Not cutting as deep in Minnesota health, human services

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A House proposal to cut $156 million in health and human services spending this biennium spares some programs reduced or eliminated under Gov. Tim Pawlenty‘s supplemental budget recommendation. Yet it’s little comfort to patients and providers long accustomed to falling under the budgeting axe. 


The House Finance Committee approved HF2614, the omnibus health and human services supplemental budget bill, April 28. Sponsored by Rep. Thomas Huntley (DFL-Duluth), the bill would cut significantly less than the $346 million proposed by the governor.


Like Pawlenty, House leadership is counting on $408 million in federal funding to help fill the remaining budget gap. However, that money may not be approved by Congress until after the Legislature adjourns.


Cuts in the bill, combined with reduced spending on General Assistance Medical Care, would reduce health and human services spending by about $300 million. These cuts are especially sensitive because they traditionally affect the elderly, people with disabilities and the very sick.


“I know people across the state of Minnesota are struggling as we come out of the recession,” said Rep. Erin Murphy (DFL-St. Paul), “but there are people that are vulnerable and they’re really feeling the impact in the way they lead their lives.”


In what some see as a glimmer of hope, the bill also sets the stage for future health reforms. Some are prompted by the federal health care reform law, such as a provision that would use federal funding to increase enrollment in the state’s Medicaid program. Other proposed reforms are state-directed efforts to reduce administrative expenses, improve accountability and bring down costs in the long run.


The bill was amended to incorporate HF1993, a budget bill from the House Housing Finance and Policy and Public Health Finance Division that would eliminate $1.6 million in public health expenditures. It also includes a portion of HF2760/ SF2505*, the omnibus early childhood bill, bringing its total General Fund savings to $164 million.



Cyril J. Denn of Mankato testifies before the House Health Care and Human Services Finance Division April 27 during public testimony on the omnibus health and human services supplemental budget bill. (Photo by Andrew VonBank)Difficult decisions


The House bill calls for cuts in state funding to health care providers, but makes some compromises to lessen the blow.


Payments to non-primary care physicians and professional services would be cut by 3 percent beginning next summer. However, clinics owned by nonprofit HMOs would receive increased funding.


Hospitals would be safe from cuts until next summer, when the state would reduce their payment rates by 7.5 percent. Some of the savings would be used to support specialty facilities like Children’s Hospitals and Clinics of Minnesota.


Legislators are also proposing an increased surcharge on HMOs in order to capture federal funding. The surcharge dollars would also help the state avoid cutting payments to nursing homes and facilities serving people with developmental disabilities.


Hospital representatives, patient advocates and others who testified before the House Health Care and Human Services Finance Division April 27 said the bill’s proposed cuts are particularly painful in the context of previous reductions and unallotments. For example, community mental health services expecting to lose funding under the scaled-back version of General Assistance Medical Care would also lose valuable state grants under the budget bill.


“Our mental health system simply cannot absorb these cuts,” said Sue Abderholden, executive director of the National Alliance on Mental Illness of Minnesota. “You can’t make these cuts, obliterate entire programs and expect them to rebound in two years. It will be too late.”


The House proposal would also eliminate nearly $10 million in grants used by counties to address child abuse. Critics say failure to protect children is not only an injustice, but will lead to greater state expenses later on.


“Without protection and early intervention, they are the future clients of our mental health, corrections, chemical dependency and homeless services,” said Mary Regan, executive director of the Minnesota Council of Child Caring Agencies.


House leadership opted not to include many of the governor’s recommendations in their legislation. The bill does not touch General Assistance, which provides cash assistance to childless, unemployed adults. Pawlenty proposed replacing GA with a short-term grant program.


The governor also recommended the repeal of the rate equalization law, which keeps nursing homes from charging private pay residents more than people on Medical Assistance. The repeal, which is not included in the House bill, is supported by cash-strapped nursing homes, but opposed by seniors’ advocacy groups like AARP.


Other provisions in the bill would restore some dental benefits to people on Medical Assistance; establish licensure for birth centers; and remove state-imposed barriers to the federal food support program, allowing an estimated 70,000 Minnesotans to receive related benefits. An amendment would slow the redesign of State Operated Services, the Department of Human Services division that runs facilities for people with developmental disabilities, mental illness and chemical dependency issues.


Looking to the future


The bill is peppered with reform measures, many of them aimed at capturing funding under the Patient Protection and Affordable Care Act.


The most immediate reform would mean a major change in health coverage for current participants in General Assistance Medical Care. Beginning in 2014, this population and other low-income adults will be covered under a federal expansion of Medicaid. At that time, the federal government will pay a significantly higher share of Medicaid costs.


Huntley says an aim of the budget bill is to ensure that the state’s estimated 30,000 GAMC enrollees receive appropriate care until the federal expansion takes effect. He supports a so-called “early option”: enrolling certain adults in the state’s Medicaid program ahead of 2014.


“The patients get better care, they get a better (benefits) package, and all the health care providers … will get an additional payment – roughly 20 percent more than they’re getting right now – on the GAMC population,” Huntley said.


Representatives from several of Minnesota’s health systems have said the early option is preferable to the revised GAMC program, which asks selected hospitals to care for GAMC patients with low reimbursement.


The early option would leverage an estimated $1 billion in federal funding, but would require a state match. Huntley proposes to pay for it by using the money that otherwise would have been spent on GAMC and running a deficit in a fund that helps low-income families and individuals purchase health insurance. Transfers from the General Fund would keep the deficit in the Health Care Access Fund from growing more than is currently projected for fiscal year 2013.


Not everyone is as enthusiastic about the early option and even supporters acknowledge their questions still need answers from the Centers for Medicare and Medicaid Services. An amendment to the budget bill would require the Department of Human Services to prepare a January report to the Legislature on the costs and savings to the state over the next five years because of the federal health care reform law.


Then there is the $408 million in pending federal funding state officials hope will close the budget gap. As part of the American Recovery and Reinvestment Act of 2009, Congress approved a temporary increase in federal matching funds for states’ Medicaid programs. This increase in Federal Medical Assistance Percentages (FMAP) may be extended by Congress, which is unlikely to address the issue before the Legislature must constitutionally adjourn May 17.


Other reform-related provisions in the omnibus bill direct the Department of Health to explore new models of service delivery that would incentivize providers to keep their patients healthy. An “Office of Health Care Inspector General” would be created within DHS to enhance antifraud activities, and the department would be charged with reducing the costs of caring for the most expensive Medical Assistance enrollees. An advisory board would review the reasonableness of administrative expenses within publicly funded programs.


A companion, SF2337, sponsored by Sen. Linda Berglin (DFL-Mpls), was held over by the Senate Health and Human Services Budget Division April 28.