Maryland's $160 Million Problem

November 23, 1993

Heads ought to roll over the state government's failure to pay Blue Cross and Blue Shield for administering its health insurance program covering 87,000 state workers and retirees. There is no excuse for running up a $117 million deficit that threatens to sap state money from other worthwhile programs, force most state employees to pay double for their health insurance and leave Blue Cross in a tenuous financial bind.

None of this need have happened. Some officials in the Department of Personnel operated as though they had no obligation to tell anyone else in government that they were intentionally underpaying Blue Cross. Nor did anyone in the Department of Budget and Fiscal Planning ever bother to check what was going on: the guys with the green eyeshades simply accepted the low-ball health-insurance numbers sent to them.

Blue Cross warned personnel officials last December that the state was running up a big monthly debt, but the warning was ignored. An update on the situation was sent to the state budget secretary but he doesn't remember reading the document. Mistake compounded mistake.

By next July, Maryland will owe Blue Cross $117 million for unpaid medical bills. And the Schaefer administration is now proposing it pay off only a portion of that debt and leave $38 million in IOUs to the next governor. That is bad fiscal policy. The General Assembly should not permit it.

The Schaefer government has an obligation to clean up the mess it created, a mess that will cost the state a total of $160 million. Passing the debt on to the next administration runs counter to the responsible approach Gov. William Donald Schaefer has always taken on fiscal matters.

Straightening out this fiasco will hurt. Some 60,000 state workers and retirees enrolled in the Preferred Provider Network will see their premiums double. Some $121 million the governor wanted to use for raises or for hard-pressed state social programs will be diverted to pay these health-care IOUs. State agencies, already battered from years of recession-induced penny-pinching, will be squeezed again to make up some of the shortfall.

As if this were not enough, it is patently unfair to penalize Blue Cross for the state's failure to pay its own bills. Postponing reimbursement would rob the company of sorely needed funds. The health insurer remains in precarious shape. Its net income for the last quarter was a mere $2 million. The state's debt to Blue Cross must be paid in full.

It is unacceptable public policy to run up debts and then push repayment into the future. Mr. Schaefer should insist that his budget department devise a more responsible plan for resolving this financial mess. The sooner state government erases these arrears, the better.

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