Despite surplus, House HHS budget bill cuts affordable health coverage, cancels long-term savings

Ben Horowitz
May 05, 2015

The House Health and Human Services omnibus bill (House File 1638) makes more than $1 billion in cuts in FY 2016-17 to vital services that help Minnesotans meet their most basic needs. The bill would repeal MinnesotaCare, eliminating a time-tested affordable health care option for more than 100,000 working Minnesotans. There is a lot to talk about in the 372-page legislation, but two themes are particularly troubling: the House bill would greatly decrease investments in preventive health efforts with long-term payoffs, and the bill includes several poorly defined savings initiatives.

The bill’s most alarming provision is its repeal of MinnesotaCare. The proposal would raise health care costs to unaffordable levels for working Minnesotans earning less than 200 percent of the federal poverty guidelines ($23,540 for a single individual). With the repeal, these households would purchase insurance through MNsure.

Our rough estimate is that an average “silver” health insurance plan on MNsure would cost these working Minnesotans more than $100 per month by FY 2017, even with federal and state premium assistance accounted for. This is double the maximum premium for MinnesotaCare. That means many of these households could only afford a bronze plan, and would face higher out-of-pocket costs when they get sick or injured.

MinnesotaCare’s repeal operates at cross purposes to the bill’s $27 million in FY 2016-17 for mental health initiatives and $4.3 million to expand access to dental services. That’s because basic MNsure plans lack the level of mental health coverage found in MinnesotaCare; unlike MinnesotaCare, many MNsure plans lack dental coverage entirely. For the Minnesotans losing MinnesotaCare, this would mean toothaches are more likely to turn into a more serious issue and a costly visit to the emergency room. People struggling with mental health issues would be less likely to receive the counseling or medication they need. These new state investments would not do much to offset the big loss in coverage.

The bill also cuts $51 million from two long-term, evidence-based savings initiatives in FY 2016-17 by:

  • Eliminating the state’s funding for the State Health Improvement Program (SHIP), short-circuiting efforts to reduce obesity and tobacco use, two big drivers of health care costs. SHIP grants mostly go to fund locally-based initiatives in Greater Minnesota. Cutting SHIP threatens our status as a national leader on obesity reduction, and risks a reversal of recent declines in tobacco use.
  • Reducing low-income parents’ access to Nurse Home Visiting. Home visiting prevents future costs in the education, social service and justice systems by connecting at-risk families with professionals who help parents create nurturing environments.

Beyond these cuts to specific services and initiatives, the House bill relies on $637 million in FY 2016-17 from broader savings proposals to meet their target. These include:

  • $300 million from contracting with a private vendor for an eligibility and provider audit of Medical Assistance and other programs in the Department of Human Services. Similar efforts in other states failed to generate their promised savings and resulted in lots of eligible people losing coverage. Fiscal notes released on a similar approach predicted it would yield only $17 million in savings in FY 2016-17.
  • $132 million from undefined administrative cuts to the Departments of Human Services and Health, and for the managed care organizations that administer public health care programs. Because these cuts are not specifically defined, we can not know difficulties they may create for Minnesotans’ ability to access health care and other services.
  • $135 million from delaying payments to health care managed care organizations.
  • $70 million in reduced payments to health care providers.

The House bill includes $382 million in new general fund appropriations for FY 2016-17, including the aforementioned mental and dental health proposals. Examples of expenditures include:

  • $138 million to increase nursing home rates.
  • $52 million to fund child protection reforms and $4.3 million for the Homeless Youth Act and Safe Harbor for Sexually Exploited Youth. Similar initiatives are in Governor Dayton’s budget and the Senate’s proposal.
  • $90 million for a one-time increase in FY 2017 for home- and community-based service workers.
  • $8.7 million for two initiatives making it easier for employed Minnesotans with disabilities and seniors to access affordable health care; the Senate passed similar proposals.

This new spending is more than offset in a bill that ends affordable health care for 100,000 working Minnesotans and terminates long-term investments in health care and children. The bill also has more than half a billion dollars’ worth of savings that may not materialize. This approach is difficult to justify with a nearly $2 billion surplus.

-Ben Horowitz