Minnesota Department of Human Services

Commissioner Tony Lourey

P.O. Box 64998
St. Paul, Minnesota 55164-0998

April 10, 2019

Senator Michelle Benson, Chair Senator Jim Abeler, Chair

Senate Health and Human Services Senate Human Services Reform
Finance and Policy Committee Finance and Policy Committee
3109 Minnesota Senate Building 3215 Minnesota Senate Building
95 University Avenue West 95 University Avenue West
St. Paul, Minnesota 55155 St. Paul, Minnesota 55155

Re: 2019 Senate Health and Human Services Reform and Finance Omnibus Budget Bills (SF92 and SF2452)

Dear Chair Benson and Chair Abeler:

I am writing to express our deep concerns about the Senate Health and Human Services Reform and Finance
omnibus budget bills being considered by your committees. At the Department of Human Services (DHS), our
health and human services programs provide critical services to over one million Minnesotans. Your combined
budget bills would significantly cut state spending on these important programs by about $1.175 billion over the
four-year budget horizon. The bills also do not address the losses to the state budget from the sunset of the
provider tax – a stable source of funding that has supported health care for our low-income populations for
decades.

The magnitude of losses to health and human services will have far-reaching and devastating consequences for
the people and communities who rely on our services across the state. It will also negatively impact the health
care and human services workforce, along with our county and tribal partners. Moreover, it is concerning to us
that many of the savings proposals in the Health and Human Services Finance omnibus bill are unsupported,
putting the bill out of balance by about $150 million for FY 2020-21.

As I expressed in your committees this week, I am greatly concerned about the impact of both of these bills on
the state budget, the people who rely on our public health care programs, the children and families who will no
longer have access to child care, the people with disabilities who will have reduced or no access to home and
community-based services, the people living with mental health and substance use disorders who will continue
to experience the critical gaps in the health care system, and our most vulnerable seniors and their families who
will still go without the protections they need to ensure safe environments and quality care in long-term care
settings.
Senator Benson and Senator Abeler
April 10, 2019
Page 2

Below are more details about our concerns about the proposals in the Senate Health and Human Services
budget bills. I hope as the Senate moves forward with these bills that we can work together to find ways to
improve our programs and services at DHS without significant loss of services for the people of Minnesota.

Impact on services and programs for children and families in the Human Services Omnibus Budget Bill.

Each month, an average of 15,000 low-income families, including 30,000 children, rely on the state’s Child Care
Assistance Program (CCAP) as they strive to build a better life for themselves. The Senate Human Services
Reform (Benson) bill would hurt the children and families who are struggling to make ends meet. By eliminating
the state’s Child Care Assistance Program and Basic Sliding Fee child care assistance program, your bill leaves
poor working families in Minnesota with no access to affordable child care, which is critical to enabling them to
work and receive job training so they can lift their families out of poverty. This change will not only impact those
children and families in need of child care, but will also have a significant impact on the 3,265 child care
providers who care for the children served by these two programs, resulting in a loss of about $275 million per
year in state and federal payments to these providers. This will also exacerbate the problems with access to
child care in rural Minnesota, leaving many more families without access to the child care they need.

Additionally, this budget bill does not account for the multiple interactions with the proposed elimination of the
CCAP program. For example, as more parents are forced out of the labor market because of reduced access to
child care, there will be increased costs to the state’s Minnesota Family Investment Program (MFIP). DHS is
currently in the process of determining the cost of the resulting growth in the MFIP program from this proposal.
The bill would also mean that more families on MFIP will be unable to meet the work requirements for this
program, subjecting them to more sanctions because of the lack of access to affordable child care. Furthermore,
this bill includes many of the Governor’s fraud prevention efforts for CCAP. I am glad to see that we all agree on
these needed investments for program integrity. However, the savings from these proposals should not be
included the bill because the bill also eliminates this program altogether.

This bill also fails to fund other key initiatives in the Governor’s budget that would support and protect
Minnesota children and families. These include the increase to the MFIP cash grant for the first time since 1986,
establishment of a child welfare training academy, an expansion of the Tribal Child Welfare Initiative, and
planning for the implementation of the federal Family First Prevention Services Act.

Impact on access to Home and Community Based Services in Human Services Reform Omnibus Budget Bill.

Unfortunately this bill fails to adopt the Governor’s proposal that will address the current problems with the
disability waiver system by simplifying and streamlining disability waivers and reforming the way we pay for and
provide services, without resorting to cutting off access to care.

While the bill provides rate increases for providers through the Disability Waiver Rate Setting (DWRS) system,
certain Elderly Waiver (EW) services and Personal Care Assistant (PCA) complex care services, it pays for those
increases through a cap on people with disabilities who would be eligible to enroll in the Home and Community
Based Services (HCBS) programs. This will cut off all access to care and services for the very people who need
Senator Benson and Senator Abeler
April 10, 2019
Page 3

them; prevent over 6,000 vulnerable people with disabilities from accessing services in their communities; and
force about 1,000 people into more expensive institutional care where it is unclear whether there is sufficient
bed capacity to care for and house these individuals. Decreasing eligibility for these services will not fix the
workforce shortage. Instead, this change will create crises in other, more expensive parts of our system,
including hospitals, intermediate care facilities and nursing facilities.

During the presentation of this bill in Chair Abeler’s committee, it was mentioned that an amendment will be
offered to address the needs of people subject to the waiver cap by increasing state funding for the Family
Support Grant (FSG). The total value of waiver cuts in this bill is $145 million. Compared to a loss of that size,
the FSG funding will be significantly inadequate.

The bill also makes it more difficult for people with disabilities who need help with activities of daily living by
eliminating access to PCA services for 3,560 people who would currently qualify for these services. This cut is
shortsighted; PCA services are some of the least expensive in long-term care and they help people avoid more
expensive home health services and hospitalization.

The bill recommends closing adult foster care beds. While we support encouraging people with disabilities to
live as independently as possible. closing corporate foster care beds will have a major destabilizing effect on the
foster care system. Because this is an automatic bed closure process, individual homes could quickly become
destabilized, resulting in people becoming homeless.

This bill also fails to include the Governor’s proposal to increase the frequency of inspections of HCBS from once
every five years to once every three years, a proposal I had hoped we could all agree on.

Impact on behavioral health care in the Human Services Reform Omnibus Budget Bill.

While we appreciate that this bill includes the Governor’s position to refinance the state’s behavioral health
system and continues to support the state’s SUD waiver, it does not invest in the improvements to the state’s
system needed to address the growing behavioral health needs in our communities. Governor Walz proposes a
number of strategic investments (almost $26 million in FY 2020-21) in Minnesota’s system for behavioral health
care to address urgent needs and to continue building the system and improving access to high-quality care. This
includes the Governor’s initiatives to expand school-linked mental health grants to serve 7,000 additional
children, help counties with the ongoing cost of care in IMDs, expand access to services for children with more
psychiatric residential treatment facilities, sustain and expand Certified Community Behavioral Health Clinics,
invest in the Transitions to the Community program and create uniform standards for providers who care for
people in Minnesota’s behavioral health system.

Impact on seniors and vulnerable adults in Health and Human Services (HHS) Finance Omnibus Budget Bill.

As I expressed earlier this week, we have an important responsibility this session to make the changes and
investments needed to better protect vulnerable seniors and adults in Minnesota. While this Senate bill funds
the Governor’s proposal to add ten FTEs to the Office of the Ombudsman for Long-Term Care, it does not make
Senator Benson and Senator Abeler
April 10, 2019
Page 4

the critical improvements to the Minnesota Adult Abuse Reporting Center (MAARC) system needed to better
alert law enforcement of when there are allegations of maltreatment. Nor does it provide the investments
needed to help counties and tribes with the cost of investigating maltreatment allegations. It also does not
include the Governor’s proposal to establish a report card for assisted living services so that vulnerable adults
and their families can get the information they need to better understand and address quality and safety issues.
We are hopeful that these needed investments will be included in a stand-alone vulnerable adult bill in the
Senate.

Also, I would note that this Senate bill fails to include the Governor’s important recommendation for value-
based reimbursement for the services provided in 362 nursing homes. These changes would improve the health
of the state budget and provide meaningful incentives to improve the quality of care provided to our most
vulnerable residents.

Impact on funding for health care and the Health Care Access Fund in the HHS Finance Omnibus Budget Bill.

For decades, Minnesota has had a stable source of funding to pay for the health care needs of hundreds of
thousands Minnesotans through its provider tax. Unfortunately, this tax is set to expire at the end of this year
and will leave a budget hole of over $700 million a year.

Instead of providing a permanent fix for the funding shortfall, this Senate bill proposes that the state kick the
problem down the road, hiding the losses facing the state’s health care system in future years. It also spends
down the $1.5 billion balance in the Health Care Access Fund over four years, leaving Minnesotans no
assurances beyond FY 2023.

The bill also does not take the necessary steps to preserve access to quality, affordable health care for
Minnesotans. In fact, the bill proactively prohibits the state from offering buy-in options, like the Governor’s
ONEcare package. Without this package, the state will lack the tools to improve options for affordable health
coverage, address rising prescription drug prices and improve access to dental care. This is especially concerning
since we are out of compliance with federal requirements for access to dental care for children on Medical
Assistance.

The bill also restricts coverage for parents and adults without children to the benefits covered under
Minnesota’s Essential Health Benefit (EHB) Benchmark plan. Essentially, this will eliminate the coverage for
important health care benefits like dental and vision care, non-emergency medical transportation and PCA
services for parents and adults without children. This also means that the state will forgo $179 million in federal
reimbursement for the dental and vision portions alone.

The bill also proposes to reduce the actuarial value of MinnesotaCare from 94 to 70 percent for more than
80,000 low-income working Minnesotans enrolled in the program.

Disappointingly, the Senate budget package does not include the Governor’s proposals to provide automatic
Medical Assistance (MA) eligibility for children in foster care, leaving hundreds of children without coverage. It
Senator Benson and Senator Abeler
April 10, 2019
Page 5

even fails to make a very small systems investment to ensure that Indian Health Services receive cost-based
federal reimbursement.

Impact on the state’s Direct Care and Treatment programs at DHS in Human Services Reform Budget Bill.

We appreciate that this Senate bill increases the bed capacity for Direct Care and Treatment (DCT) Minnesota
Health Services. However, the bill does not make the necessary investments in DCT as proposed by the Governor
to maintain existing staffing levels and transition people in DCT programs into more appropriate care. The HSR
bill also fails to fund the positions needed at the Minnesota Sex Offender Program (MSOP), which puts staff
safety at risk. Without additional funding, MSOP will need to reduce its staffing.

The bill also proposes that the state close the Minnesota State Operated Community Services (MSOCS) facility in
Coon Rapids. DHS strongly opposes this position as it would directly interfere and conflict with DHS’ authority
and responsibility to ensure care for people whom community providers are unable to care for and negatively
impact our ability to comply with the Jensen Court settlement which requires us to provide for integrated
settings.

Impact on DHS’ ability to prevent fraud, waste and abuse in public programs in Human Services Reform
Budget Bill.

We appreciate that the Senate includes a number of fraud prevention initiatives and other critical items from
the Governor’s budget proposals to prioritize DHS’ efforts to improve program integrity. As I mentioned earlier,
those efforts related to CCAP, however, are incongruent with the bill’s proposal to eliminate the program. Some
provisions relating to fraud in the HSR bill also conflict with federal law. DHS will continue to work with you to
refine these proposals through technical assistance as the bill moves forward.

Impact on federal funding and compliance issues in HHS Finance Omnibus Budget Bill.

As you know, Minnesota is one of only four states out of compliance with a federal outpatient drug rule and has
been repeatedly warned by the federal government that we risk the loss of federal match on pharmacy
expenditures if we fail to comply. The state was recently given 30 days to provide a plan for how the state will
come into compliance. This Senate budget bill fails to bring the state into compliance with the rule, which
jeopardizes federal funding needed to operate our programs. The amount of federal funds at risk are up to $190
million per year. This will impact services in our pharmary program and our hospitals and pharmacy providers.
Remaining out of compliance puts the state budget at risk and is irresponsible, especially when coming into
compliance costs the state less than $4 million annually.

Several sections of the bill also conflict with federal law, including instituting a new asset test under Medicaid,
reducing the actuarial value for MinnesotaCare, and reducing the managed care trend. This would be out of
compliance with federal requirements for this program, putting federal funding at risk.

Impact of unsound budgeting and unsubstantiated savings in the HHS Finance Omnibus Budget Bill.
Senator Benson and Senator Abeler
April 10, 2019
Page 6

The bill purports that it will produce $253 million in general fund cuts in FY 2020-21 through a series of
measures. Based on our analysis, these savings will not be realized as they are based on false assumptions. This
type of budgeting will create real harm to Minnesotans who rely on services and programs that receive this
funding.

A number of examples are highlighted below.

• This bill books savings of $37 million in FY 2020-21 and $145 million in FY 2022-23 by limiting the annual
trend increases in managed care rates to 1 percent. DHS has been very clear that rates that are limited
in that way do not meet federal Medicaid rate-setting requirements and and therefore would not be
certified by CMS. Thus, the savings for this proposal will not be realized. This was attempted in a
previous session and the author was required to back it up with real money.

• The Senate bill also tracks $58 million in cuts in FY 2020-21 and $87 million in FY 2022-23 by eliminating
dental and vision coverage for adults. The actual value of adult dental and vision for these populations is
$27.5 million in FY 2020-21 and $44 million in FY 2022-23, and this does not account for offsetting costs
to Medicaid for the increased use of emergency rooms for care as a result of this proposal.

• The bill assumes $64 million in savings in FY 2020-21 by directing DHS to develop a corrective action plan
to eliminate duplicate identification numbers used for each individual enrolled in Medicaid and
MinnesotaCare (also referred to as person master indexes (PMIs). DHS is already working to address this
issue. While there may be some savings from this work, there is no basis for assuming this level of
savings or anything close to it.

• The bill transfers $37.4 million from the systems account to the general fund in FY 2021, based on an old
analysis. The current projected fund balance in the systems account in FY 2021 is approximately $17
million, and the majority of that is funding that the Legislature appropriated to DHS in 2013 and 2017 for
system modernization efforts. Without this funding, we will be forced to lay off staff and will not be able
to complete the systems work required to implement the provisions of this bill, such as the duplicate
PMI solution and other changes to METS needed to respond to federal and state audits of our public
health care programs. Making this type of reduction to the systems account hurts our ability to run our
systems properly, harms counties and tribes in their efforts to enroll people in needed services and
jeopardizes our ability to make payments to providers for services and draw down federal funds that
benefit the entire budget.

• The bill moves $10 million from a dedicated account that holds Medical Assistance (MA) recoveries and
other revenues that are used to cover the state match on MA. Taking these funds will increase the cost
to the general fund for its share of the state match for MA. As a result, this proposal results in no net
savings.

• The bill proposes to move $4 million from a dedicated account that provides assistance and support to
people with disabilities while they wait for a disability determination by the Social Security
Senator Benson and Senator Abeler
April 10, 2019
Page 7

Administration. This provision will eliminate funding for the agencies that provide services for those
individuals with disabilities.

• The bill cuts $20.5 million per year from the DHS central office and leaves the Commissioner with the
task of figuring out how to allocate a cut of that magnitude. This potentially could leave DHS without the
resources needed to function adequately. As an example, DHS could choose to eliminate its general fund
support for Medicaid fraud investigations, child welfare and permanency, and health care member and
provider services and still not meet the required cuts put forward in this bill.

Based on our preliminary analysis, the bill is $150 million short of its target in FY 2020-21. This is based on the
savings tracked in this bill that we believe will not be realized.

The impact of other provisions in the Senate HHS Omnibus Budget Bills.

There are a number of additional provisions that we are concerned about in the Senate HHS budget bills.

• Chair Benson’s budget bill transfers the Office of the Inspector General (OIG) from DHS to an
independent office. The OIG serves an important function at DHS. Federal law requires a number of the
investigatory and enforcement duties related to the Medicaid program to remain within DHS. This bill
does not account for those requirements. I strongly encourage the Senate to consider a measured
approach to addressing the questions about where the functions of the OIG should live in state
government. This approach should include more time and discussion with stakeholders and other
partners impacted by these decisions, including our agency at DHS.

• Chair Benson’s bill reduces appropriations to DHS for salary and benefit amounts attributable to
positions that have been open for at least 180 days. Most of the positions that currently meet that
criteria are specialized, hard-to-fill positions in our Direct Care and Treatment programs that remain
open until they can be filled. These are often related to services in Greater Minnesota.

• Chair Benson’s bill includes licensing and Medicaid coverage for services provided in Prescribed Pediatric
Extended Care Centers, or PPECC. The Department has concerns about this proposal, because it sets a
rate in statute for PPECC services, which cannot be substantiated based on costs. Instead, uniform rate
methodology must be used. For this reason, this proposal would not be approved by CMS. We also
continue to have concerns about the segregated nature of the setting.

• Some of the proposals in Chair Abeler’s bill would increase administrative complexity for some of the
programs that serve children and families. These include changes to the CCAP asset policy and income
definitions, how we treat self-employment income, and a proposal that subjects all Supplemental
Nutrition Assistance Program (SNAP) participants to additional paperwork and documentation burdens.
Simplfying our programs has been a bipartisan effort for years, aimed at benfitting local county staff and
the families we serve.
Senator Benson and Senator Abeler
April 10, 2019
Page 8

Thank you for your work thus far; I understand and appreciate the energy and time it takes to put together an
omnibus budget bill for health and human services. I hope you will take our comments into consideration, and
that we can work together to make the changes needed to help people across Minnesota that rely on the
services we provide at DHS. I look forward to partnering with you as the bill moves through the process and into
conference committee. As always, please do not hesitate to contact me or my staff for additional information or
assistance.

Sincerely,

Tony Lourey
Commissioner

cc: Governor Tim Walz

Lt. Governor Peggy Flanagan
Senator Jeff Hayden, Minority Leader, Senate Health and Human Services Reform Committee
Senator John Marty, Minority Lead, Senate Health and Human Services Finance Committee
Cassandra Moore, Senior Policy Advisor, Office of the Governor