But hospitals are much more expensive than community care, and Medicaid pays for many hospital services that are less urgent than the front-line help to disadvantaged and disabled people provided by private agencies. “The community mental-health services not only keep people out of hospitals,” says Eric Smith, “they keep them out of incarceration and in their jobs and homes.”
Some people — even Commissioner Wyke, who points out that hospital-cost inflation has run significantly higher than overall inflation — also raise questions about the size of the hospitals’ bill to the state for Medicaid. In 2005, hospital spending nationally increased by eight percent, according to Modern Healthcare magazine. Across the whole economy, inflation in 2005 was three percent. This discrepancy has persisted for years. “Hospital costs need to be scrutinized,” urges social-services lobbyist Hennessy.
But whether the hospitals actually deserve higher payments or not, neither the Appropriations Committee nor legislative leadership nor the governor began a public discussion of whether the “unexpected” surplus should go to the hospitals. Their demands could have been met by a regular legislative appropriation — competing in the open market of the Legislature, so to speak, with other pressing state needs. Giving the hospitals money through a surplus — especially if it was an expected but unpublicized surplus — was a back-handed governmental process.
“I was upset when I heard about that surplus,” says Representative Linda Valentino, a Saco Democrat on the Appropriations Committee. “I made those cuts in good faith based on the forecast we had.” She says she “never would have cut so deeply” into social services had she known a big surplus was on the way. The surplus “made the Appropriations Committee look bad,” she adds.
Other key legislators claim they, too, were in the dark — at least, about the exact size of the surplus. If its magnitude had been known before adjournment, Representative Mills says, perhaps there could have been fewer or smaller cuts. Representative Hannah Pingree, the House majority leader who is in line to be the next House speaker, and Elizabeth Mitchell, the Senate majority leader, say the same thing.
As justification for giving the surplus to the hospitals, Pingree, Mitchell, and other legislators insist it will enable the state to catch up on long-overdue debts. “We honorably have to pay our debts,” says Senate president Beth Edmonds. “We owe the hospitals the money,” says John Martin, the Senate assistant majority leader, who sits on the Appropriations Committee.
But the surplus is not going to pay old debts, says fiscal analyst Pennoyer. Although, per Baldacci’s pledge to the hospitals, the Health and Human Services Department this year is using previously appropriated funds to pay off some long-standing hospital Medicaid bills, Pennoyer points out that the budget law specifically requires this year’s surplus to increase the weekly advance payments for Medicaid services — not cover old debt.
Summing up how legislators handled the surplus issue, a legislative finance expert, Somerset county Republican state senator Peter Mills (Justice Mills’s husband and Representative Mills’s brother), says, with characteristic candor: “People were anxious to produce a surplus to take care of the hospitals.”