Budgetary 'Perfect Storm' Looms Over Health Care Programs

ST. PAUL, Minn. (AP) — Minnesota lawmakers entered 2017 squarely focused on rescuing the individual insurance market from collapse. By next year, all eyes will be on a funding crisis facing the state's public health care programs for low-income residents, and the specter of painful cuts and service disruptions.

Much of those problems hinge on Congress as it moves to repeal President Barack Obama's health care law with bills that would eventually cut billions in Medicaid spending. But state officials also face problems of their own making.

They'll eventually have to replace hundreds of millions of dollars in temporary funding from a budget gimmick used this year to help pass a balanced spending package. And they'll also need to work out how to continue paying for MinnesotaCare, the state's health care program for the working poor, if the tax on health care providers that pays for it is allowed to expire at the start of 2020.

Lawmakers' response — or another stalemate — will determine the fate of health care for nearly 1.2 million Minnesotans who are low-income, elderly, disabled or children.

"We set ourselves up to have the perfect storm," said state Sen. Tony Lourey, a top Democrat on health care issues.

With massive federal changes looming, Minnesota lawmakers did little to alter the state's array of health services in 2017. Instead they focused — and spent nearly $1 billion —on trying to control skyrocketing premiums for shoppers who buy their own health care. But the Legislature and Gov. Mark Dayton also agreed to siphon $350 million in each of the next two years from the state's Health Care Access Fund, potentially emptying it by 2021.

That money was used to temporarily cover ongoing health care costs, freeing up extra funds for tax breaks and other government programs and paving the way to a budget deal between Gov. Mark Dayton and top Republicans this spring. In coming years, lawmakers will have to find the money again to pay for it.

"Those bills are going to come due. It was incredibly reckless at a time when future revenues are also so at risk," Lourey said.

But for now, top officials have to wait on direction from Washington. In both the House and Senate legislation, changes to how state Medicaid programs are funded would leave Minnesota with a $2 billion shortfall in the first 18 months alone. And both bills would eliminate federal funding for MinnesotaCare altogether — more than $420 million in 2016 alone, according to state data.

Sen. Michelle Benson, chair of the Senate's health care committee, hopes to have a clear picture of federal health care when the Legislature reconvenes in February. Though the next budget won't be due until 2019, Benson said lawmakers can't wait to start planning how to control costs, make cuts or, if necessary, raise new taxes to cover more of Minnesota's health care costs.

"It will be important for us to be courageous and set a trajectory," she said. "In an election year, that could be difficult."
Human Services Commissioner Emily Piper oversees all of the state's public programs. She doesn't hide her frustration with Republicans who control the Legislature for not acting sooner.

"It's unclear to me what their strategy around the long-term financing of health care is," Piper said.

Those looming budget woes have renewed talk of extending the state's 2 percent tax on health care providers, a part of the 1992 creation of MinnesotaCare that the Legislature scheduled for expiration back in 2011.

But major hospital organizations that pay millions in those taxes have resisted any attempt to reinstate the tax, and Benson and other top Republicans have showed little interest.

Despite the politics, Lourey said the magnitude of budgetary problems bearing down on Minnesota's health care services leaves lawmakers with no other option.

"The books don't balance without at least some of that revenue," he said. "If we want to live up to the promises that we have made ... we're going to need the resources to be able to do that."

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