The Omnibus Health Care and Family Services Appropriations Bill (Chapter 203) appropriated over $5.7 billion for the Department of Human Services (DHS). Of that amount, over $5.17 billion is from the General Fund, over $542.5 million is from the federal welfare reform block grant, and $915,000 is from the state government special revenue (SGSR) fund, which consists of revenues from fees, licenses, and department earnings.

Agency Management

Over $50.4 million was approved for this activity (compared to current spending of about $49 million), including over $49.7 million from the General Fund. The central office budget was reduced by almost $1.4 million. Significant new spending initiatives included:

• $555,000 to purchase software to improve the department's ability to collect delinquent debts (a $600,000 increase in collections is expected over the biennium);
• $820,000 to expand efforts to increase the number of disabled persons receiving federal Retirement, Survivors, and Disability Insurance (RSDI) benefits (this initiative is linked to nearly $3 million in savings in Medical Assistance and Group Residential Housing); and
• $500,000 to increase the number of hours of service and the hourly payment rate of Attorney General staff providing legal services to the department.

Children's Grants

Over $78.3 million was appropriated for this activity, a significant increase from current spending of about $46.4 million. A $2 million appropriation will be used to implement, on a demonstration basis, a two-track child protection screening and service delivery model to identify and provide community-based treatment to "low-risk families" and to provide respite care to families whose children have challenging behaviors. Almost $17.8 million was provided for in-home family preservation services to replace federal earnings no longer available because of the establishment of the welfare reform block grant. An appropriation of $5 million was made available to privatize adoption services for all children committed to DHS guardianship, and almost $1.8 million was provided to fund a needs-based guardianship support program. Guardians are typically grandparents living on fixed incomes. A $1.4 million appropriation will provide money to complete development and implementation of a competency-based child welfare training system, recruit foster and adoptive families, and pay increased foster care liability insurance premiums.

The Legislature made $2 million available for additional development of 16 existing children's mental health collaboratives and expansion of the collaborative model to ten additional communities. An additional $800,000 was provided for existing crisis nursery services and expansion into six additional sites. These nurseries provide child care while families deal with family crises. Also, funding for children's mental health services was increased by $1.4 million.

Children's Services Management

Over $5.6 million was provided for this activity, versus current spending of about $3.8 million. The largest new spending item was $1.5 million for training and implementation costs of the social services information system (SSIS).

Basic Health Care Grants

Over $1.77 billion was provided for basic health care activities, including almost $691 million for Medical Assistance (MA) services for families and children (versus current spending of about $615 million), over $738 million for elderly and disabled persons (versus current spending of about $689 million), and almost $344 million for General Assistance Medical Care (GAMC) services (compared to the current level of over $365 million).

MA for Families and Children

Of the appropriation for these services, over $48.8 million was to pay the costs of forecasted spending increases over the biennium. Much of this increase is the result of an unusually large drop in the share of federal MA funding (determined as the result of a national per capita income formula) and increased spending for families and children who are low income but not eligible for state welfare programs.

Almost $2.3 million was appropriated to cover anticipated inflation in MA payments for inpatient hospital services, and over $3.4 million was provided for corresponding increases in managed care capitation payments to cover those increased costs. Almost $2.5 million was appropriated to continue providing MA services to families who would have been eligible for MA under the AFDC income standards in effect on July 16, 1996, as required by the federal welfare reform legislation. This continuation closely mirrors current DHS policy.

Over $2.2 million was appropriated to accelerate the phaseout of the current billing system used for income maintenance and health care programs under which counties pay a share of costs in the first six months of the fiscal year and are reimbursed for most of those costs in the second six months. This acceleration is designed to simplify fiscal operations for both the state and the counties and appears in a number of budget activities throughout the DHS budget. Of the $2.2 million, $992,000 is to phase out the county share of MA transportation services, which is the only MA service affected by the phaseout. The remaining $1.2 million is offset by revenue from the county, and all other MA services will continue to have a county share for the next four years.

Almost $17 million was added for health care services for families and children under the new Minnesota Family Investment Program-Statewide (MFIP-S), which will replace AFDC. The Legislature repealed the $1 pharmacy prescription copayment, which was never implemented but for which budget savings were assumed, and reduced the dispensing fee paid to pharmacists to $3.65 from $3.85 in MA and $4.10 in MinnesotaCare. The net cost of these changes was $924,000.

The Legislature approved a 5 percent cost-of-living (COLA) increase for a variety of health care providers. In this budget activity, the Legislature provided almost $1.4 million for a COLA for MA therapy services and over $1.4 million for a dental services COLA.

A $5 million grant was approved for the first year of the biennium to the Medical Education and Research Costs (MERC) Trust Fund. The Legislature adopted a number of measures designed to reduce costs in this area, including: eliminating hospital rate appeals unless the amount in question exceeds a minimum threshold, saving over $1.3 million; requiring sponsors of immigrants who enter the United States on or after August 22, 1996, to assume responsibility for the medical expenses of the immigrant (called "sponsor deeming"), saving almost $1.5 million; and reestablishing an asset test under MA for pregnant women and children, saving almost $6.1 million.

MA Elderly and Disabled

The appropriation for this activity includes a forecast adjustment of almost $33.4 million, 80 percent of which is for basic health care for persons with disabilities, driven largely by projected caseload increases of about 7 percent each year. In addition, inpatient hospital inflation for services to elderly and disabled persons will cost almost $4 million, and the corresponding increase in managed care capitation rates will cost $878,000. Almost $1.3 million was appropriated to continue and expand demonstration projects to test managed care delivery of services to persons with developmental disabilities. Additional services and sites will be added to the two currently approved pilots.

A proposal to expand the income eligibility guidelines for the MA elderly waiver program was adopted at a cost of over $9.8 million, but budget savings are reflected elsewhere in the DHS budget. Savings of over $1.1 million are anticipated through "sponsor deeming" (explained above) in this budget activity.

General Assistance Medical Care (GAMC)

An appropriation of $547,000 was provided for the net costs of eliminating the $1 prescription copayment (which was never implemented) and reducing the pharmacy dispensing fee to $3.65 from $3.85. Over $4 million was provided for the costs of accelerating the phaseout of the county share of GAMC costs. The Legislature approved a number of changes designed to reduce GAMC spending. The spending forecast was reduced by over $12.6 million due largely to caseload reductions and to savings that result from a delayed expansion of managed care. (Since managed care providers are generally paid prospectively, a one-time cost results when managed care is implemented and post-service payments are converted to prepayments. For the initial budget period, both types of payments are occurring simultaneously.) "Sponsor deeming" will save $896,000.

Savings of $1 million are forecast from a policy change that will restrict GAMC coverage for persons who are residents of other states temporarily in Minnesota. Under the new policy, these people will only be eligible for emergency hospital services and related care for the treatment of injuries resulting from an accident that occurs in Minnesota.

A savings of $531,000 is projected from reinstating an asset test for pregnant women and children on GAMC. Costs in GAMC will be reduced by over $11.4 million in FY 1999 through a shifting of costs to the health care access fund (HCAF) when working adults and parents are transferred from GAMC to MinnesotaCare (as provided in separate MinnesotaCare legislation). In addition, the HCAF must reimburse the General Fund for costs of $16.3 million that would have been paid by MinnesotaCare if the transfer of these individuals had occurred in FY 1998.

Health Care Management

About $48 million was provided for this activity, compared with current spending of about $45.7 million. The major increase is a $2.2 million appropriation to cover county administrative costs related to the Prepaid Medical Assistance Program (PMAP).

State-Operated Services

The Legislature provided about $410.6 million for state-operated services, including about $382.5 million for regional treatment centers (RTC) (compared to current spending of about $392 million); almost $7.9 million for state-operated community services for persons with mental illness (versus current spending of about $7.7 million); and about $20.2 million for state-operated services for persons with developmental disabilities (up from current spending of over $19.2 million).

The appropriation for the regional treatment centers was reduced by over $11.8 million. This amount reflects both the continued decline in the population of those facilities and the development of specialized services, such as the Minnesota Extended Treatment Options (METO) program at the Cambridge RTC. METO provides secure inpatient treatment beds and state-operated community services for persons with developmental disabilities who have behavioral problems. An appropriation of $1.3 million was approved to provide additional staffing at the treatment facility in Moose Lake for persons with psychopathic personalities.

The Legislature approved $800,000 for a second phase of the adult mental health pilot projects to provide needed services in the community. Almost $3.7 million was provided for cost-of-living adjustments for state employees working in community-based facilities, but over $2.7 million of that amount was transferred to the MA account and included in the 5 percent COLA amount.

Continuing Care and Community Support Grants

Almost $2.3 billion was appropriated for a variety of programs grouped in this area.

Funding for Community Social Services Act (CSSA) grants was about $111.3 million, compared to current spending of about $108.4 million. The major increase was over $2.8 million to pay for a 5 percent COLA increase for day training and habilitation services for persons with developmental disabilities funded out of this appropriation.

Funding for consumer support grants for persons receiving community-based services remained unchanged at about $3.5 million.

About $15.8 million was appropriated for aging and adult services grants, compared to current spending of about $14.4 million. The most significant increase was $650,000 to expand the Living at Home/Block Nurse program.

Grants for programs that serve persons who are deaf or hard-of-hearing were over $2.9 million, compared to current spending of about $2.1 million.

The Legislature provided about $98.7 million for mental health grants, compared to the current level of about $93.3 million. A $2.7 million appropriation was provided for a second phase of the adult mental health pilot projects. These projects are designed to support local multi-county system redesigns, improve the range and scope of service options, and reduce reliance on institutional care. Over $4.1 million was provided to enable a 5 percent COLA increase for mental health services (explained above). A net General Fund savings of $800,000 was realized through a change in funding for compulsive gambling treatment services. These services will now be funded with an appropriation from the lottery prize fund.

Long-Term Care

Over $12.8 million was appropriated for developmental disabilities community support grants. The only change from current spending levels was an addition of $460,000 for a 5 percent COLA increase for service providers.

Over $548 million was provided for MA long-term care waivers and home care, compared to current spending of about $434 million. The spending forecast in this area was increased by about $77.4 million, due in large part to a reduction in the share of MA paid by the federal government and to increased costs for serving persons with developmental disabilities. Almost $10.5 million was provided to expand the income eligibility guidelines under the elderly waiver program as part of the initiative designed to expand the number of persons served by that MA program while reducing the number of participants in the 100 percent state-funded alternative care program. Over $25.3 million was provided for 5 percent COLA increases to providers of various waivered services, home health services, personal care assistant services, and day training and habilitation services.

The appropriation for MA long-term care facilities was $1.168 billion, compared to current spending of over $1.136 billion. The spending forecast was increased by only about $2.9 million. Increased spending that will result from a significant decrease in the federal share of MA costs was almost completely offset by reduced projections of nursing home caseloads. The long-term care facilities appropriation was reduced by over $10.4 million to reflect the impact of continuing efforts to reduce the number of persons with developmental disabilities who reside in regional treatment centers.

Over $6.9 million was provided for rate increases for intermediate care facilities for persons with mental retardation (ICFs/MR), an increase of about $1.6 million over the amount proposed by the Governor.

Over $37.2 million was appropriated for nursing facility rate increases proposed by the Governor; and the Legislature approved additional nursing facility rate increases, for the industry in general or for specific facilities, totaling over $6.9 million.

The Legislature appropriated $1 million for the MA costs of nursing home moratorium exceptions to be approved through an administrative process and $188,000 for a moratorium exception for a specified facility. Savings of almost $14.5 million were taken as a result of the initiative to expand the elderly waiver program (reflected elsewhere in the budget) and reduce spending on long-term care as well as on the state-funded alternative care program.

The appropriation for alternative care grants was about $80.6 million, compared to current spending of about $82 million. Savings of over $5.2 million were assumed through the initiative to shift some clients from alternative care to the MA-funded elderly waiver program. An appropriation of $744,000 was provided for the added costs in this activity from the initiative to accelerate the phaseout of the county share of expenditures. Almost $3.1 million was approved for a 5 percent COLA for alternative care service providers.

Residential Housing

The group residential housing (GRH) appropriation was over $135 million, compared to current spending of about $101 million. Forecasted spending increased by about $33.8 million. The increases are due largely to a federal change that will eliminate federal Supplemental Security Income (SSI) payments for persons with disability based on drug and alcohol addiction, resulting in added state costs to provide housing for these persons, and forecasted caseload increases of about 10 percent per year.

A savings of over $2.3 million was anticipated through expansion of an initiative to maximize federal Medicare and Retirement, Survivors, and Disability Insurance (RSDI) payments, both retroactively and into the future, for GRH-eligible residents.

Additional savings of almost $1.2 million were taken through elimination of duplicate service funding through GRH "difficulty of care" rates and personal care assistant services for the same client. Over $2.7 million was provided as part of the initiative to accelerate the phaseout of the county share of program costs in this area. Over $1.4 million was provided for a GRH rate adjustment.

Chemical Dependency

Almost $85.4 million was provided for entitled and nonentitled clients in the Consolidated Chemical Dependency Treatment Fund. For clients who are entitled to treatment (basically those who meet the income guidelines of MA or GAMC), about $75.4 million was provided, compared to current spending of about $87.5 million. Forecasted spending in this area was reduced by almost $18.7 million. Placements paid through this source are declining as a result of the increasing coverage of MA and GAMC recipients through managed care.

The Legislature authorized annual rate increases of up to 3 percent per year for service vendors. This rate adjustment actually reduced the budget by $930,000 because the forecast budget had assumed a larger rate increase. Almost $3 million was provided to maintain the current allocation to Indian tribes for chemical dependency services. Without this appropriation, tribes would have received reduced funding based on the existing formula. A $3 million appropriation was approved to adjust county maintenance of effort requirements which are becoming burdensome as a result of the shift of chemical dependency services to managed care. Over $1.5 million was provided to cover the costs of providing chemical dependency services to persons with drug and alcohol addiction who are losing GA eligibility as a result of state welfare reform initiatives. Funding for chemical dependency services for persons receiving care paid for by the chemical dependency fund as "nonentitlement" recipients was $10 million, compared to current spending of about $8.7 million.

The increase of almost $1.3 million will provide services to all eligible clients with incomes under 60 percent of state median income. Under previous policy, persons were eligible only if they met income criteria and had children in the household, were pregnant, or were under 18 years of age.

Continuing Care and Community Support Management

Almost $38.4 million was provided for this management activity, compared with current spending of about $36.9 million. Management costs will increase in a variety of demonstration and pilot projects.

Economic Support Grants

The Legislature appropriated nearly $431 million from the General Fund and almost $543 million in federal funds for this activity, for a total of almost $974 million. These appropriations implement the federal welfare reform legislation approved by Congress in 1996.

About $200 million was provided from the General Fund for assistance to families grants under the new Minnesota Family Investment Program-Statewide (MFIP-S), which will be phased into operation between January 1 and March 31, 1998. The MFIP-S grants were funded with a transfer of about $257 million from the AFDC account. This amount was reduced by about $71.4 million in order to maximize the use of federal block grant funds available for this purpose. The Legislature also transferred $7.8 million from the MFIP field trials to MFIP-S in FY 1999. (The field trials terminate at the end of FY 1998.)

About $2.7 million was provided to extend the temporary AFDC income disregards until the AFDC program phases out, in order to prevent disruptions in the incomes of working recipients. About $3.9 million was provided to pay for temporary grant supplements equivalent to the value of Food Stamps for certain immigrants on MFIP-S who no longer qualify for Food Stamps under federal law.

Temporary Assistance for Needy Families (TANF)

A new federal account was established for the Temporary Assistance for Needy Families (TANF) block grant, replacing all federal AFDC accounts, totaling about $543 million. Base- level federal funding included about $321 million for cash grants; about $28.5 million for work grants (replacing STRIDE, Work First, and other welfare-to-work funding); about $11.4 million for the MFIP field trials; about $43.9 million for county administration; and about $14.2 million for state administrative costs. Additional funding was provided for the MFIP-S program, with about $97.6 million added for the cash grants (replacing state funds and creating work incentives) and $26.1 million added for welfare-to-work programs.

The Legislature appropriated about $27.9 million from the General Fund for work programs, with the only increase over current spending being $280,000 for the New Chance demonstration project to help welfare recipients become employed. The base-level funding for STRIDE and other welfare-to-work programs was transferred to the new MFIP-S program.

About $23.7 million was appropriated for the MFIP demonstration project to fund the project until it terminates on June 30, 1998, compared to current spending of about $48.3 million. The MFIP forecast for cash grants was increased by about $1.8 million and for child care by about $2.3 million. These increases were necessary because of lower-than-anticipated attrition rates in the program. Reductions of about $28.7 million were taken because of the early termination of MFIP and the transfer of MFIP child care funds to the Department of Children, Families, and Learning.

Aid to Families with Dependent Children (AFDC)

The Aid to Families with Dependent Children (AFDC) program received about $7.7 million, compared to current spending of about $265 million. This amount will fund the program until it phases out early in 1998. The remaining $257 million was transferred to the new MFIP-S account (see above).

About $10.2 million was appropriated for child support enforcement activities, compared to current spending of about $11 million. Savings of $1.1 million were achieved through elimination of the requirement for publication of the names of delinquent obligors. The publication program was replaced by a "most wanted list" program to be established by the Attorney General's office.

General Assistance (GA)

About $105 million was appropriated for the General Assistance (GA) program, compared to current spending of about $95 million. The spending forecast was increased by about $16.1 million, due almost entirely to a higher caseload driven by federal changes limiting eligibility for the federal SSI program. About $3.3 million was provided in this program for the cost of accelerating the phaseout of the county share of expenditures. Savings of almost $10.6 million are expected through the elimination of the Family GA program and making those clients eligible for MFIP-S. About $2 million was provided to temporarily increase GA benefits for immigrants who no longer qualify for Food Stamps because of federal welfare reform. A savings of about $1.8 million is anticipated from a requirement that GA recipients cooperate with chemical dependency assessments and treatment.

Almost $1 million was provided for the housing costs of certain immigrants who are terminated from SSI due to federal welfare reform legislation.

State Supplemental Aid

About $53.2 million was provided for Minnesota Supplemental Aid, compared to current spending of about $50.9 million. The spending forecast was increased by about $1.5 million to cover an expected caseload increase. An appropriation of $866,000 was provided to cover the costs in this area of accelerating the phaseout of a county share of program expenditures.

About $3.2 million was provided for refugee services. This amount is identical to the current spending level.

Economic Support Management

About $76 million was provided for this activity. For economic support policy admin-istration, the Legislature provided almost $18.7 million, compared with current spending of about $15.6 million. A $1.7 million appropriation was approved for welfare reform administration, and $1.2 million was provided for the administrative costs of new federal child support enforcement mandates. For economic support operations, about $57.4 million was provided, compared to current spending of about $53.5 million.

A $600,000 appropriation will cover the added costs of the MAXIS computer system related to welfare reform.

A $1.6 million appropriation was added in this activity for costs related to federal child support changes. An $846,000 appropriation was approved for enhanced anti-fraud activities, including additional grants to counties for fraud prevention investigations and money to help prevent fraud related to the provision of Food Stamps through the Electronic Benefit System (EBS). That system will be expanded statewide using an $825,000 appropriation.