Minnesota’s Budget Woes Continue

As Aging Services staff has been visiting members, two things keep coming up in conversation: the state’s budget deficit is only going to continue, if not get worse; and Minnesota needs to get creative in how to pay for older adult services.

There is a great article from Politics in Minnesota on the numbers.  In summary, we can expect a $7.3 billion deficit for fiscal years 2012-13 (includes inflation).  The article calculates that this amount will equal about 24% of the state’s 2010-11 expenditures and revenues.

In balancing the FY2010-11 budget, the legislature and the governor used one time federal money, accounting shifts, unallotment, and revenue changes, in addition to major budget cuts.  No new revenue was included, although the legislature passed tax increases. And the state has no reserves.

And let’s not forget that the state has been in deficit for 6 of the last 7 legislative sessions.  (2007 was the only year in recent memory where was extra money to spend.)  Therefore, cutting state spending has been an ongoing exercise.

Finally, a recent Budget Trends Study Commission report on the state’s budget situation found that, thanks in large part to demographics, the state will continue to be in structural deficit unless some major changes are made in how the state spends its money and collects its revenue.  The last legislative session saw no success in doing either of these things.

So what’s the state to do?  Well, there is a clear message that we can neither only cut nor only tax our way out of this mess.  The state is going to have to look at new ways to fund programs as well as new ways to raise money.  And Minnesota can’t just pretend that our citizens are aging, with fewer workers paying into the system to support them.

Aging Services, with our partners in the Long-Term Care Imperative, has proposed Long-Term Care Financing Reform.  This legislation was introduced in the last legislative session.  The proposal would create a statewide insurance trust, funded through a payroll tax, that would pay out a cash benefit to eligible Minnesotans based on disability, not age.   A similar proposal is also being offered at the national level and is included in Senator Ted Kennedy’s health care reform proposal.

But this proposal will take some time to come to fruition, and longer to begin paying out the benefit.   There will need to be a shorter-term solution to bridge the gap until financing reform is fully operational.  In the current budget climate, it is going to take hard work and creative thinking to find this gap solution.

Of Deadlines and Fiscal Notes

Tomorrow is the deadline for Legislative budget divisions to have their omnibus bills voted on and sent to the full finance committees.  However, neither the House nor the Senate will have their HHS budget bills ready tomorrow, and maybe not even this week.

The reason?  The legislators are blaming fiscal notes.  (The Pioneer Press did an interesting article on the problem this weekend.)

Fiscal notes are the way the state prices legislation.  Here’s a scenario: Rep. Bob Smith has a bill that would increase COLAs for long-term care providers.  This legislation is sent to the Department of Management and Budget, which then sends it to the Department of Human Services.  DHS has staff that looks at this legislation and determines how much it will cost, based on the COLA percentage, the number of providers impacted, the current Medicaid reimbursement rate, number of employees needed (or not) to carry out the legislation, and other factors.  That cost is put into a spreadsheet along with a narrative description of the assumptions used to arrive at the cost, and you have a fiscal note.

The fiscal note, signed off on by an Executive Budget Officer, is considered a pretty official document.  It often means life or death for a particular bill, especially in a year when the state is facing large deficits.

So why does this matter?

Well, things are moving pretty slowly at the legislature, particularly for the Health and Human Services budget committees.  The committees are blaming slow progress being made on the fiscal notes they need from DHS for their bills.  The fiscal notes on these bills will often determine if the bills become part of an omnibus budget bill.  And if there are no fiscal notes to determine a cost, there is no decision on what goes into the omnibus bill…and there is a delay in putting together the omnibus bill.

Hence a delay in getting the HHS omnibus budget bills out.

Rep. Huntley has announced the House bill will be released on Friday.  Rumor has it the Senate bill will not be ready until next week.  We will let you know what we know when we hear more!

Housing Advocacy Off to a Great Start!

94 Housing members have signed up to participate in the Housing with Services Advocacy campaign!  This is amazing!

Thanks to you, calls and email messages are raising awareness at the Capitol about the importance of protecting Elderly Waiver and access to older adult services.  Continue sending weekly messages at http://www.agingservicesmn.org/index/Become_Active.

Aging Services of Minnesota truly has incredible membership.  Thank you for your work!  And keep it up!

Policy Deadlines and Budget Bills

The legislature has pushed through its first policy deadline and we are quickly moving toward the second.

In the meantime, finance committees are beginning to put together their budget bills.  Nearly all bills being heard in either HHS finance committee are either budget-neutral or have their fiscal provisions deleted.  In short, nothing with money is being heard. This is reflective of the budget deficit the state is facing.

We should be seeing budget bills rolled out the week of April 13th.  The deadline for finance committees to have their omnibus budget bills voted on is April 16th.  Easter Break will be the week before — April 8 – April 14 — and it is critical that members use this time to contact their legislators.  Go to http://www.agingservicesmn.org/index/Become_Active to find your legislators!

Elderly Waiver Advocacy Campaign Launches

Hello Housing with Services members!

Aging Services is launching an Elderly Waiver advocacy campaign to help legislators better understand how important this program is to older Minnesotans and to the state’s economy.  In short, cuts to EW are short-sighted.

We are asking members to sign up for this effort.  Weekly messages, a legislative call-in day, and a rally are all on the list for those who choose to participate.  Here is the advocacy schedule:

• Weekly messages to legislators highlighting a different fact about EW, starting this week and running through the week of April 13;
• A special legislative call-in day on April 7; and
• An older adult services rally in the Capitol Rotunda on April28.

Go to http://www.agingservicesmn.org/index/Become_Active for this week’s message to send to legislators.

Please contact Jen McNertney at jmcnertney@agingservicesmn.org to sign up!

Impact to Older Adult Services Appears Minimal In Revised State Budget

Today, we started a new chapter in the continuing saga regarding balancing Minnesota’s state budget as Governor Pawlenty presented his revised budget this afternoon.

Compared to the governor’s January budget proposal, the revised budget calls for increasing spending on K-12 education and higher education. The budget also puts short-term offenders in state prisons instead of county jails; exempts unemployment insurance benefits from state taxes up to $2,400 per individual; and puts another $10 million into the state court system. While we have not seen the detailed budget pages that impact health and human services, the revised budget reduces state spending levels in health and human services by about $1.4 billion. Much of this reduction of state spending is likely replaced by federal stimulus dollars.

However, the revised budget also proposes new cuts in state health care programs, including general assistance medical care (GAMC). The governor’s revisions propose saving $172 million from the state’s general fund by reconfiguring the General Assistance Medical Care (GAMC) program so care is provided in clinics, not in emergency rooms. The revised budget would also delay eligibility related funding reductions until January 2011 in light of the requirements of the federal stimulus legislation. These delayed reductions will temporarily restore eligibility for Medical Assistance as well as MinnesotaCare eligibility for parents.

We have been told to expect few changes in the continuing care portion of the budget, however, we will be reviewing the budget detailed pages to determine whether that is the case.

The next move in this budget-balancing epic will be made by the House later this week, when it will release its budget targets. The House majority caucus has said it will not adopt the Senate’s budgeting approach in which cuts are made to all programs. Most insiders predict that health and human services will take much deeper cuts than education in the House budget proposal. This is in stark contrast to the Senate’s approach, which tried to insulate health and human services from excessive cuts. In addition, while the Senate has proposed raising $2 billion in new revenue, it is unclear that the House has the support to pass a tax increase.

Since the governor released his original budget plan in late January, the projected state budget deficit has grown to $6.4 billion for FY 2010-11 or 17 percent of the state general fund budget. In addition, Congress has passed a federal stimulus bill, designed in part to provide some relief to states. The February forecast accounted for $1.8 billion in Medicaid matching funds coming to the state of Minnesota as part of the federal stimulus, and as a result, the projected budget deficit was reported as being “only” $4.6 billion.

The state also faces a deficit for FY 2012-13, or the “tails” of $5.1 billion. This is important, because recently the governor signed a bill that requires the Governor to propose, and the legislature to enact, a budget that is balanced through FY 2012-13.

We will send another Breaking News Alert regarding the latest budget news on Friday.

For Further Information: Contact Kari Thurlow at kthurlow@agingservicesmn.org

Commentary on Rebasing Proposal

The Governor’s budget proposes the elimination of rebasing of nursing facility operating rates, effective with the rate year beginning on October 1, 2009. While the actual legislative language will not be available for a few more days, we suspect that it will accomplish this goal by adding a section that suspends the implementation of rebasing indefinitely. The elimination of rebasing, while not a major blow to providers (or a big savings to the state) in the near term, is a huge step away from a reform step taken to assure the long term viability of care centers throughout the state.

The rebasing law, passed in 2007, was a Long-Term Care Imperative proposal to implement a new payment system that bases care center operating rates on the cost of providing care. Over the past fifteen years or so, the gap between the cost of care and the rates paid by the state has grown significantly. Currently we have the 7th largest gap between rates and costs of all states in the study, and we are one of only two states with a rate equalization law requiring facilities to charge private pay residents no more than the Medicaid rate. The other, North Dakota, has virtually no gap between rates and costs. The combination of Medicaid rates that are much less than the cost of care and the rate equalization requirement is putting considerable financial stress on nursing facilities and limiting the investments that providers can make in providing quality care for their communities. The rebasing law was intended to address this problem over time by providing care centers with the resources they need to provide quality care.

Because the rebasing plan that passed takes eight years to be fully implemented, and does not do most of the “rebasing” in the first few years, it is not an ideal system. However, the current rebasing law does offer more long term promise for care centers than annual COLAs or any other plan that has been proposed at the Legislature, and if it is repealed then the long term viability of many care centers will be greatly threatened. The savings from repeal is limited in the first couple of years, because the portion of the rate made up of the cost-based rebasing portion is only 14% in the next two rate years. (It was at 13% in the current rate year, the first to include a rebasing component in the rates). The loss to care centers in the next two years is estimated at 1.3%, which is the value of the minor increase in the portion of the rate from rebasing, and the increase in costs that is reflected each year in the rebasing portion of the rate. The state is projected to save just over $11 million in the next two years by eliminating rebasing.

The big savings to the state, and loss to providers, comes in the next biennium. In the October 1, 2011 and 2012 rate years, the portion of the rate based on the actual cost of care increases to 31% and then 48%. That movement toward rebasing would begin to significantly reduce the gap between rates and cost of care. However, the state saves over $40 million in that biennium by eliminating those rate adjustments. Given the delayed impact on both providers and the state, we would like to see the state go forward with rebasing under current law, or at least suspend it for no more than two years in the hope that the economy will improve and the rate increases from rebasing will be more easily afforded by the state in the next biennium.

Care center rate rebasing was a major reform initiative advanced by the Long-Term Care Imperative, and while we did not come out of the 2007 legislative session with everything we wanted, the passage of a rebasing phase-in did offer hope that the problematic gap between Medicaid rates and cost of care would eventually be addressed. To lose that victory two years later because of the state budget situation, at a time when the true cost of rebasing is still over two years off, would be a major loss for care centers and the people who depend on them for necessary care and services.

For information, contact Jeff Bostic at jbostic@agingservicesmn.org.

Speak Up! Attend a Legislative Town Hall meeting!

Sometimes the best advocacy is the personal kind. Starting on Thursday, Aging Services members, caregivers, family members, and friends have the opportunity to share their personal stories about long-term care with Minnesota state legislators. Legislators want to hear from the public – that’s why they are going around the state. And from personal experience, I can tell you that it is the individual stories that have the greatest impact on elected officials.

So take this opportunity. Tell legislators about the special resident who makes everyone smile, the caregiver who works overtime because of that smile, and the community that supports them both. Or let legislators know how the reimbursement rates are impacting staff. Talk about the difficulty of providing quality care while worrying about all the paperwork. And then talk about why all of this matters in the first place – we are taking care of our grandparents, parents, friends, and neighbors, and they deserve the very best.

Thank you in advance for taking the time out of your busy lives to share with legislators. We here at Aging Services know that time is really at a premium and appreciate your efforts! We can’t do this without you all.

The town hall meeting schedule is posted at http://www.house.leg.state.mn.us/budgettownhallmeetings.asp. If you have any questions, let Kari (kthurlow@agingservicesmn.org) or me (jmcnertney@agingservicesmn.org) know.

The Long-Term Care Imperative 2009 Budget Background Brief

After analyzing the details of Governor Pawlenty’s budget The Long-Term Care Imperative has prepared the following review of how the proposed 2010-2011 budget would affect providers of older adult services and the seniors who depend on them for essential services.

Under the current budget, more than 350,000 elderly or disabled Minnesotans receive some type of service from Continuing Care Medical Assistance-enrolled providers. These recipients include:

• 31,300 people per month who are at risk of institutional placement and instead receive waiver services in the community,
• 26,000 people who receive home and community-based services through community services and/or services development grants; and
• Roughly 32,000 nursing facility residents of whom about 19,500 are paid for by Medical Assistance (MA).

We have a number of concerns with regard to the budget proposal’s impact on access to needed services and the financial health of providers, as well as the budget’s lack of support for important policies that would reform the financing and delivery of care.

Economic Stability

Long-term care is a vital part of Minnesota’s economy and communities.

· Long-term care facilities directly impact Minnesota’s economy by supporting more than 142,000 jobs, including more than 87,000 health and social services jobs.

· The impact extends outside of the health care industry, including more than 54,000 jobs in construction, science and technology, finance and insurance, manufacturing and retail and wholesale trades.

· The total economic impact (direct and indirect) of long-term care facilities in the State of Minnesota is more than $9.8 billion annually (Economic Impact of Long Term Care Facilities. 2008. Prepared by the Lewin Group for the American Health Care Association).

Long-term care rate reductions

The governor’s budget would implement a three percent rate cut to all of the community-based programs serving the disabled and elderly, including elderly waiver, alternative care, intermediate care facilities (ICF/MR) and home health (nursing facilities are exempt from this reduction – see below for nursing facility reductions).

FY2010 and 2011 reductions in state funding: $84,870,000

Nursing facility funding reductions

The governor’s budget would reduce funding for nursing facilities through the repeal of operating rate rebasing, changes to Medicaid payments for single rooms and a reduction in the incentive for bed closure.

FY2010 and 2011 reductions in state funding: $4,653,000

During the 2003-2004 budget deficit, the governor’s budget contained a two-year freeze for nursing facility rates and additional funding reductions. According to a survey taken after the implementation of those policies, nursing facilities were forced to adopt the following strategies:

· 59.1% of nursing facilities froze staff wages

· 44.1% of nursing facilities reduced staff hours

· 21.1% of nursing facilities eliminated or reduced step or merit increases

· 18.6% of nursing facilities had staff layoffs

· 18.2% of nursing facilities reduced healthcare benefits

Access

The safety net is shrinking under the proposed budget, resulting in a growing number of people left without access to quality, affordable care and/or services.

Tightening of nursing facility level of care (LOC) thresholds

The governor’s budget would limit access to nursing facilities and waiver services through the use of a new, higher threshold of needs for those programs. It is estimated that:

· About 1% of people seeking admission to a nursing facility after October 1 would not qualify.

· 4,300 clients would no longer qualify for the Elderly Waiver, Alternative Care, Traumatic Brain Injury, and community alternatives for disabled individuals (CADI) waiver program. Of those, 1,100 would not receive any Medicaid State Plan Services.

· This proposal would profoundly reduce the access and benefits to home and community-based services programs in Minnesota

FY2010 and 2011 reductions in state funding: $36,315,000

Eliminate dental coverage for adults and critical access dental

The governor’s budget would eliminate dental coverage for all non-pregnant adult (including seniors) in the MA, General Assistance Medical Care (GAMC), and MinnesotaCare programs. Clients would continue to receive emergency dental care through hospital emergency departments for emergencies such as severe pain, trauma or infections. This would leave MA elderly waiver recipients without access to routine dental care, would move non-routine dental services from the dentist office to the much higher cost emergency room, and would require nursing facilities to arrange for dental services (due to state regulations) yet receive no payment for this now unfunded mandate.

FY2010 and 2011 reductions in state funding: $50,274,000

Eliminate coverage of rehabilitative services

The governor’s budget would eliminate rehabilitative services (PT, OT, SLP, and audiology) for non-pregnant adults (age 21 and above) on MA, GAMC and MinnesotaCare. The elimination of this service would mean that individuals not covered by Medicare would not receive needed rehabilitative services. Facilities would either need to cover the costs of therapy or deny services to residents who would need MA-covered rehabilitative services during the course of their stay.

FY2010 and 2011 reductions in state funding: $6,775,000

Reform

The governor’s budget would discontinue nursing facility rate reform and is silent on long-term care financing reform.

Elimination of nursing facility rebasing

Rebasing is an important reform policy designed to bring MA payment rates in line with actual costs to facilities. The eight-year phase-in was begun on October 1, 2008 with the goal to reduce the more than $20 per resident day difference between the average MA rate and the average cost of care. The governor’s budget would repeal this important piece of long-term care system reform.

No funding for nursing facility renovation or replacements

The typical nursing facility is over 35 years old. It is estimated that nearly half of the nursing facility beds need to be replaced over the next 10 years to meet the future needs of the aging population. The governor’s budget does not contain any appropriation for nursing facility construction projects.

Financing reform

By 2025 it is estimated that there will be more than 1.1 million Minnesotans age 65 or older. The governor’s budget proposal does not address how Minnesota will prepare itself to have adequate resources for this population. The current approach is not sustainable, especially in the current economic environment.

While long-term care financing reform will not be a quick fix to our state budgetary issues, it is an issue that must be discussed in conjunction with the current budget concerns during this legislative session. Long-term care financing reform, if done correctly, will give individuals an incentive to take personal responsibility for funding their long-term care needs, which should lead to a stimulation of the long-term care insurance market, reduced pressure on government budgets and access for all older adults to the continuum of older adult services.

District Swings, week 2 and Budget note

Hello again! Week 2 of District Swings has ended. Unfortunately, it ended with the cancelation of District B’s webinar due to technical difficulties. Sorry District B!

Otherwise, this week went well. St. Cloud (District D) and Detroit Lakes (District C) had great turnout. And with the release of the governor’s budget there was a lot of lively discussion! We also had a successful District A webinar on Thursday.

Speaking of the governor’s budget…

The governor has presented a budget that balances the current $4.8 billion deficit by cutting higher education, health and human services, and tax aids/credits as well as shifting $1.2 billion in K-12 spending into the next biennium, counting on a large amount of federal money, and bonding against future tobacco lawsuit money.

Long-term care takes a few hits in the budget. Eligibility for waiver services, like Elderly Waiver, is changed and will lead to fewer enrollees. LTC providers, except for care centers, get a 3% rate reduction. Rebasing for care centers is eliminated and rates are frozen. There is also a 5% cut in the Customized Living 24 hour cap.

In addition, there are unfunded mandates for care centers in the budget. Health care benefits like critical access dental are eliminated from state coverage. Nursing homes are mandated by federal law to provide critical access dental.

Finally, over 100,000 Minnesotans would lose health care coverage under Governor Pawlenty’s budget. Because of the interaction between MinnesotaCare funding and Medicaid money, if Minnesota cuts current eligibility for our state health care programs we stand to lose out on federal money that we would otherwise receive in the federal stimulus package. A “lose-lose” if ever there was one.

Of course, this is just the opening salvo. The governor’s budget will have to be re-drawn when the February forecast comes out, because the deficit will almost certainly increase. In addition, the House and Senate still have to draft their own budgets. So we are a long way from finished with the budget this session!