Testimony at Hearing on LD 1578: An Act to Increase Health Security by Expanding Federally Funded Health Care for Maine People

 Maine is on the cusp of an unprecedented economic opportunity. As many as 4,400 jobs and half a billion dollars in economic activity are at stake. That’s roughly equivalent to the total number of jobs at LL Bean and the total contribution of all arts, entertainment, and recreation businesses make to Maine’s GDP.
Just imagine what you would do, what the state would do, if a company announced plans to invest $340 million annually in Maine’s economy that would deliver 4,400 jobs and generate half a billion in economic activity. That’s what’s at stake with LD 1578 over the next three years. In this case, the federal government is willing to pay 100 percent of the cost now and 90 percent of the cost in the future to provide health coverage to tens of thousands of Mainers. And unlike most private sector developers, the feds are not asking for special tax breaks or other givebacks in return.
These federal funds will flow throughout Maine with significant economic impact in every county. They will pay hospitals, physicians, pharmacists, mental health counselors and other health care providers. Health care businesses will use these funds to purchase materials and equipment and to pay the salaries of doctors, nurses, health aides, administrative personnel and others. In turn, they will spend their wages to purchase food, clothing and other goods and services from local businesses, boosting their sales and their payrolls.
The combined economic impact from these federal funds is significant. In addition to the 4,400 jobs and half a billion dollars in economic activity, they will generate as much as $23 million in additional state and local revenue. Based on the Office of Fiscal and Program Review’s preliminary cost projections in the fiscal note for LD 1066 last year, this revenue will more than offset any new cost to the state from 2014 to 2016.
A common, and appropriate, critique of this type of economic impact analysis is that it often fails to account for the “opportunity costs” associated with the proposed policy. For example, if a city proposes to spend $100 million on a new convention center, an economic impact analysis must account for the lost opportunity of using those funds on a different project, investing them in an interest-bearing account, or simply returning them to local taxpayers in the form of a property tax cut. City officials must weigh the benefits of these alternative uses of the $100 million against the benefits derived from using the money to build the convention center.
In this case, the opportunity cost for Maine taxpayers during the first three years is minimal compared to continuing current policy. There will be no reduction in other economic activity elsewhere in the state to offset the increase in economic activity associated with accepting federal Affordable Care Act (ACA) dollars for health care. If Maine does not accept the federal funds, they will be reallocated elsewhere in the country or in the federal budget. The federal government will not allow Maine to accept the funding and then spend it on highways or schools or to finance sales or income tax cuts.
You have an unprecedented opportunity to boost Maine’s economy. Last year’s OFPR analysis affirms this. Every federal ACA dollar Maine spends on improving Mainers’ health care will yield an additional $62 in federal funds. By comparison, each dollar Maine spent in recent years to match federal transportation and waste water treatment funds brought back $1.76 and $4.57, respectively. Stated differently, the state’s share of the cost of increasing health coverage is only 1.6 percent of the total cost during the first three years. This is also a unique occasion to leverage federal dollars, and is in no way comparable to Maine’s past efforts to expand access to health care for low-income Mainers. It could not come at a better time, with 100,000 Mainers struggling in a weak labor market, wages and incomes for typical Maine families going nowhere, and very little economic relief in sight for low-income families.
Included with my testimony is a new MECEP report that summarizes the economic impacts of accepting federal funds. This report builds on earlier analysis contained in the March 2013 report “Federal Health Care Spending Makes Dollars and Sense for Maine” by Maine Equal Justice Partners and MECEP. Last year’s report focused on economic impacts associated with $256 million in new federal dollars Maine would receive in 2016 by accepting federal funds to provide health coverage for almost 70,000 Mainers. This new report accounts for close to $82 million in federal funds the state has received previously that it will lose by 2016 if it fails to accept federal ACA funds. I have also included the technical notes for the 2013 report for your review. MECEP takes pride in the credibility of our work, and I will be more than happy to discuss how we reached our conclusions.
I thank you for your time and for your service to the people of Maine. This may be one of the most, if not the most, important decisions you make as a lawmaker. At stake is affordable health care for tens of thousands of hardworking Mainers and thousands of much needed jobs in a struggling economy. It is a once in a generation bargain Maine cannot afford to pass up. I urge you to pass LD 1578.
Garrett Martin, Executive Director at the Maine Center for Economic Policy, testifying before the Joint Standing Committee on Health and Human Services in favor of LD 1578, “An Act to Increase Health Security by Expanding Federally Funded Health Care for Maine People.”