Legislature’s Health and Human Services bill makes drastic cuts to health care for families and children, relies on gimmicks

Ben Horowitz
May 18, 2017

On May 9, the Minnesota Legislature passed a Health and Human Services (HHS) omnibus bill that reduces general fund spending on HHS by $482 million using accounting gimmicks, deep cuts to health care services, and cuts to affordable child care. On May 12, this bill was vetoed by Governor Mark Dayton. At a time when federal policymakers are posing great threats to our state budget, legislators should re-focus their efforts on maintaining Minnesota’s stable financial footing while making smart investments in policies that support some of our most vulnerable neighbors.

Cuts to health care would amplify harmful impact of potential federal policy

The bill proposes to stop paying for inflationary increases in Medical Assistance, which would cut the funding available for health insurance for the state’s lowest-income children and families by $545 million in FY 2020-21. The cuts would grow even larger over time. The bill does not specify how those cuts would be made. It isn’t clear how the state could both reduce funding for Medical Assistance and meet its legal obligation to serve all eligible Minnesotans. Funding reductions of this magnitude could only be achieved through further policy steps to reduce eligibility for Medical Assistance, cut payments to health care providers, or limit what health care services are covered.

The bill also fails to act to maintain Minnesota’s provider tax. A law passed in 2011 would eliminate the provider tax in 2020, knocking out a vital, 25-year-old fiscal pillar from efforts to expand access to Minnesota’s nation-leading health care system. Allowing this repeal to move forward would reduce health care funding by $999 million in FY 2020-21 and put MinnesotaCare and other affordable health insurance options for about 1.2 million Minnesotans at risk.

The bill would threaten health care for Minnesotans at a time when grave threats are already on the horizon. For example, the Affordable Health Care Act (AHCA) passed by the U.S. House of Representatives would cut federal health care funding for Minnesota by $2.5 billion by FY 2021, with even larger cuts in the future.

Unclear policy changes unlikely to deliver promised savings

The bill contains about $250 million per biennium in savings from several provisions that lack evidence to support their claims of anticipated savings. It could put the state’s budget out of balance if the promised savings don’t materialize.

For example, a new eligibility audit program in the Department of Human Services is projected to save $140 million. The savings would supposedly be found by adding additional layers of paperwork to the process people follow to stay eligible for Medical Assistance. Other states following a similar path predicted, but did not find, large savings, and wound with lots of Medicaid-eligible people losing health insurance along the way. Additionally, the state is already in the process of rolling out a similar program due to a law passed in 2015; it is unclear how this new proposal could generate additional savings on top of the savings already accounted for from that proposal.

Two other areas where the bill assumes large savings without providing evidence involve reforms to assessment and support planning for people with disabilities and changes to the state’s health care delivery systems. These proposals may make sense, but without a detailed fiscal analysis, it is unclear how they will result in the assumed $107 million in savings in FY 2018-19.

Budgeting gimmicks obscure real costs of the proposal

Legislators further reduce near term spending in Health and Human Services by employing a simple accounting trick that shifts costs into the future. Here’s how it works: if the state makes a payment on June 30, 2017, it shows up on the balance sheet for FY 2017; if the state makes that same payment on July 1, 2017, it occurs in FY 2018. The bill moves some payments to medical providers forward one fiscal year into the future, creating savings of $173 million in FY 2018-19 and $24 million in FY 2020-21. That lowers costs in the short term, but the state would still be responsible for making those payments in FY 2022-23 — the first years that don’t show up on this year’s budget spreadsheets.

Similarly, the bill makes changes to important services for the elderly and people with disabilities with implications for FY 2022-23, making it difficult to fully understand the fiscal impact of these proposals.

An investment in low-income families offset by unnecessary cuts to child care assistance

The bill would increase the cash assistance available to Minnesota’s most financially vulnerable families for the first time in more than 30 years. Families accessing the Minnesota Family Investment Program would see their monthly assistance increase by $13. That’s still far too low — the maximum grant for a family of three is just $532 — but it is a long overdue step in the right direction.

Unfortunately, even as the bill increases assistance for some families, it would decrease funding for a vital support for others. Parents who use Basic Sliding Fee Child Care Assistance can go to work or school secure in the knowledge that their child has stable, nurturing care. But Basic Sliding Fee is not fully funded, leaving 5,000 families on a waiting list. And the waiting list represents only a fraction of the families who are eligible and go unserved.

Proposed changes to Basic Sliding Fee’s eligibility criteria would allow the state to serve the same number of families for about $3.7 million less per year. But despite the long waiting list, the bill is not reinvesting those savings in affordable child care; instead, they reduce funding for Basic Sliding Fee by an equivalent amount. By doing so, they lose the opportunity to serve about 250 more families per year.

Health and human services are too important for gimmicks and broad cuts

Minnesota has a history of finding innovative ways to ensure many of the most vulnerable Minnesotans receive the health care and other services they need to thrive. Among many other things, the HHS budget pays for critical services for the elderly and people with disabilities, and for programs that connect families with affordable child care options. Minnesota lawmakers should not place Minnesotans’ well-being at risk by making drastic cuts and assuming savings from proposals that have not gone through a rigorous policy-making process. When the state has a large surplus and is facing historic funding threats from the federal government, it’s time to invest wisely and defend the health care and other services that support our neighbors.

-Ben Horowitz