Health care programs might see cuts as state tightens budget belt

by Lorna Benson, Minnesota Public Radio

The health and human services budget accounts for more than a quarter of the state's general fund spending. With the projected $5.2 billion state budget deficit, it is very likely that state-sponsored health care programs will be one of the first areas lawmakers review as they try to close the budget gap.

St. Paul, Minn. — Lawmakers don't have a lot of appealing choices when it comes to trimming the health and human services budget, the bulk of which goes to pay for services for people with low incomes.

They can either reduce program eligibility and benefits for people who can't afford health insurance on their own, or they can cut the Medicaid reimbursement rates that they pay to doctors, nurses and hospitals.

DFL Representative Paul Thissen of Minneapolis chaired the House Health and Human Services Committee last session. He said in bad economic times, it doesn't make sense to whittle away at people's health insurance. But scaling back Medicaid reimbursements has equally dire consequences.

"Where those dollars ultimately flow are to hospitals and nursing homes," Thissen said. "As those numbers get cut, it puts increasing pressure on those institutions and the ripple effect of that, of institutions closing or having to do layoffs, have significant effects, particularly in greater Minnesota." Nursing homes and assisted living centers may have the most at stake when it comes to Medicaid. Kari Thurlow is the Vice President of Advocacy for Aging Service of Minnesota. She said more Medicaid rate cuts would be extremely bad news for her members.

"About 30 percent of our care centers are what we would deem at risk of closure already, which means that they have a negative 5 percent operating margin or worse," Thurlow said. "So obviously we're in a precarious situation."

One consequence of the situation is that the battle to resolve the budget seems likely to pit the interests of the elderly against the interests of their grandchildren.

Jim Koppel, executive director of the Children's Defense Fund, is worried that more kids will lose their health coverage.

"Everybody loves children. Everybody wants children to do well," Koppel said. "The issue comes down to where do we fall in the priority? Where do we fall when it comes to what's the easiest thing to cut? And too often, it's our children's programs that get those cuts."

Koppel said he isn't suggesting that lawmakers cut more from programs that serve the elderly. But he said he will make the argument to lawmakers that insuring more kids saves money in the long run.

"Children cost about half of what adults cost," he said. "Children are the cheapest investment we can make in health care. And child health is not going up anywhere close to what the overall health care budget is going up."

In the midst of discussions about painful budget cuts there is also talk about ways to raise revenue. Some of the possibilities that relate to health care include another hike in the cigarette tax and raising the tax on health care providers. It's currently two percent.

"We're not out-and-out opposed to it. It needs to be looked at," said Lawrence Massa, president of the Minnesota Hospital Association.

Massa said providers might be open to the idea if the money was used as it was intended to be used - to help insure people who can't afford health coverage. But, he said lately the money in the Health Care Access Fund hasn't been used that way.

"I think somewhere in the neighborhood of $500 million over the last five years has been taken from that fund to plug holes in the general fund budget, and that's very problematic to health care providers," Massa said.

Currently there is approximately $200 million of surplus money in the Health Care Access Fund. In times like this it will be very tempting for lawmakers to tap that money to help plug the budget deficit.

But some, including Representative Paul Thissen, said they intend to fight vigorously against any efforts to use the fund that way.

Broadcast Dates

• All Things Considered, 12/04/2008, 5:50 p.m.