Accepting Affordable Care Act funds a boon to struggling rural Maine economies

February 11, 2014

Four-and-a-half years after the official end of the worst recession since the 1930s, Maine’s economy continues to struggle, especially in the state’s rural areas. Though Maine’s unemployment rate is declining along with the nation’s as a whole, our recovery to prerecession unemployment rates is just over half complete. Even absent this gloomy backdrop, surely our governor and legislators would roll out the red carpet for a proposed investment that would support 4,400 jobs and add $500 million annually to Maine’s economy.

That is what Maine stands to gain if we accept federal Affordable Care Act funds to expand health coverage to nearly 70,000 people. Why then have the governor and Legislature failed to seize this unprecedented windfall?

The federal government hasn’t asked Maine to suspend zoning or environmental regulations as part of the deal. It isn’t holding out for a fat state tax subsidy or other financial carrot.

The federal government isn’t asking Maine taxpayers to foot the bill. In fact, contrary to what the governor and other opponents contend, the federal government will pay 100 percent of the cost for eligible individuals over the next three years. After that, the federal government will gradually reduce its share of the cost, leveling off at 90 percent in 2020. In fact, accepting these federal health care funds would protect large employers from paying costly penalties, generate about $23 million annually in additional state and local tax revenues, and save the state more than $690 million over the next decade.

Even T he Wall Street Journal and the Heritage Foundation, well-known conservative institutions, have acknowledged that accepting Affordable Care Act funds would be a good financial deal for Maine.

The recession hit rural eastern and northern Maine especially hard, and recovery in these areas continues to lag. In Washington County, the average unemployment rate in 2013 was 10.1 percent, far above the 6.8 percent level statewide. It was 9.9 percent in Piscataquis County, 9.4 percent in Somerset County and 8.9 percent in Aroostook County.

The Maine Center for Economic Policy ’ s analysis has shown that accepting federal health care funds would deliver 140 to 150 jobs and add $15.3 million-$17.5 million in annual economic activity in Washington County; 60 jobs and $5.8 million-$6.6 million in Piscataquis County; 190-210 jobs and $20.5 million-$23.5 million in Somerset County; and 250 to 280 jobs and $28 million-$32.1 million in Aroostook County. Shouldn’t capitalizing on such a major boost to these rural economies be a slam dunk?

These new federal funds will go to hospitals, medical practices, pharmacies and other health care providers who will, in turn, use the money to buy supplies and equipment and pay the salaries of doctors, nurses, health aides, administrative personnel and other employees. All of this spending will ripple through Maine’s economy, boosting local businesses and increasing their payrolls.

Maine has been reaping benefits from federal funding since before we became a state. Federal funds help support education, retirement security and health care, particularly for Mainers who are very old or very young, low-income, disabled or veterans. Federal funds currently pay for more than one-third of our state budget.

Over the past century, federal highway funds have helped to build thousands of miles of roads and bridges we use daily. Federal dollars fund clean water, electricity for rural residents, and even Internet access. Maine voters routinely approve bond issues for transportation and other infrastructure knowing that the federal government will match or exceed each dollar the state spends. MECEP’s analysis of bond issues in recent years found that for each state transportation and wastewater treatment bond dollar the federal match has been $1.76 and $4.57, respectively.

Accepting federal Affordable Care Act funds represents an unparalleled chance to capture federal dollars. Every dollar Maine spends to expand health care will result in a staggering $62 in federal matching funds. Turning down the federal funds will only put Maine at an economic disadvantage with states that use the funds to improve health care. What’s more, if things don’t work out as intended, Maine can opt out at anytime.

After more than a year of debate, it’s time for our leaders to do the right thing: accept federal Affordable Care Act funds to provide tens of thousands of hardworking Mainers with affordable health care, while realizing the benefits from thousands of good jobs and a welcome boost to stressed state and local economies. Maine cannot afford to miss this once-in-a-generation opportunity.

Garrett Martin is executive director of the Maine Center for Economic Policy.

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