Minnesota’s Health and Human Services budget deal puts state fiscal stability at risk

Ben Horowitz
Oct 09, 2017

Minnesota legislators put both the state’s balanced budget and Minnesotans’ health at risk with the Health and Human Services budget bill signed into law this session. The legislation cuts $463 million in general fund spending in FY 2018-19 for the portion of the budget that includes critical services for sick children, Minnesotans struggling with mental health issues or addiction, people with disabilities, and the elderly. The bill relies on fund transfers and various shifts to make up some of the difference. But it has left Minnesotans more vulnerable to federal policy changes, such as those that threaten access to affordable health care through the Children’s Health Insurance Program (CHIP)MinnesotaCare, and Medicaid.

Putting affordable health care in jeopardy with risky financial choices and a new layer of unnecessary bureaucracy

For over two decades, a 2 percent provider tax has generated revenue intended to fund statewide access to affordable health insurance. The revenue from the provider tax accrues in the Health Care Access Fund (HCAF). From there, it typically covers the state’s share of MinnesotaCare and a portion of Medical Assistance, health insurance options for Minnesotans who can’t afford the insurance offered by their employer or on the individual market.

Prior to the 2017 Legislative Session, the provider tax more than covered all of its commitments until FY 2021. As a result, a surplus built up in the HCAF. The surplus was projected to rise to $1.2 billion by FY 2021. This critical reserve could have helped offset any forthcoming federal cuts to health insurance assistance. It could have financed innovative new policies to connect even more Minnesotans with affordable health insurance, building on our past successes to ensure that fewer Minnesotans would need to choose between pay for a prescription and making a car payment.

Instead, the HHS budget bill nearly empties the HCAF, using those funds for existing services previously financed by the general fund and paying for the state’s high-risk pool for health insurers. As a result, the HCAF will have just $4.4 million available in FY 2021. This leaves Minnesota with fewer resources to respond if federal policymakers follow through on their plans to slash federal health care funding.

Making matters worse, policymakers left in place the scheduled cancellation of the provider tax in FY 2020. As a result, the HCAF will almost certainly face a deficit in FY 2022. Extending the provider tax would be a simple way for the state to maintain its commitment to affordable health care, and was included by Governor Mark Dayton in his budget proposal.

Minnesota policymakers also put low-income Minnesotans’ health coverage at risk by enacting a new paperwork barrier to affordable health insurance. Minnesotans who have already filled out forms to become eligible for Medical Assistance will now be subject to an additional verification program. If the experience of other states is any guide, this new program will likely result in people losing their health insurance even when they are eligible for assistance.

Shifting state costs to health care providers and counties

The bill includes a cut to the amount Medical Assistance pays to the providers of health insurance for low-income Minnesotans. The lower rates will make it harder for the insurers to find doctors and other health care providers who can serve low-income Minnesotans without taking a loss. That could mean reduced access to care for the more than 1 million Minnesotans who are covered by Medical Assistance, including many of our most vulnerable neighbors.

The bill also reduces funding to counties for assessments for long-term services for people with disabilities by $19 million in FY 2018-19. This policy change was included without any prior hearings on the impact of the funding shift.

Accounting gimmicks leave Minnesota more exposed to future risk

The bill delays payments to health insurers by a few months. On paper, that creates $173 million in “savings” for FY 2018-19 and $24 million for FY 2020-21. In reality, the state will need to make up for some of these savings by paying providers what they are owed in FY 2022-23.

Some progress made on improving Minnesotans’ access to affordable child care

Minnesota policymakers took a step in the right direction by removing a barrier to stability for families participating in the Child Care Assistance Program (CCAP). CCAP makes child care affordable for low- and moderate-income families. While the new HHS budget will not reduce the CCAP’s 2,000-family waiting list, it will invest $19 million in FY 2018-19 and $30 million in FY 2020-21 to make the program work better for child care providers and the families they serve.

Minnesotans deserve better

The HHS budget determines how Minnesota will support many of our most vulnerable neighbors — seniors, children, people with disabilities or struggling with addiction, and Minnesotans who have just plain had a string of bad financial luck. Given the state projected a $1.7 billion surplus for FY 2018-19, policymakers had an opportunity to thoughtfully invest in policies that would support these neighbors in their efforts to get ahead. In one especially disappointing example, policymakers chose to leave the Minnesota Family Investment Program cash grant amount stagnant for the 31st year in a row — meaning Minnesota’s most economically struggling families will still have to somehow try to make ends meet on a budget that won’t even cover the cost of rent.

By choosing disinvestment and budget gimmicks over investments in the everyday Minnesotans who face significant barriers to financial stability, the HHS budget doesn’t just miss an opportunity to make our state stronger. In a time of great uncertainty, it leaves our existing supports much more vulnerable to threats from the federal government.

-Ben Horowitz