$1.8 billion cut to health and human services delivers a responsible set of solutions to state’s budget problems

Early on in the legislative session, the Minnesota House and Senate set out to cut $1.6 billion from the health and human services (HHS) budget.  These cuts are part of a broader strategy to balance Minnesota’s projected $5 billion budget deficit without raising taxes.   Mid-week, the House and the Senate finished their work and passed a HHS budget with cuts totaling $1.8 billion.  (They hit their $1.6 billion target for the general fund and cut another $222 million from the health care access fund.)

As you’d expect, advocacy groups and other special interests are none too happy with these cuts.   I’m certainly sympathetic to the criticism that the HHS target was set too high.   The K-12 budget should share some of the burden, especially after not being called to shoulder much of any burden in past budget crises.  But, politics as it is, K-12 funding is untouchable for both Republicans and DFLers.   With K-12 cuts politically impossible, the HHS budget targets are what they need to be. 

Of course, plenty of folks would have preferred raising taxes to avoid such deep cuts to the HHS budget.  Unless we’re going to consider broader tax reforms, taxes should not be part of any budget solution.  Minnesotans are taxed enough. 

I’ll leave a more thorough discussion on taxes for another day.   Right now I want to dig into the House and Senate final conference committee agreement on the HHS budget.  In my view, it’s a responsible approach to a very difficult budget crisis. 

If you listen to opponents of the conference agreement, you’ll hear how thousands of Minnesotans will lose insurance coverage, safety nets will be dismantled, and people with disabilities will be driven into institutions.

There is no doubt that the conference agreement includes some tough cuts that will pose extra burdens on certain people.  Indeed, there is no question that hard choices are being made. 

However, after reviewing the agreement, it is clear that the House and the Senate have not lost sight of the human impact of their actions, have worked hard to maintain services for the most vulnerable, and have kept their eye on the future to avoid future budget crises. 

A number of strategies to mitigate the impact of these cuts are evident throughout the bill.

First, some cuts simply roll back recent (and imprudent) public program expansions that were passed in the past five years.  Year after year, lawmakers expand public programs to higher income levels, increase benefits, and make it easier for new people to access and, yes, take advantage of these programs.  Not surprisingly, these expansions tend to support people who are less needy and less vulnerable.  As such, they should be the first to be cut in order to protect the programs that serve the most vulnerable.   (Last year, I outlined these expansions to identify cuts to help fund General Assistance Medical Care.  See the appendix of this report.)  

Second, certain savings come from freezing the growth of current programs versus eliminating people from the programs.  For instance, $93 million is saved by freezing waiver spending in programs that provide home and community based services for people with disabilities.  In some cases, the Department of Human Services is given flexibility to adjust certain programs in order to maintain enrollment.

Third, reductions in payment rates—one of the usual suspects when looking for budget savings—are focused on services that are less necessary, such as rates paid for personal care provided by relatives and non-licensed child care. 

Fourth, when a program is cut entirely, it’s replaced with a less expensive alternative.  General Assistance—a program that provides cash assistance for disabled adults—is replaced by an Adult Assistance program that gives each county a block grant and puts them in charge of distributing cash assistance. 

The most controversial cut is the elimination of the early Medicaid expansion to childless adults that Gov. Dayton put into place by executive order in January.  The Medicaid program for childless adults is replaced by reinstating the coordinated care delivery system (CCDS) that served the same population last year.  Admittedly, this is far from ideal.  Like last year, the funding for the CCDS is woefully inadequate.  But, on a positive note, these funding shortfalls are spurring some more creative thinking by health plans and providers on how to better serve this population at a lower cost.  (Note that a majority of states don’t have any public health program for childless adults.)

Importantly, the conference agreement looks beyond the current budget crisis and works to avoid future budget crises.   A number of provisions work to fundamentally redesign our public health care programs in order to provide better service at less cost.  Federal rules tightly limit the state’s ability to redesign public health care programs.  To free the state from certain rules, the conference agreement directs the Department of Human Services to apply for a broad waiver from federal Medicaid rules in order to redesign Medicaid to be sustainable, value-driven, and, at the same time, patient centered.

There’s little chance that Gov. Dayton will sign the current conference agreement on the HHS budget.   Nonetheless, the conference agreement is a serious effort to plug a serious budget hole.  It is mindful that any cut will have a human impact and aims to mitigate that impact for Minnesota’s most vulnerable citizens.  As such, it represents a solid foundation to negotiate an HHS budget that can gain the governor’s signature.