Local Legislators Back Nutting for House Speaker
Ethics and competency questions over nominee
Friday, November 26, 2010 3:36 PM
Speaker of the House nominee Robert Nutting (R-Oakland), who served on the Appropriations and Financial Affairs Committee in the last legislative session, has come under public scrutiny in the past week for mismanagement of the finances of True's Pharmacy that led to True's receiving over $1.6 million dollars in taxpayer money that it was not entitled to.
Nutting owned True's Pharmacy in Oakland.
He has stated publicly that the overpayment was due to an error the pharmacy billing department made for five years and that he was unaware of the error until the state conducted an audit.
True's billed MaineCare double the going rate for items it sold for incontinency. The pharmacy closed in 2003 after Nutting declared bankruptcy when he was unable to reach a settlement for repaying the money to MaineCare.
Nutting served in the legislature at that time. No criminal charges were filed and the Maine ethics commission was not asked to investigate, according to a spokesman for the commission. In a press release, the Maine Republican Party said Nutting is the man to help get the state's economy back on track.
Through the bankruptcy process, True's reimbursed MaineCare $433,000. $1.2 million of taxpayer money was never repaid.
The Appropriations and Financial Affairs Committee, where Nutting now has a seat, is one of the most important and influential in the legislature. Members guide general fiscal policy and are responsible for review of revenue estimates; budgeting methodologies, general fiscal policy; and financial evaluation of state government agencies.
The overpayment and subsequent bankruptcy were reported in the media at the time, but came up again when Nutting was tapped for the Speaker of the House position.
The Speaker of the House presides over the legislature and can influence legislation through procedural maneuvers that allow some legislation to move forward and some to stall out. More specifically, the Speaker is the voice for the majority political party in the House of Representatives. Nutting has said that he will tackle reform of state regulations such as the ones that kept him from reaching a long-term repayment schedule of his debts.
The money Nutting owed to MaineCare, however, was to the state and federal governments, with federal repayment regulations overriding state regulations. Reforming state regulations is unlikely to have changed the outcome for True's pharmacy.
Marc Fecteau, a Program Audit Manager at the Department of Health and Human Services, was in charge of the audit that revealed the $1.6 million error in 2001.
Fecteau said the overpayment was discovered in a routine audit of the top 20 to 25 highest paid Durable Medical Equipment providers in Maine.
"True's was big. At the time, they represented two thirds to three quarters of all the incontinent products sold in the state," said Fecteau.
Fecteau said the audits revealed that other pharmacies had also been overpaid, but not by much.
The $1.6 million overpayment to Nutting was unusual. "It was one of the largest overpayments we have found" Fecteau said.
True's pharmacy did not use the standard MaineCare formula for mark up for sale - a formula that reimburses at a lower rate than retail. True's marked up using a retail formula that many pharmacies use for standard retail mark-up, then plan to bill MaineCare for the full amount.
"If the cost of the product was $1, the Nutting formula marked that up to sell at $1.67. The MaineCare formula marked it up to $1.40," said Fecteau.
Nutting should have been billing $1.40 for every dollar using the MaineCare formula.
The Maine Care formula for mark-up is Cost multiplied by 1.4 = Reimbursement. Fecteau said the retail formula used by Nutting was: Cost divided by .6 = Selling Price.
Fecteau said he did not know why True's Pharmacy used the "point six formula" for MaineCare reimbursement.
In fact, it was worse than that. True's did a double mark-up. The Nutting formula wasn't used, or was used incorrectly, a hundred percent of the time, according to Fecteau. True's Pharmacy didn't typically make 27 cents per dollar. They made at least a hundred percent profit by billing to MaineCare.
"It was more like $2 they were reimbursed for every dollar they spent," said Fecteau.
Fecteau said, in his experience, the $433,000 bankruptcy "settlement was not typical" in a case like this. It was low.
Several local legislators in the Free Press circulation area responded to the news reports on Nutting's past. They will vote on whether to accept Nutting as Speaker on Tuesday, December 2.
Wes Richardson (R-Warren) said he was surprised when he read about it in the newspapers.
"I was disappointed about the situation, not knowing about it ahead of time," he said. Richardson said he initially supported Paul Davis (R-Sangerville) for Speaker, but that he would support Nutting now that he was the nominee.
Dana Dow (R-Waldoboro) said he supported Nutting.
"I will be voting for him," he said. "People who have any questions about him should refer to the people in his district that have supported him term after term."
Leslie Fossel (R-Alna) said he would also support him.
"Bob Nutting is the Speaker of the House and that's the beginning and end of it," he said. "I don't think this will impede his ability to be effective."
Fossel is a small business owner with fewer than 20 employees. When asked if he could have made a $1.6 million accounting error in his business and not known it, he said these days he had so few employees he would notice.
"But you get focused on something and that could happen" said Fossel. "Bob is a competent, moderate guy.'"
Fossel blamed Nutting's bankruptcy on the state of Maine.
"In business, they screwed everybody," he said.