Gov. Tim Pawlenty's new plan to erase the state budget deficit would cancel state-subsidized health insurance for as many as 21,000 Minnesotans. Another 20,000 people would have their health benefits reduced.
Health and Human Services spending bore the biggest share of cuts in the governor's supplemental budget plan, which was released Monday. More than 25 percent of the spending reductions were aimed at social service programs, including long-term care.
Most childless adults on the state's MinnesotaCare program would lose their health coverage under the governor's plan. Only those at 75 percent of the federal poverty level -- an annual income of about $8,100 -- could keep their insurance.
Currently MinnesotaCare covers people with incomes as great as 250 percent of the poverty level, which is about $27,000 a year. The governor said the insurance program's benefit is too generous, and out of sync with the rest of the nation.
"There's only three or four states in the country that even have a program like that," Pawlenty said. "Both on the GAMC side and on the MinnesotaCare side, single adults without children are typically not covered much or at all, certainly not at Minnesota's levels."
Long-term care providers also found themselves on the governor's chopping block. He proposes cutting their payments by 2.5 percent.
But Pawlenty also offered them an olive branch, saying he will support their bid to repeal the state's equalization law. That law prevents facilities from charging private-paying residents more than those who are on public programs.
Pawlenty said repealing the law would give providers a way to recoup some of the revenue they are losing through state payment cuts.
"So that will help. I don't want to say it's going to offset it perfectly. But it will help soften the impacts," Pawlenty said.
"We're grateful that he's given us a little. But it's nowhere close to making up the losses," responded Patti Cullen, president and CEO of Care Providers of Minnesota, a long-term care trade association.
Cullen said most providers don't have enough private-pay clients to make a dent in their bottom line. "We have some inner city facilities that have 85 percent Medicaid and maybe 2 percent private pay. You know you can't charge $8,000 a day to make up the differences," Cullen said.
Spending cuts account for most of the governor's deficit reduction plan. But his budget fix also relies on $387 million in federal Medicaid funding. The U.S. House has agreed to extend the funds into next year. But the Senate has not yet approved the measure.
Rep. Tom Huntley, DFL-Duluth, chairs the Health Care and Human Services Finance Division and the Policy and Oversight committee. He thinks the governor's strategy is risky. "It's the funny money, smoke and mirrors. If he can assume that the feds are going to do something in the future, then I guess we can assume that, too. I could assume that they're going to give us $1.2 billion and then we don't have a deficit," Huntley said.
If the federal Medicaid allowance doesn't materialize, the governor will have to find a way to make up that $387 million in federal spending. He acknowledged that more changes to the proposal are possible in the weeks ahead, when a new economic forecast is released in March.
One area of the governor's plan that's still a little hazy is his proposal to replace General Assistance with short-term emergency grants.
Approximately 19,000 people a month receive General Assistance payments. Sen. John Marty, DFL-Roseville, said it appears that most of them will lose their monthly allowance.
"These are often people trying to live on $203 a month, which means they're usually homeless, they're extremely down and out," said Marty, who is also a candidate for governor. "It's an attempt to make the poorest and sickest people bear the brunt of the economic problem."
Lawmakers will have a say on the Pawlenty's proposed budget plan. But the governor warned them against a protracted debate. He says for every day the state doesn't deal with the deficit, it spends another $2 million.