The Health and Family Security Supplemental Budget Bill (Chapter 407) reduced General Fund appropriations for the Department of Human Services (DHS) by almost $321.8 million and reduced health care access fund appropriations by almost $17.6 million. The General Fund reduction was the net result of forecast reductions of almost $374.2 million, offset by new spending of over $37.7 million and transfers to the state Temporary Assistance for Needy Families (TANF) reserve account of almost $14.7 million. The health care access fund total reduction includes almost $13.2 million in forecast reductions and over $4.4 million in other net spending reductions.

General Fund Forecast Reductions

As a result largely of the booming economy, forecasted General Fund spending in the various health care and income maintenance programs administered by the department was reduced by almost $374.2 million below the amount appropriated in 1997 for the 1997-1999 biennium. The forecast reductions were as follows:

Program	Forecast Change
Medical Assistance (MA) for Families and Children	($ 90,923,000)
MA for the Elderly and Disabled	(71,526,000)
General Assistance Medical Care (GAMC)	(67,821,000)
MA Long-Term Care Waivers and Home Care	(13,346,000)
MA Long-Term Care Facilities	(39,069,000)
Group Residential Housing	(17,478,000)
Chemical Dependency Treatment Fund Entitlement	(7,893,000)
Assistance to Families Grants	(34,351,000)
General Assistance	(30,111,000)
Minnesota Supplemental Aid	(1,636,000)
Total	($ 374,154,000)

Appropriations out of the health care access fund were reduced by almost $17.6 million overall. MinnesotaCare program funding was reduced by over $20.9 million. A major component of that reduction was a forecast drop in program spending of about $13.2 million. A savings of over $8 million was estimated from delaying the shift, first approved in 1997, of certain GAMC clients to MinnesotaCare until January 1, 2000, in order to allow more time to prepare for a smooth transition. The Minnesota-Care asset test for children was eliminated at a cost of $222,000. However, this expenditure is more than offset by the elimination of the MA asset test for pregnant women and children, which made some current MinnesotaCare recipients eligible for MA, saving $437,000 in the MinnesotaCare program. The elimination of the asset test for children in both programs was necessary in order to comply with federal requirements attached to the federal block grant for a children's health insurance program. The Legislature directed the department to seek a waiver in order to retain the asset test for children in both programs.

Effective January 1, 1999, families on MinnesotaCare whose incomes increase above 275 percent of federal poverty guidelines, and individuals whose incomes increase above 175 percent of poverty guidelines, are no longer eligible for the MinnesotaCare program. This provision does not apply if the annual premium for a policy with a $500 deductible available through the Minnesota Comprehensive Health Association (MCHA) exceeds 10 percent of the income of the family or individual. In addition, families and individuals who are no longer eligible for MinnesotaCare due to this provision are provided with an 18-month notice period before disenrollment. This delays the fiscal impact of this provision until FY 2001.

Beginning July 1, 1999, the state cost of MinnesotaCare services provided to pregnant women and children under age two will be paid out of the General Fund. However, for the period July 1, 1999, to June 30, 2001, a transfer will be made from the health care access fund to the General Fund to reimburse these costs. (These costs have traditionally been paid from the General Fund, but in the budget forecast prepared for the 1998 legislative session, the administration recommended the transfer of the source of payment for these costs to the health care access fund.)

About $3.3 million was appropriated out of the access fund for health care management costs, including over $2.6 million for information systems costs in the MinnesotaCare program. A number of other small spending and reduction decisions contributed to the net $17.6 million reduction.

Cost of Living Allowances (COLAs)

The Legislature appropriated about $11.2 million out of the General Fund and $367,000 out of the health care access fund in FY 1999 to provide a 3 percent COLA, effective July 1, 1998, for a variety of providers of community-based waivered services, home care services, mental health services, and other services. The Supplemental Budget Bill states the Legislature's intention that this money be used to increase the compensation package of employees by 3 percent. Capitation rates in the prepaid programs managed by DHS will be increased on January 1, 1999, to reflect these increases. In addition, the Legislature provided over $8.4 million in FY 1999 for a 3 percent COLA for nursing home employees and over $1.4 million to provide the same COLA for workers in intermediate care facilities for persons with mental retardation (ICFs/MR).

Children's Grants

In addition to the $10.3 million provided for children's services out of the federal TANF reserve (described below), the Legislature provided over $1.6 million out of the General Fund for children's services, including $800,000 in FY 1999 for adoption assistance costs to help families who adopt children with special needs. The Legislature also approved a new method to pay for children's mental health case management costs, but delayed the effective date of the changes until July 1, 1999, so there is no impact on the current biennial budget. Under the new method, base year state funding for MA and GAMC case management costs will be converted into grants to counties, and the counties will assume the nonfederal share of future costs. The new method is designed to increase direct services to clients, simplify county administration, and increase federal payments. In order to ensure that counties do not suffer a financial penalty, the Legislature mandated that, beginning in 2001, each county's share of MA and GAMC base-year costs be adjusted according to county caseload growth.

Basic Health Care Grants

The Legislature reduced General Fund spending on basic health care grants by over $223.4 million, due largely to reduced spending forecasts. Excluding the forecast changes, General Fund spending in this area was increased by over $6.8 million. In order to ensure Minnesota's eligibility for some share of the federal Children's Health Insurance Plan block grant, the Legislature expanded eligibility for MA for children to 280 percent of poverty, from the previous level of 275 percent. The FY 1999 cost of this change is $13,000. In order to qualify for federal matching funds, it was necessary to remove the asset test for pregnant women and children, which was reinstated in 1997. The FY 1999 cost of this change was $978,000. However, the Commissioner of Human Services was directed to seek a federal waiver to retain the asset test for children.

In order to comply with the federal Balanced Budget Act, the Legislature established a new MA eligibility category for children who lost federal Supplemental Security Income (SSI) benefits in 1996 due to federal law changes that tightened childhood disability criteria. This change, retroactive to July 1, 1997, cost $877,000. The Legislature amended the Health Maintenance Organization (HMO) surcharge by excluding certain Medicare revenue from the taxable base, as required by the federal Balanced Budget Act, retroactive to August 1, 1997. This will result in a revenue loss of about $3.4 million for the biennium. The Legislature also authorized a delay in the implementation of county-based purchasing of prepaid MA services in counties that are in the process of implementing this purchasing strategy. The delay results in a savings of over $7.9 million in MA and almost $3 million in GAMC in FY 1999, which was placed in a reserve account for future prepaid costs. The Legislature increased the income eligibility standard for elderly and disabled applicants for MA and GAMC to 133 percent of the income standard under the former Aid to Families with Dependent Children (AFDC) program. The cost of this revision was almost $3.4 million in MA and $898,000 in GAMC. Delaying the shift of certain GAMC recipients into the MinnesotaCare program until January 1, 2000, costs the GAMC program almost $9.7 million.

Continuing Care and Community Support

The Legislature made a net General Fund reduction in this area of almost $46.2 million. Excluding forecast reductions, General Fund spending was increased by almost $31.6 million. This budget area includes state-operated facilities and services, mental health grants, long-term care, waivered services, and home care programs.

The only sizable expenditure approved for the regional treatment centers was $650,000 for additional staff to accommodate the growing population at the Minnesota Sexual Psychopathic Personality Treatment Center. The treatment center operates at facilities in Moose Lake and St. Peter.

The Legislature approved about $1.9 million in additional mental health spending. Of this total, $800,000 was to continue providing needed mental health services in the portions of northwestern Minnesota affected by major spring floods in 1997. Most of the additional spending was for provider COLAs (described above).

Spending on long-term care facilities was reduced by about $41.2 million. This is the net result of forecast reductions, COLAs, and a variety of adjustments in rates for nursing homes and ICFs/MR. Total spending on a variety of items not related to COLAs or the forecast was under $1.6 million, including about $1.5 million for nursing homes and $65,000 for ICFs/MR.

The Legislature provided almost $22.7 million to pay the additional alternative care costs that result from delaying for one year, until July 1, 1999, the expansion of the elderly waiver program, which will result in shifting many alternative care clients into the waiver. This cost is partially offset by a corresponding savings in the elderly waiver program of about $14.1 million.

In the chemical dependency treatment fund entitlement area, the Legislature canceled $3 million out of the FY 1998 reserve.

Economic Support

The Legislature reduced General Fund support in this area by $2.1 million in FY 1999. The base funding level for TANF work grants was reduced by $1 million, and the base for child support enforcement was reduced by $1.1 million, but the agency was allowed to carry forward $1.1 million in unspent appropriations from 1998 to 1999 to offset the reduction.

TANF Reserve Accounts

The Legislature also appropriated money out of the federal and state TANF reserve accounts, which were created in 1997 in response to federal welfare reform legislation adopted by Congress in 1996 that established a federal TANF block grant. The federal reserve account consists of funds provided to Minnesota in a block grant by the federal government under a formula basis but not needed yet because of the reduction in welfare caseloads. The state reserve account consists of savings in state funds that result from federal welfare-related actions. The 1997 Legislature established the state account. Any savings that result from federal action in the welfare area are to be "reserved" in this account. The February 1998 forecast estimated $14.7 million in savings due to federal changes that occurred after the adjournment of the 1997 Legislature. These changes included the restoration of federal SSI benefits to a number of noncitizens who were barred from the program under the 1996 federal legislation.

The forecast for biennial spending out of the federal TANF reserve account was reduced by over $54 million, from over $542.5 million to about $488.5 million. The Legislature appropriated $38.8 million out of the federal reserve account for a variety of purposes. The Legislature transferred $10.3 million from the federal account to the Title XX social services block grant to be used for family preservation services ($10 million), Indian child welfare services ($100,000), and home visiting ($200,000). Chapter 406 further delineates how the $10 million is to be used to enhance family preservation efforts. (See miscellaneous legislation below for further explanation.)

Almost $20.5 million was appropriated from the federal account to delay for one year, until July 1, 1999, the policy enacted in 1997 to count the first $100 of any housing subsidy received by recipients of TANF benefits as income, thus reducing TANF grants for public housing residents. Over $7.4 million was appropriated for a variety of food-related benefits for TANF recipients. An appropriation of $791,000 was approved to provide child care benefits for participants in the Minnesota Family Investment Program field trials during a transitional period after the field trials end.

The $14.7 million "reserved" in the state TANF account was offset against the forecast reductions in General Fund spending. Out of the state TANF reserve, the Legislature appropriated about $5.4 million, including almost $5 million to provide food benefits to legal immigrants who are not TANF recipients and do not qualify for the federal Food Stamp program because of their immigrant status.

Miscellaneous

Chapter 406 allocated the $10 million transferred in Chapter 407 from the federal TANF reserve account to the family preservation program. Of that amount, $9.3 million was allocated to counties under the existing distribution formula for concurrent permanency planning, and $700,000 went to the Commissioner of Human Services for the following activities: mediation training for relative care conferencing ($200,000); an independent evaluation of the concurrent permanency planning program ($200,000); and administrative costs associated with developing the concurrent permanency planning program and providing training, and for conducting external reviews of county child protection practices ($300,000).

Concurrent permanency planning, required under Chapter 406, is a process through which counties must develop an alternative permanency plan for children in out-of-home placement while also making reasonable efforts to reunify the child with the family.

Health

The Omnibus Health and Human Services Appropriations Bill (Chapter 407) appropriated about $19.8 million out of the General Fund, $259,000 out of the health care access fund, and $108,000 out of the state government special revenue fund for the Minnesota Department of Health for FY 1999.

Health Systems and Special Populations

The Legislature provided $15.2 million in General Fund revenue and $259,000 from the access fund for this activity. Of the General Fund appropriation, $5 million was for a comprehensive statewide initiative to prevent alcohol-related birth defects and develop strategies for serving persons afflicted with fetal alcohol syndrome (FAS) and fetal alcohol effect (FAE). The appropriation includes $200,000 to be transferred to the Commissioner of Children, Families, and Learning for school-based pilot programs to identify and implement effective educational strategies for individuals with FAS/FAE; $800,000 for a public awareness campaign; $400,000 to develop a statewide network of regional diagnostic clinics; $150,000 for professional training about FAS; $350,000 for the fetal alcohol coordinating board; $800,000 to be transferred to the Commissioner of Human Services to expand the maternal and child health social services programs; $200,000 to study the extent of FAS; $400,000 to be transferred to the Commissioner of Human Services for the intervention and advocacy program; $850,000 for the FAS community grant program; and $850,000 to be transferred to the Commissioner of Human Services to expand treatment services and halfway houses for pregnant women and women with children who abuse alcohol during pregnancy.

The Legislature also provided $10 million out of the General Fund for the Medical Education and Research Trust Fund which makes grants to educational and research programs. The trust fund is designed to replace money that has historically been raised through patient fees to support educational and research activities but is no longer readily available, largely because of the current competitive nature of health care and the unwillingness of purchasers to pay additional amounts for these purposes. Of the appropriation, $5 million per year becomes part of base-level funding for future bienniums.

The Legislature provided $50,000 to the Commissioner of Health to reimburse members of the Consumer Advisory Board for travel, food, and lodging expenses incurred in the course of conducting board duties. The board's purpose is to advise the Commissioners of Health and Commerce and the Legislature on the needs and concerns of health care consumers and on consumer protection issues in the self-insured market. The Legislature also provided $100,000 for a new Office of Consumer Assistance, Advocacy, and Information within the Minnesota Department of Health. The office is charged with assisting patients and enrollees in understanding and asserting their contractual and legal rights, assisting enrollees in obtaining referrals, assisting patients and enrollees in accessing the services of other patient protection services that are already available, educating and training enrollees about their health care coverage, and other duties. The office has no regulatory power or authority and may not provide legal representation in court. The office must be separated from all regulatory functions within the department.

The $259,000 health care access fund appropriation was for the rural physician loan forgiveness program which encourages physicians to locate in rural and urban under-served areas in return for forgiveness of medical school loans. The program is experiencing increasing obligations because of recent expansion, and the appropriation will provide a stable funding base for the program.

Health Protection

The Legislature provided about $4.6 million from the General Fund and $108,000 from the state government special revenue fund for this activity. Of this amount, $2.5 million from the General Fund and the $108,000 from the special revenue fund were for a food safety leadership initiative to support the development of a redesigned system for protecting food safety. The initiative will encourage the participation of producers, distributors, food service workers, consumers, and health care providers to help control food-borne disease and will expedite the development of early warning systems to protect the food supply and to stop the ongoing transmission of these infectious diseases.

This appropriation also included about $2 million for a variety of disease prevention and control activities, as follows: almost $1.3 million for breast and cervical cancer control; $200,000 for an institutional infection control program; $250,000 to design an occupational respiratory disease information system; and $300,000 for activities designed to reduce the incidence of sexually-transmitted diseases.

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