A new Maine law aimed at covering the state's uninsured may end up raising healthcare prices for the rest of the state's residents.
MaineHealth, the largest healthcare provider in the state, is a five-hospital system based in Portland that plans to increase prices to help reach voluntary expense targets set by legislation that Maine Gov. John Baldacci, a Democrat, signed into law in June.
Maine's new law created Dirigo Health, a quasi-public state insurance program designed to squeeze savings out of the healthcare system to help cover as many as 180,000 uninsured state residents. Hospital officials say they are concerned that consumers may not understand that the law requires hospitals to limit their expense growth, not their prices. Educating patients about that difference could present a challenge.
"We as an industry will need to explain to our public that nongovernment payers have to absorb the costs shifted to them by federal and state government programs," said Bill Caron, president of MaineHealth. "Many people have interpreted the governor's challenge to be one on rate increases."
MaineHealth plans to raise prices next year an average of about 5.3% across its five hospitals, two of which will increase rates by 6%. The new law does not require hospitals to keep a lid on price increases. In fact, Maine hospitals successfully lobbied to strip regulation of hospital prices from the bill (June 9, p. 6).
Hospital price increases are "not a new issue, and not a Dirigo-related issue," said Trish Riley, director of Baldacci's office of health policy and finance. Shortfalls in public financing, Riley said, represent the major reason hospitals have to raise their prices.
The law mandates a study of hospital costs and prices that will shed more light on the issue, Riley said. Maine's 2004 budget calls for Medicaid cuts of some $58 million as the state also struggles with increased utilization and Medicare payment shortfalls, according to the Maine Hospital Association. Most hospitals in the state plan to at least attempt to comply with the Dirigo limits, a spokeswoman for the association said.
For the fiscal year that begins Oct. 1, MaineHealth will see its operational costs increase an average of 3.8% across its five-hospital system, Caron said. Under the new law, hospitals were asked to limit expense growth to 3.5%.
"Each of our members (hospitals) were able to meet the 3.5% challenge with the exception of Maine Medical Center, which is the primary tertiary-care center in the state," Caron said last week. The system also will post a margin of no greater than 2.4%, under the 3% limit stipulated by Dirigo.
Maine Medical, a 557-bed hospital in Portland and the largest facility within MaineHealth, will see its operational costs increase 4.2% next year, 0.7% of which will help finance the use of two cardiac technologies that officials said are important to providing quality care: drug-eluting stents and automatic implantable defibrillators. Last year, MaineHealth posted net income of $13 million on net revenue of $650 million.