maine hospitals have already eliminated some 600 jobs, deferred wage increases, cut hours and decreased capital spending to cope with prior MaineCare cuts and a major decrease in patient care revenue. New MaineCare provider cuts will accelerate job losses at hospitals and probably stop new capital spending.

Hospitals are the “safety net” as people who lose services show up in emergency rooms. More free care will only increase stress on Maine hospitals. We are proud of our high quality patient care and we try to insulate patients from the effects of budget cuts. However, when hospitals are forced to cut back, patients will have to wait longer and travel to receive the care they need.

Hospital cutbacks will also negatively impact Maine’s weak economy. Hospitals create good jobs and hospital payrolls pour millions of dollars into the Maine economy and tax rolls. Hospital capital spending puts Mainers to work. Forgoing new projects will undermine the recovery of Maine’s struggling construction industry.

The U.S. is experiencing a “jobless recovery.” Failure to extend the enhanced FMAP for six months will predictably cost jobs directly in the social service sector and indirectly across Maine’s entire economy.

There are better alternatives. Congress could allocate unused American Recovery and Reinvestment Act of 2009 dollars to FMAP, find savings offsets in other federal programs or some combined cost saving approach to pay for the FMAP extension.

Congressional representatives need to act today to extend FMAP. We need to keep people working, create new jobs and get Maine moving again.

Douglas Boyd is owner of The Maine Bucket Company and a director of Central Maine Healthcare.