Baldacci raids the cookie jar

By LANCE TAPLEY  |  October 15, 2008

The money should be repaid by then, the Attorney General’s Office told Karass in early September — 10 months after the borrowing began — in order to comply with the Maine Constitution. If the people’s veto succeeds, Karass forecasts Dirigo will owe the cash pool $14.2 million at the end of June. In a recent appearance before the Appropriations Committee, he reported that Dirigo owed the cash pool $19.7 million as of this past July.

The amount Dirigo is in debt varies month to month as other income flows into the program — a good deal from what are called “savings offset payments,” which result from a tax on the state’s health-insurance companies. This tax captures savings the companies supposedly enjoy because Dirigo lowers health-care costs by reducing free hospital care and encouraging efficiency, through the program’s planning functions, in the state’s health-care system.

The savings offset payments will continue if the people’s veto passes. But the insurance companies have strenuously disputed the amounts the state annually charges them, and they have paid very slowly — on the average, about two years late. That delay is why Dirigo will not have enough cash, if the referendum passes, to repay its debt by next June.

The new Legislature, of course, could appropriate money to cover Dirigo’s borrowing. But given that an “emergency” two-thirds vote of both houses would be needed to fund the program before the end of the fiscal year, and given that Republicans — who are generally very critical of Dirigo — almost certainly would block such a move, the chances are close to nil. The other alternatives are that Dirigo would have to shut down or be severely curtailed. Already, as its financial woes have mounted, it has turned away would-be new enrollees for more than a year.

Thus, the end of the Dirigo experiment may be in sight. When with bipartisan support Baldacci signed Dirigo Health into law in 2003 to national fanfare, its proponents promised it would insure all uninsured Mainers by 2009. There are still about 118,000 Maine people uninsured, almost as many as five years ago, and only about 4000 of the 11,500 people insured by Dirigo were uninsured previously. The rest switched from other insurance plans.

Is it legal?
Karass, the controller, says he began meeting in October 2007 with Rebecca Wyke, then commissioner of Administrative and Financial Services, and Karynlee Harrington, head of Dirigo Health, to figure out how to deal with the program’s cash-flow problems.

While they and other administration officials developed legislative proposals to inject money into Dirigo — the contentious new taxes were the eventual result — Karass got permission, he says, from state treasurer Lemoine to use the cash-pool money. (Lemoine would not respond to requests to discuss the borrowing.)

Karass says he felt obligated to pay Dirigo’s bills. The state has a contract that requires monthly payments to the insurance company managing the program’s policies, Harvard Pilgrim Health Care. Karass says he will restrict Dirigo’s monthly borrowing to $20 million because of the “needs of the funds comprising the cash pool” as well as Dirigo’s needs. The program will pay interest on the loans at a rate to be determined by the state treasurer, he says. The borrowed money has already been committed to state agencies, and the state normally earns interest on money in the treasury.

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