AUGUSTA — The Legislature’s Health and Human Services Committee voted largely along party lines Wednesday to recommend that an expansion of the state’s Medicaid program be tied to the payback of Maine’s $484 million debt to its hospitals.

The vote marks the first procedural move by Democrats in the Legislature to include an expansion of Maine’s Medicaid program in a bill that provides for the state’s 39 hospitals to be repaid and for the state to fund the repayment through a renegotiated wholesale liquor contract.

The committee voted 10-4 in favor of incorporating the Medicaid expansion into the hospital debt payback bill. The committee’s Democrats and one Republican, Rep. Carol McElwee, R-Caribou, supported the move while the remaining Republicans on the committee opposed it.

The Health and Human Services panel will now send a letter to the Legislature’s Veterans and Legal Affairs Committee recommending the Medicaid expansion be included in the bill that authorizes the hospital debt payback and a restructuring of the state’s wholesale liquor contract.

It will now be up to the Veterans and Legal Affairs Committee to decide whether to add Medicaid expansion to the legislation. The Senate chairman of that committee, Sen. John Tuttle, D-Sanford, said last week he opposes linking the issues.

Democratic leaders in the Legislature started advocating late last month to include an expansion of Medicaid program under the federal Affordable Care Act in the hospital debt payback bill. Gov. Paul LePage has opposed linking the two issues. He’s made paying back the state’s hospitals his top priority this legislative session while he hasn’t embraced an expansion of Medicaid.

House Speaker Mark Eves, D-North Berwick, has said that linking Medicaid expansion and the hospital debt payback addresses a major cost driver in the state’s health care system: the amount of free care Maine hospitals must provide to low-income residents without health insurance.

Expanding Medicaid “addresses one of the cost drivers in our health care system, which is charity care,” Eves said last month. “The hospitals want Medicaid expansion, and they know it would address a cost driver within their system. We really feel it’s the responsible thing to do.”

The hospitals’ lobbying group, the Maine Hospital Association, has separately supported legislative efforts to repay the state’s 39 hospitals and an expansion of Medicaid eligibility in the state. However, the association opposes linking the two issues.

Rep. Deborah Sanderson, R-Chelsea, said Wednesday that the state needs to pay back the hospitals as quickly as possible. Policymakers, meanwhile, have to take more time to analyze the financial impact to the state of expanding Medicaid, she said.

“The governor has been very clear that he does not want these two tied together. If they’re tied together, I don’t think it’s a stretch to assume that it might get a veto even if it includes payment for the hospitals,” she said. “What [Democrats are] doing is they’re trying to hold payment for past debt due to Medicaid expansion hostage with more Medicaid expansion.”

Lawmakers have advocated for paying back the hospital debt before Oct. 1, when the state’s federal Medicaid funding rate drops, leaving the state with a larger portion of the debt. The Medicaid expansion would take effect on Jan. 1, 2014.

Under Maine’s current Medicaid funding rate, the state would owe $181 million of the $484 million hospital debt and the federal government would kick in the rest. On Oct. 1, Maine’s responsibility would grow to $186 million, triggering a federal match of about $298 million.

The vote to incorporate Medicaid expansion into the hospital debt bill comes as consensus is emerging on other parts of the legislation.

On Tuesday, the Veterans and Legal Affairs Committee unanimously agreed to a liquor contract structure that incorporates elements from proposals made by LePage and Democratic Sen. Seth Goodall.

The Legislature’s Appropriations Committee, meanwhile, is determining exactly how to execute the hospital debt payback and will soon make a recommendation to the Veterans and Legal Affairs panel.

Consensus seems to have emerged around having the state issue a revenue bond through the Maine Municipal Bond Bank to fund an immediate debt payback rather than demanding an upfront payment from the vendor ultimately chosen to operate the state’s wholesale liquor business.

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