BOIS FORTE SPECIAL SESSION REPORT 2011

08/08/2011

HEALTH & HUMAN SERVICES FINANCE 2011 SPECIAL SESSION

SF10/HF25

Fiscal Impact: $1 billion in General Fund Cuts, $1.2 billion in all funds cuts

Summary:

No other budget area benefited more from additional revenue/borrowing than Health and Human Services (HHS). The additional revenue/borrowing made it possible for the state to: 1) protect the state’s new Early Medical Assistance (MA) program, 2) ensure 140,000 Minnesotans to keep their health care coverage, and 3) protect most of the 20,000 middle-class private sector health care jobs eliminated in the Conference Committee Report (CCR).

The final HHS agreement does not contain: 1)language de-funding family planning grants, 2) prohibitions on stem cell research, 3) a repeal of nursing home rate equalization, 4) the nurse licensure compact, and 5) prohibitions on state implementation of the Affordable Care Act (ACA/Obama Care).

Nonetheless, the bill still contains over $1 billion in difficult HHS cuts. These cuts will hurt the elderly, disabled, children, medical education institutions, counties, hospitals, and all other health care providers.

To secure the revenue needed to protect valuable HHS programs from more severe cuts, the Governor had to make two major concessions to the Republican majority leaders. The first is the defined contribution program for childless adults above 200% Federal Poverty Guidelines (FPG). The program is however feared to be unaffordable for many low-income adults. Properly funded, however, this Gottwalt proposal could be a significant early step forward for Minnesota in complying with federal health care reform. In 2014, individuals above 133% FPG will be eligible to purchase subsidized private health care insurance via a Health Care Exchange.

The second major concession was an agreement to reduce the provider tax contingent upon a surplus in the Health Care Access Fund (HCAF). This proposal was actually Representative Huntley’s idea in 2010 (HF3709). The Republicans are counting on a significant savings from federal health care reform to achieve their provider tax reductions. The federal government is expected to cover 100% of Early MA populations in 2014. Should the saving fail to materialize the provider tax would not be reduced but would stay at its current level. Similarly, if the tax were reduced but the HCAF later be projected to have a deficit, the provider tax would then be back on, but would not increase beyond 2%.

FY 12-13 HHS Budget CutGovCCRFinal Deal

Total Cuts (All Funds)$1.06 billion$1.8 billion$1.23 billion

Total Cuts (General Fund)$.85 billion$1.6 billion $1.04 billion

MAJOR BUDGET ITEMS:

Defined Contribution/Voucher/GottCare?/ACA Pilot Project/MNCare Privatization-

The bill would require childless adults above 200% of the Federal Poverty Guidelines (FPG) currently on MNCare to go into a defined contribution program. The change would impact about 7,150 people—individuals making more than $22,000 annually and married couples making more than $29,000. Currently, these individuals receive state subsidized health care under the state MNCare program. The plan saves $9.4 million in FY 12-13. This bill puts individuals into a defined contribution program. They would receive a voucher from the state to purchase health care on the private market.

Context is important when considering this defined contribution program proposal. The Governor is initially recommended eliminating all coverage for these individuals—a recommendation he dropped after the February forecast. The GOP and Rep. Gottwalt in particular have advocated for defined contributions for much broader portions of the MNCare population. Once implemented, this program will only exist for a little over a year since the federal ACA will require this population to go into a similar, but more affordable, defined contribution plan starting in 2014; this proposal could be considered a pilot project for federal health care reform.

Cuts to Children-

2.5% Child Care Assistance Program (CCAP) Rate Cut:$6.6 million

Other CCAP Changes Resulting in Cuts:$6.8 million

20 % Legal Non-Licensed Family Child Care Provider Rate Cut:$6.5 million

Cuts to Child Care Grants:$1.4 million

Recapture Basic Sliding Fee (BSF) Funds:$5 million

Total Cut (Excluding CCSA cuts discussed below):$26.3 million

In addition to the cuts outlined above, the bill also cuts $22 million from the Children and Community Services Act (CCSA) grants. They are the only state dollars that go to counties for child protection. Most CCSA grants benefit children and adolescents who experience dependency, abuse, neglect, poverty, disability, and chronic health conditions. The CCSA cut will impact approximately 51,000 children.

Cuts to the Elderly and Disabled-

Eliminate 1% Developmentally Disabled (DD) Waiver Acuity:$9 million

Aging Grant Reduction:$7.2 million

Elderly Waiver (EW) and Alternative Care Programs:$16 million

Reduced Congregant Living Rates:$12.7 million

Disability Waiver Enrollment Limits:$48.1 million

Separate Elderly Waiver (EW) and Nursing Home Rates:$1.2 million

1.5% Reduction in Non-nursing Home Rates and Grants: $44 million

Corporate Foster Care Low Needs Reduction:$1.3 million

Suspend Nursing Home Property Rate Adjustment:$1 million

Modify Non-Rate Nursing Home Payments:$3.4 million

Cuts to Personal Care Assistant (PCA) Care by Relatives:$24.1 million

Require Disabled to Enroll in Managed Care w/Opt-Out:$26.3 million

Long Term Care (LTC) options counseling for housing with services:$3.8 million

Non-Funded operating rate increase for low rate providers:($2 million)

Total Cut:$197 million

The cuts listed above are only the cuts in Fiscal Year (FY) 12-13.

Reduced Fee for Service Basic Care Rates-

The bill reduces payments to outpatient hospital and ambulatory surgery services by 5% and most other physician and non-acute services by 2% to 3%, only for fiscal year (FY) 12-13. This accounts for an $18.7 million savings.

Federal Prepaid Medical Assistance Program (PMAP) MNCare Waiver-

Department of Human Services (DHS) is in the process of receiving a federal waiver allowing the federal government to provide a federal share for MNCare adults without children. The waiver and additional federal dollars will save the state $154.3 million over the biennium. The waiver lays groundwork for the public option for people up to 200% FPG when federal ACA provisions become effective in 2014. The bill requires the residency requirement for MNCare to be reduced from 6 months to 1 month as a condition of the federal waiver.

Operating Budget Reductions-

This bill reduces DHS’ operating budget by $6 million; this is consistent with the Governor’s recommendation. The bill reduces Minnesota Department of Health’s (MDH’s) operating budget by 44.3 million, approximately $1 million more than the Governor recommended. Both reductions are significantly less than those in the CCR.

SMALLER BUDGET ITEMS:

Long Term Care Counseling-

The bill requires people going into long term care/assisted living facilities to go through counseling with DHS.

Minnesota Family Investment Plan (MFIP) Changes-

The bill prohibits Minnesota Family Investment Plan (MFIP) participants in the Electronic Benefits Transfer (EBT) card program from using cash assistance to purchase alcohol or tobacco. The penalty for a violation would be disenrollment. The bill also creates a task force to develop policies to prevent inappropriate use of cash assistance. The bill also decreases the vehicle allowance for MFIP recipients from $15,000 to $10,000, saving the state $1 million. Finally, the bill excludes “political activity” from the allowed MFIP “work activity”.

Changes to General Assistance (GA) Eligibility-

The bill makes relatively minor modifications to the requirements for receiving General Assistance (GA). The changes address issues regarding what participants must do to find work. The change saves $3.3 million.

Medical Assistance (MA) and MNCare Cost Sharing-

A Republican cost-sharing proposal will result in slightly higher co-pays for Medical Assistance (MA) and MNCare Services. The change results in a savings of $4 million.

Chemical Dependency Program Changes-

The bill makes two significant changes to state chemical dependency programs. First, it tightens placement criteria, effectively requiring patients to be sicker before receiving expensive residential treatment. This was the Governor’s recommendation and it saves $9.1 million. The bill also increases the share counties must pay for treatment from 16% to 23%. Again, this was the Governor’s recommendation and it saves the state (and costs the counties) $6.7 million.

State Operated Service (SOS) Changes-

The bill delays the closing of the Willmar Community Behavioral Health Hospital until March 2012. The immediate closure was recommended by the Governor and part of the GOP CCR, but the local union strongly opposed the closure. The bill gives the union another session to make their case. The bill also makes a $3.3 million out of the State Operated Service (SOS) Special Revenue fund into the General Fund.

Fees-

The bill creates licensing fees for background studies conducted by Department of Human Services (DHS). The fee raises about $1.3 million. The bill also restructures fees, capturing an additional $1.2 million. The bill also increases the DHS’ Child Support Recovery Fee, capturing $1.6 million. All of these fees were recommended by the Governor.

Critical Access Dental Eligibility Changes-

The bill reduces payments to critical access dental providers by $6.1 million over the biennium. There is already a shortage of critical access dental providers in parts of the state; this will only make the problem worse.

Leverages Federal Funding for Health Care Reform-

The bill allows DHS to spend $2.5 million to leverage $22.5 million in federal funding for state implementation of the ACA. Likewise, it allows Minnesota Department of Health (MDH) to spend $1.5 million to leverage $5million in federal funding for ACA implementation.

OTHER ITEMS:

  • Combines and restructures Emergency General Assistance (EGA) and Emergency MN Supplemental Aid (EMSA) per the Governor’s recommendation.
  • Eliminates state Child Support Incentive Grants to counties. These grants have been used in the past to offset child support administrative costs. Saves $6.7 million.
  • Eliminates Family Asset for Independence in Minnesota (FAIM) grants. FAIM grants have helped low-income people buy homes, start businesses, and improve their financial literacy. Governor’s recommendation saves $492,000.
  • Liquidates the Supplemental Security Income Interim Assistance Reimbursement (SSI-IAR)carry forward. The carry forward would ordinarily be used for SSI program advocacy and outreach. SSI is a federally-funded program that helps people with little or no income thatare elderly, blind or disabled. Governor’s proposal saves $2.8 million.
  • Leverages existing CCAP spending to get additional federal Food Stamp Employment and Training (FSET). This change allows the state to realize a $1 million General Fund savings- Governor’s recommendation.
  • Establishes a White Earth Human Services project (a $365,000 cost) and allows the study of the need for a White Earth Urban Clinic (a $100,000 cost).
  • Refinances the HIV/AIDS State Rebate Account to save $2.4 million.
  • Expands MA coverage to include dental therapists at a cost of $120,000.
  • Alzheimer’s Disease Working Group recommendations. The bill codifies recommendations requiring DHS to look at existing data and make recommendations regarding Alzheimer’s assessment, care, diagnosis (including other forms of dementia), and treatment plans.
  • Requires coordination of care for children with high cost mental conditions at a cost of $170,000.
  • Establishes coordination of in-reach services, saving $13,000.
  • Repeals unapproved rolling and grace month for MNCare enrollees, saving $7 million.
  • Eliminates the Health Care Access Commission, saving $100,000.
  • Makes minor modification to Personal Care Assistant (PCA) service payments, saving $95,000.
  • Requires community spouses to make contributions. This bill requires the community spouse of someone on MA in a long-term care institution to contribute part of their income, on a sliding scale basis, towards the institutionalized spouse’s care if the community spouse makes more than 250% FPG. A “community spouse” is a spouse who lives in the community- not in the long-term care facility with their spouse. Program savings of $68,000.
  • Maintains child and teen checkup payments savings $395,000- Governor’s recommendation.
  • Reduces nonemergency transportation and ambulance rates, savings $4.2 million.
  • Modifies pharmacy reimbursement rates to save $1.2 million- Governor’s recommendation. Increases rural pharmacy payment rates by about 4% at a cost of $237,000- GOP proposal.
  • Makes modification to rehab services and prior authorization charges, saving $1.1 million.
  • Provides $62,000 to Comprehensive Advanced Life Support (CALS) program providing emergency medicine training in rural Minnesota.
  • Reduces the benefit set offered under Emergency MA (EMA) saving $14.6 million.
  • Eliminates auto renewal for MNCare, effectively cutting coverage short by one month saving $2.4 million.

E-12 EDUCATION OMNIBUS FINANCE & POLICY BILL- 2011 SPECIAL SESSION

SF11/HF26

Fiscal Impact-

Excluding shifts, the bill increases education funding $195 million. Compared to the Conference Committee Report (CCR) that reduced E-12 education spending by $44 million compared to base, which was $80 million less than the Governor originally proposed. The Governor increased E-12 funding by $35.5 million.

For Fiscal Year 2013 (FY13), there will be no net change compared to current law in statewide school district property tax levies, although the impacts vary for each district. The Governor’s proposal for FY12-13 would decrease property taxes for FY2013 from current law by $1.4 million.

Aid Payment Shift-

The Governor accepted the Legislature’s offer of a 60/40 aid payment shift (Governor wanted 50/50), which reduces school funding in this biennium by another $780 million. Both the Governor and Legislature had previously proposed extending the current 70/30 aid payment shift through FY12-13 rather than returning it to 90/10 as current law provides. Total state savings from the aid payment shift now amount to $2.2 billion.

Property Tax Recognition Shift-

The Governor’s proposal to use gross levies rather than net levies is adopted.

SUMMARY-

Provisions not in the bill that were in the Conference Committee Report include-

K-12 vouchers, A-F school grading, delinking basic formula components, special education growth reductions, prohibitions on the Commissioner adopting common core standards and pushing back implementation of social studies standards, teacher contract negotiations limitations and inability to strike, and tenure limitations.

Major provisions in the bill include-

Basic Formula Allowance: There is a $50 increase in FY12 and a $50 increase is FY13. The CCR had increases of $20 in FY12 and $21 in FY13.

NEW- Integration Revenue: Program continues the same in the next biennium, but then there is a sunset. The Commissioner must establish an advisory task force to recommend how to repurpose integration revenue funds to achieve improved education outcomes for all students and report to the Legislature by February 15, 2012. The pool of funds shall remain available for whatever new purpose is devised.

Literacy Incentive Aid: Beginning in FY12 a new aid component is created. Districts receive $85 X district enrollment X percentage of 3rd grade students meeting or exceeding proficiency on the Minnesota Comprehensive Achievement (MCA)-II reading assessment and 4th grade students achieving medium or high growth. The entitlement is capped in FY13 at $48 million.

NEW- Literacy Plan: Every school district must adopt a local literacy plan to have every child reading at or above grade level no later than the end of Grade 3, intervene with students to accelerate reading skill development as necessary, and give parents timely information about their child’s reading proficiency.

Minnesota Reading Corps: Receives an additional $5.5 million for FY12-13.

Early Graduation Incentive Program: Provides higher education scholarships to students who graduate early up to three semesters early from high school. The total scholarship spending is less than the state aid these students would have generated, so there is a savings for FY12-13. This however, reduces—in the school year the student leaves early—the amount that the districts could have redirected to early childhood programs, including all-day Kindergarten.

Adult Basic Education: Current law allows this aid to grow by 3% per year. The bill will reduce annual growth to 2%.

Career and Technical Ed Levy: Increases to the greater of $80 times the district’s average daily membership in grades 9-12, or 35%, instead of 25% of approved expenditures.

NEW- Small Schools Revenue: Districts with adjusted marginal cost pupil units of 1,000 or less are now eligible for additional small schools revenue. Charter schools are not eligible.

NEW- Early Childhood Education Scholarships: $4 million in FY13 is provided for early childhood education scholarships. The base for the program is $2 million each year.

Academic Standards: Students will be allowed to complete a career and technical education credit rather than a chemistry or physics credit for high school graduation.

Principal Evaluations: The Commissioner and the Association of Elementary and Secondary School Principals are directed to convene a group of experts to develop an annual performance-based evaluation system model. The group is to report to the Legislature by February 1, 2012, with principal evaluations beginning in the 2013-14 school year. Local administrator professional development models must be established by July 1, 2012.

NEW- Teacher Evaluations: Allows a school board and the exclusive representative of the teachers to develop through joint agreement a teacher evaluation process. If no agreement is reached, the district must implement the plan the Commissioner develops in consultation with a named group of individuals/groups. The evaluation will be a 3 year review cycle. The evaluation must use an agreed upon teacher value-added assessment model as a basis for 35% of the evaluation results. This process is based primarily on Rep. Brynaert’s evaluation model EXCEPT the 35% of the evaluation being based on assessment results.

NEW- Tiered Licensure: The Board of Teaching and the Education Commissioner must convene an advisory task force to develop recommendations for a statewide tiered licensure system and report to the Legislature by February 15, 2012. The Board of Teaching is directed to issue the licenses accordingly.