Hospitals and medical clinics for the poor are making a push for state government to keep threatened medical programs alive, using an infusion of borrowed money if necessary, until a lifeline from the federal health care law arrives.
Their effort might give new momentum to a shelved idea of fixing the budget shortfall of more than $1 billion by borrowing against future revenue from a tobacco settlement. The Legislature did it a decade ago during a previous budget crisis and is still paying off the debt.
The idea has yet to make it into any version of the budget, including House Democrats’ plan, which preserved the medical programs. Nor will it be in the budget Senate Democrats will release Tuesday, according to its lead author, Sen. Ed Murray. He said that kind of bonding doesn’t have the votes in the Senate.
“That would break the basic structure of the bipartisan budget we passed” with Republican help in 2011, Democrat Murray said. “I’m not breaking with that agreement.”
His comments are yet another sign of the widespread opposition to anything that resembles what was done in 2002. Gov. Chris Gregoire, who would have to sign a budget, has said lawmakers had better not send her one that includes such “securitization.”
Still, the Senate budget plan merely opens the door for final negotiations. If lawmakers find themselves deadlocked and want to leave Olympia on time March 8, the securitization proposal will be waiting in the wings with promises of an easy $220 million.
That’s how much it will cost to keep two medical programs alive until federal money pours in, according to the Washington State Hospital Association and Community Health Network of Washington. A group lobbyist, Len McComb, has been pitching the borrowing idea to lawmakers, including centrist Democrats whose votes are key to Senate support.
At least one member of that group isn’t dismissing it entirely.
Sen. Jim Kastama of Puyallup is a staunch opponent of securitization – and he questions the assumption that the federal government would come through with promised funding for the health programs in 2014.
But he nonetheless says he is open to considering this new proposal, seeing it as different from previous borrowing.
“Basic Health and Disability Lifeline are a short-term need. It’s just really a bridge,” said Sen. Karen Keiser, the Senate health committee chairwoman who is selling the proposal to fellow Democrats. “I know a lot of members are concerned about securitizing for ongoing operations, and this would not do that.”
Borrowing provides a one-time funding source, and the state does it all the time to finance one-time projects, such as construction of a building. But doing it to pay for operating expenses is different. Opponents liken it to putting rent or groceries on a credit card.
Washington raised $450 million in 2002 by borrowing against part of the money received from the national settlement with tobacco companies. The Washington State Budget and Policy Center said interest costs totaled about 28 cents for every dollar borrowed.
The budget center says in a report that 18 states have made similar moves, most recently Minnesota last year. That state managed to secure relatively low interest rates, the left-leaning center said, but Minnesota’s credit rating was downgraded later that year by Standard & Poor’s.
Borrowing “jeopardizes the high credit rating that makes borrowing affordable in the first place,” the report says. It concludes that borrowing could work – but that it should only be used as part of a plan that also generates new revenue through tax reform.
Opponents of securitization, including State Treasurer Jim McIntire, say ratings agencies will look askance at Washington, too, if it uses such methods.
The money would pay for helping 52,000 people who are not eligible for Medicaid government health insurance now but will be eligible starting Jan. 1, 2014, under President Barack Obama’s health care law.
The formerly state-only medical programs – the Basic Health Plan and what was until recently called Disability Lifeline – are partly federally subsidized as part of a “bridge” to 2014 Medicaid coverage. The federal government is supposed to pay entirely for those patients from 2014 until 2016, when the state will have to resume paying for a fraction.
Savings to the state in just the first five years of the expanded federal role will exceed the debt payments on the proposed bonds, according to the proposal by the hospitals and clinics.
But if the state ends the programs for the next two years, clinics that serve low-income patients would face “disaster,” Keiser said.