How to make 'open for business' more than a political slogan

Posted Wednesday, December 14, 2011 in Analysis

How to make 'open for business' more than a political slogan

by Gina Hamilton

Forbes Magazine came out with its 'Best for Business' lists, and Maine was, for the second year in a row, dead last.

Business growth was the lowest score, at 50 of 50 states.  There may not be much Maine can do about that; it is tied to average population age (Maine's is 47, quite elderly as these things go) and increasing population (ours is not declining, but it is not growing by leaps and bounds, either).

We aren't at the bottom on regulatory reform (we rank 45 of 50), which no doubt comes as a surprise to the Governor and Republican majority, nor are we low on labor supply (around the middle of the pack at 28 of 50).  We rank quite high in quality of life, but probably not as high as we should be, at 17 of 50.  Really, the thing that did us in is the cost of doing business, led by energy costs, which are 31 percent higher than they are in the rest of the country, especially in many of our actual competitors.

According to Central Maine Power, Maine's electricity costs are not high, compared to other states in New England.  But the truth is that we do not compete with other states in New England, at least not in many of our largest businesses.  We are competing with companies in the deep south, in the far west, and in Canada, where public energy programs, such as nuclear power plants, hydroelectric power, and wind and solar energy developments in the desert southwest provide cheap, clean energy to residents and businesses alike.  When energy plays a smaller role in family budgets, there is much more disposible income that can be spent for products and services businesses in the state or provinces may offer.

Remarkably, energy costs have not been a priority for this administration.  In the last week, Gov. Paul LePage downplayed efforts by the state to encourage conservation.  According to the Natural Resources Council of Maine and Efficiency Maine, simple conservation steps could amount for as much as half of all home and business energy costs.  Universal conservation efforts, done correctly, would undoubtedly bring down energy costs. 

For the long term, it is essential that our energy is home grown.  The cost of oil will only continue to rise, and natural gas, a byproduct of oil and coal, along with it.  Maine has millions of acres of forest land that can be dedicated to carbon-neutral wood-based heating, while creating many jobs in the poverty-stricken north.  Maine also has strong wind resources in the Gulf of Maine, which should be harnessed.  The energy from offshore wind could light nearly half the homes in Maine; onshore wind could take care of another quarter, and tidal energy, just in its early stages, could provide energy for the coastal regions without despoiling Maine's great natural beauty.  Maine also has hydropower resources throughout the state, and has enough insolation, even in winter months, for households to generate a good percentage of their own electricity.  Businesses, with large flat rooflines, are a natural for solar power, as are public buildings, such as schools, airports, and state office buildings.  All of these things take investment, and now is not the time to pull back.  Investment into green energy will not only encourage businesses concerned about high energy costs to relocate here; it will also create more homegrown energy companies.

Another high cost for businesses is health care costs.  There are already excellent models for less expensive health care in other areas of the country.  Many of these models are successful and even operate on a for-profit basis. An example is Kaiser Permanente, located largely in California, but with some offshoots in other areas of the country.  Under the Kaiser model, a patient sees his or her personal physician once per year for a full check-up, but for minor complaints, sees whatever doctor that is on-call at the clinic at the time.  Each center holds a family health clinic and a pediatric clinic for minor illnesses (such as strep throat) during regular business hours, and often, on at least one weekend day and one evening.  Clinics are staffed by doctors, nurse practitioners, and medical assistants.  A few steps away is a laboratory to test samples and to take blood and urine, a radiology clinic for x-rays and other tests, an innoculation clinic, a pharmacy, and an in-patient hospital in case more acute care is necessary.  As a result, few patients visit Kaiser's 'emergency rooms' although they are available and fully staffed for trauma.  Patients arriving with minor complaints are steered to the family health, or, after hours, to the urgent care clinic. 

Patients pay a monthly subscription and a co-pay at time of service; they are not billed for individual services such as lab services, x-rays, etc.  This means that Kaiser is strongly incented to provide only necessary services; unneeded tests are not performed.  Drugs begin with the simplest, best known, and least expensive generics; only if that treatment does not work are more expensive options tried.  Patients are treated symptomatically - they are not automatically sent to specialists in order to circumvent a malpractice suit. 

And Kaiser is able to keep its costs to patients and businesses low.  For a 50-year-old woman, monthly costs for a $50 co-pay with a $5000 deductible plan begins at $183 per month.  Preventative care on that plan is free and begins on day one.  Regular office visits are $50, even before the deductible is met.  Purchasing through a group plan is even less.

A Kaiser-type plan in Maine would be a strong inducement to bring business to the state.  The cost of health care in Maine is among the highest in the country, largely because there are few insurance companies operating in the state.  Because costs are so high, there are many more uninsured people in Maine than in other places, and most of those get necessary care from emergency rooms, the most expensive options. This, in turn causes everyone's premiums to rise.

The current shortfall in the DHHS budget, according to the Governor's supplemental budget, is about $120 million this year.  Assuming this number to be true, and assuming that the problem really is MaineCare (both assumptions merit further study), putting MaineCare patients on a Kaiser-type program -- a very high-quality outcome-based program -- would be less than the current budgeted funding for MaineCare for ALL participants, not even taking into account the federal match. 

At $183 per patient per month, keeping all current MaineCare patients covered, the cost yearly would be $586,534,032.  This would cover all their medical needs, from hospitalization to well-baby visits.  That is a lot of money, to be sure, but it is less than what the state had already budgeted for MaineCare ($613,000,000 in FY 2013, $660,000,000 in FY 2012).  And that doesn't take into account the federal match, which is currently about 63.27 percent in Maine.  That's correct, the federal government pays nearly 2/3 of our MaineCare bill.  What that means, using a Kaiser model, is that the state's share would fall to $215,433,949, only 35 percent of what the state is budgeting for FY 2013!

With the side benefit of inducing business to come to the state, it seems incredible that no one in the Governor's office has even begun to consider this option. 

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