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Health care reform helps state's budget picture

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Simpson Men's Shelter
Leonard Paige is served a hot meal at Simpson Men's Shelter in Minneapolis Tuesday, Feb. 16, 2010. Paige said he has received support from the state's General Assistance and GAMC programs for the past year.
MPR Photo/Jeffrey Thompson

The passage of a sweeping federal health care bill will provide an almost immediate financial benefit to Minnesota, and reduce a nearly $1 billion state budget deficit. 

A key DFL legislator says he expects the state to get about $330 million in federal money this year to help insure low-income adults. 

Many of the federal health care reforms don't kick in until 2014, but others are just weeks away. Rep. Tom Huntley, DFL-Duluth, who chairs the House Health and Human Services Finance Division, says Minnesota and 12 other states will start seeing benefits April 1, with an increase in eligibility for Medical Assistance. 

Huntley says that means more federal support for Minnesotans currently covered under two state-subsidized programs: General Assistance Medical Care and MinnesotaCare.

"GAMC, if we made no changes, kept it the way is was for the next 16 months, that's $500 million. So, the feds would pay $250 million," said Huntley. "The MinnesotaCare part is about $160 million, and the feds would pay half of that. So that's another $80 million that we didn't know we had. So this is a big change in our budget."

But while the federal money might help, it won't solve Minnesota's budget problems. DFL leaders were originally looking at spending cuts of $323 million in the human services area, as the second part of a three-part budget solution. 

Huntley says that number should be closer to $100 million after they factor in the new federal money and the state match. But Huntley says even $100 million in cuts will be difficult.

"The fact of the matter is the math doesn't work long term, and we need to have structural reform."

"That's on top of all the cuts we made last year. We reduced reimbursements to hospitals. We basically cut long-term care facilities," said Huntley. "Eighty-plus percent of the health and human services budget is for people who are seniors in nursing homes and people that have disabilities. And those are tough areas."

Minnesota is also expecting a shot of federal health care money from another bill. Gov.  Pawlenty and DFL leaders have already plugged that anticipated $408 million into their respective budget-balancing proposals. 

Legislators have spent a lot of time this session debating how best to continue health care coverage to about 30,000 of the state's poorest residents who were previously covered under GAMC, which is set to end soon under a budget cut made last year. Pawlenty and DFL leaders negotiated a temporary fix, which the Senate passed last week. 

In light of the new federal money, Huntley says he thinks this week's scheduled House vote should be delayed and negotiations with the governor reopened. 

But Huntley's Senate counterpart, Sen. Linda Berglin, DFL-Minneapolis, disagrees. 

"They should pass that bill, because otherwise April 1 there's no GAMC program," said Berglin. "And we're not going to have the federal reform figured out, in terms of its fiscal impact, by April 1."

Berglin says she has not spent a lot of time trying to measure the federal bill's impact. But she says coming up with the state's share of the eligibility expansion might be a challenge under the current budget limits.

Republicans are also suggesting a slower approach to a federal bill they still oppose. Rep. Matt Dean, R-Dellwood, says there are still too many questions about the constitutionality of the bill, and he doesn't want its potential funding plugged into the state budget. 

Dean says the state relies too much on federal money for temporary budget fixes. 

"In the longer range budget we need to be looking at structural reform, not just incremental reductions and nibbling around edges," said Dean. "The fact of the matter is the math doesn't work long term, and we need to have structural reform."  

A House committee plans to take a closer look at the financial impact of the federal health care bill during a hearing Tuesday. A Senate committee hearing is also likely in the next few weeks.