Health and human services budget cuts worry providers

House Speaker Kurt Zellers
House Speaker Kurt Zellers arrives at the Capitol for the beginning of the special session on July 19, 2011.
MPR Photo/Nikki Tundel

Health care providers and others who depend on services from Minnesota state government are still trying to figure out what the health and human services budget bill contains, after it was passed early Wednesday morning in a special session.

The bill calls for spending about a billion dollars more over the next two years than the current budget. Yet the spending agreement is still about a billion dollars short of the forecasted growth in health and human services programs.

To close that gap, lawmakers will cut most provider reimbursements anywhere from 1 to 3 percent. HMOs that manage the state's Medicaid program face an even steeper cut - around 13 percent.

Doctors are concerned that their financial hit will be magnified because health plans would likely pass some of their losses on to providers, according to Dave Renner is a lobbyist with the Minnesota Medical Association.

"The programs are under-funded and clinics and hospitals and others are getting paid less than their costs in some cases to serve these populations," he said. "So we are worried that this potentially will put some clinics in some difficult situations."

It's not all bad news though for health care providers. A long-standing tax that required them to pay 2 percent on all of their non-Medicaid proceeds will be phased out by 2019. In addition, there will likely be fewer uninsured patients in the years ahead as the state continues enrolling people in the expanded federal Medicaid program. The picture is also mixed for nursing homes. Unlike most providers, they managed to avoid a rate cut. A small number of struggling rural nursing homes even got a slight increase in their reimbursements. But nursing homes were shocked to learn that lawmakers had undone their long-awaited rebasing plan.

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Gayle Kvenvold, president of Aging Services of Minnesota, says the rebasing agreement was intended to help nursing home reimbursements catch up to the actual cost of care starting in 2013.

"If there's one thing that we have learned in the course of this shutdown it is that nursing homes are operating, many of them, very close to the edge and this was a path to the future, a way of ensuring the long-term sustainability of those settings," Kvenvold said.

Disabled advocates also feel they lost some important ground in the budget compromise.

"It's a troubling result to this difficult legislative session," said Steve Larson, the public policy director at The Arc Minnesota. The budget outlook for disabled people barely improved despite intense lobbying from his organization. Larson estimates there are at least $170 million dollars in cuts to waiver and home care programs that serve people with disabilities, including a pay cut that targets personal care attendant services provided by non-legally responsible relatives.

"Some of our lowest paid health care workers that do a tremendous job are now going to have to take a 20 percent cut," Larson said.

Children's advocates are also disappointed by the health and human services budget. Alexandra Fitzsimmons, legislative advocacy director for the Children's Defense Fund - Minnesota, predicts some childcare providers will stop serving families with subsidies because they won't be able to absorb the 2.5 percent cut to their payments. She says a 17 percent cut in Children and Community Services Act grants will reduce opportunities to help abused and neglected children.

"We estimate that in a single year that 51,000 children will be impacted by that cut alone. So we have grave concerns with that cut," she said.

Republicans worry that without significant reforms the costs of health and human service programs will keep rising beyond the state's ability to pay for them. GOP Rep. Steve Gottwalt of St. Cloud said his caucus pushed hard for new ways to rein in costs and succeeded by shaving more than 8 percent off the budget for this biennium. In the following biennium, he said lawmakers reduced new spending growth to less than 5 percent.

"Many times we are accused of kicking the can down the road," Gottwalt said. "That is clearly what we are not doing in this budget solution. We are actually bending the curve."

Providers and advocates say they know cuts in the health and human services budget would have been much worse if the Governor and Republican leaders hadn't found a way to raise more revenue - though most acknowledge that they are not fans of the agreement to borrow against tobacco proceeds and school funding.