House HHS bill seeks to mitigate targeted cuts

But hospitals, counties object to some provisions

When the House budget target for health and human services was released last month, it was greeted with cries of disbelief. Given that the DFL-controlled Legislature planned to increase taxes by roughly $2 billion, the common refrain went, how was it possible that they planned to cut $150 million in cuts to health and human services?

Advocates for people with disabilities bemoaned the ramifications of yet another round of cuts to programs for the state’s most vulnerable citizens. Rep. Thomas Huntley, DFL-Duluth, chairman of the Health and Human Services Finance Committee, even revealed that he considered giving up his gavel over the proposed cuts.

So it was with some measure of relief that many lobbyists and legislators reacted to the details of the budget released by Huntley on Tuesday. Most notably, it included a 2 percent pay increase for personal care assistants, group home employees and most other workers who take care of the elderly and disabled. In addition, a 1.7 percent cut in provider payments that was slated to go into effect July 1 was rescinded.

“I was surprised that Rep. Huntley was able to find that amount of money,” said Bruce Nelson, chief executive officer of ARRM, which represents group homes for people with disabilities. “I was very grateful that he was able to do that.”

Steve Larson, senior policy director for The Arc of Minnesota, makes a similar point. “With the targets that Rep. Huntley’s committee had, they did a good job for persons with disabilities,” Larson said. “But because of the lower target, there were a lot of things that were left undone that could have been addressed.”

For instance, Larson points out that there are currently 3,600 people with development disabilities on a waiting list to receive coverage for services through the state.

Discontent remains

The legislation also included significant new funding for mental health services. Most notably, there is $10 million for school-based programs, the same amount that’s included in Gov. Mark Dayton’s budget.
“We got a lot of positive feedback on what we’ve done for mental health, particularly for kids’ mental health,” Huntley said. “Unfortunately, there are many other negative things in the bill given the target we had.”

Indeed, not all service providers were relieved at the House bill. Nursing homes were among the groups that received a 2 percent rate hike. But that funding increase was offset by other cuts that mean they’d actually receive slightly less money than in current statute under the House bill. They’d been hoping for a 5 percent increase in provider payments.

“While we understand the challenge Chairman Huntley had, given the cuts budget target, the end result for caregivers is a call to change those targets,” said Patti Cullen, president of Care Providers of Minnesota, in a statement. “We hope the Senate will do a better job of making seniors and caregivers a priority and that ultimately the spending targets will reflect the need.”

Huntley indicated that he’s committed to finding a way to fix the reduction in funding to nursing homes before the bill hits the House floor. “That’s very disappointing to me,” he said.

Rep. Jim Abeler, R-Anoka, the lead minority member of the Health and Human Services Finance Committee, is still surprised that health and human services are facing any cuts at all. “The target itself is disrespectful,” Abeler said. “They raised over $2 billion and they reduced human services.”

Hospital surcharge

Huntley was able to limit the pain by tapping additional sources of revenue. Most notably, his bill includes a new hospital surcharge that’s anticipated to bring in just over $100 million over the next biennium. Huntley points out that hospitals will be able to recoup much of the money from tapping additional federal Medicaid dollars.

“It’s a way to capture a lot of federal money,” Huntley said. “Most of the money goes back to hospitals.”
But the Minnesota Hospital Association doesn’t view it that way. The group’s president, Lawrence Massa, views the surcharge as a “gimmick” to avoid making difficult choices. “We’re very disappointed, very upset about it, quite frankly,” Massa said.

Huntley acknowledges that it’s an imperfect tool. Hospitals with a large number of patients enrolled in the state’s Medicaid program will get a disproportionate share of the federal dollars. “Some hospitals that don’t have a lot of Medical Assistance, like the Mayo Clinic, they pay in big-time and they don’t get much back,” Huntley said. “It’s unfortunate.”

The other sizeable pot of money — roughly $50 million — comes from the managed care organizations that the state contracts with to run its Medicaid program. Huntley says that the size of the reduction was calculated by referring to limits on health plan reserves that used to be in Minnesota law but were removed in 2004. “Some of the HMOs — not all of them — have what I think is very high reserves, which they don’t need,” Huntley said.

Some costs are also passed on to the counties. Counties will now be on the hook for 75 percent of the cost for placements at the Anoka Regional Treatment Center, up from the current level of 50 percent. For placements at the Minnesota Security Hospital, in St. Peter, counties will be required to pay 50 percent of the cost, well above the present level of 10 percent. All told, those changes are expected to cost counties $8.2 million.

That move continues a pattern of passing on expenses to local governments. Two years ago the state increased the share of costs for individuals enrolled in the Minnesota Sex Offender Program to 25 percent for counties, up from 10 percent previously. That’s costing counties $2.6 million in the current biennium.
“These are two new cost-shares on the heels of that one,” said Julie Ring, the primary health care lobbyist for the Association of Minnesota Counties.

Huntley’s bill is slated to be voted on by the Health and Human Services Finance Committee. The Senate is expected to roll out its budget bill on Monday.

Huntley isn’t exactly happy with his budget bill, but he’s no longer threatening to resign his chairmanship. “I’m a little more relaxed than I was three weeks ago,” he said.