A Bailout for Maine

by Stephen Spruiell
National Review
October 14, 2009

Why did Olympia Snowe vote for Obamacare? One reason could be that Maine has a “public option” insurance plan that is going broke, and state officials are hoping Obamacare can save it:

The skewed economics of DirigoChoice [Maine’s “public option”] have left it highly dependent on government financing, which has created a series of problems for policymakers. The program’s initial funding mechanism was nothing short of bizarre: Each year, the Dirigo Health Agency had to come up with a number that (according to its experts) represented the amount of money DirigoChoice had “saved” the Maine health-care system; the law then required Maine insurance companies to pay that amount to the state. Needless to say, those calculations ended up being something less than rigorous, and the insurance companies objected. Employers argued that insurers were simply passing on the bill for these “savings-offset payments” to private policyholders. Last year, the furor over the payments led the agency to downgrade its savings estimate by $40 million, making the whole process look like an arbitrary sham.

The Democratic legislature tried to replace this funding mechanism with a tax on beer, wine, and soda, but Mainers exercised a “voters’ veto” and repealed this tax via referendum. Running out of money, the legislature went back to taxing Maine insurance companies (and, by extension, private policyholders), enacting a 2 percent tax on all paid insurance claims. The state also has capped enrollment in order to keep costs from spiraling further out of control. The program’s supporters are now looking to Washington for help. “We have a very limited capacity because of limited resources,” Maine Office of Health Policy and Finance director Trish Riley said recently. “With federal money, more people would become eligible and the federal government would require people to have coverage.”

Obamacare would relieve a handful of northeastern states, including Maine, of the burden of funding their broken, heavily regulated and subsidized health-care systems while imposing new burdens on the South and Midwest in the form of expanded eligibility for Medicaid. Of course Snowe voted for this bill. It’s a bailout for Maine.

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