March 23, 2011

The Honorable Jim Abeler

Minnesota House of Representatives
479 State Office Building
St. Paul, MN 55155

Dear Representative Abeler,

We write to express our strong concerns regarding certain budget provisions in the proposed Health and
Human Services budget bill.

The bill and spreadsheet released on March 21 contain a significant level of savings associated with just
four proposals, none of which have received official fiscal notes from our two departments.. Together,
these four proposals assume $1,243,070,000 in general fund savings that is not substantiated by
completed fiscal notes, which equates to approximately 75 percent of all savings assumed for the bill and
25 percent of the state’s entire projected deficit
deficit.

Passing legislation
egislation without a real understanding of the fiscal details related to such an enormous portion
of spending puts the fiscal stability of our state in serious jeopardy. Moreover, tthese four proposals have
the potential to disrupt the lives of thousands of Minnesotans and could result in irrevocable harm to our
health care and continuing care delivery systems. While this letter is not a comprehensive list of our
concerns or objections to your bill, thehe four most problematic proposals are as follows:

 Rollback of elderly and disabled services to FY 2010 levels - $483 million (FY 12-13) - This
proposal freezes spending at fiscal year 2010 levels and assumes a 19.3 percent reduction
eduction in spending
on the long-term
term care services which ensure that our vulnerabl
vulnerablee elderly and disabled citizens can
continue living in their own community rather than in an institution. The budget bill fails to identify
with sufficient specificity how these savings would be achieved. At a minimum, we expect that
thousands of people would
ould lose services, with many becoming institutionalized. Removing
emoving current
enrollees from these programs would violate federal law and cause a large loss of federal matching
funds. We do not believe that a waiver of federal law to accomplish these savings has been approved
by the federal government for any other state
state.

 Global Medicaid Waiver - $300 million (FY 12 12-13) - This proposal appears to be an attempt to
impose a variety of changes to Minnesota’s Medicaid laws somewhat similar to a waiver granted to
Rhode Island under the previous administration
administration. The bill does not provide sufficient specificity
Representative Jim Abeler
March 23, 2011
Page 2

regarding the program changes necessary to realize this level of savings. Moreover, recent non-
non
partisan analysis of Rhode Island concluded that the state experienced savings due the federal
Recovery Act (ARRA),, not as a result of its waiver. Additionally, U.S. HHS Secretary Sebelius has
indicated to states that she is still
till considering whether she even has legal authority to waive federal
law requirements known as our “maintenance of efforteffort.”

 DHS Fee for Service Caps and Care Management - $216million (FY 12-13) - This proposal
imposes a freeze on fee-for-service
service health care spending for adults without children and elderly and
disabled people in Medical Assistance at FY 2010 levels.. The effect of the freeze is equivalent to a
5.5 (rounded from 5.45) percent reduction. There is in insufficient
sufficient detail provided to DHS on how these
savings are to be achieved and no fiscal analysis can be comp
completed. For example, if the intent is to cut
all provider rates by 5.5 percent, that specific instruction must be made in statute.

 Managed Care High Cost Provider and Reforms $293 million (FY 12-13) - This proposal is an
approximate 10 percent reduction to managed care rates. The bill assumes this reduction is achieved
through related cuts to high cost providers. While the Governor’s budget proposes specific reforms in
managed care contracting, the proposed House bill has insufficient detail to determine how reform
would be achieved.. These details are necessary to complete the fiscal analysis. In the absence of
greater detail, we would have to analyze this as an across-the-board cut proposal, which would raise
serious questions about whether a flat cut of this magnitude would violate the federal law’s actuarial
soundness requirements.

We can and will disagree on policy, but we are faced with an untenable situation if we ccannot
annot agree on
underlying facts. To ensure sound financial management and the fiscal stability of our state, the enacted
budget must be based on accurate fiscal estimates; therefore we expect that fiscal not
notes
es will be completed
on these and other provisions of the proposed bill before it continues through the legislative process. This
process will require sufficiently detailed proposals such that fiscal estimates can be prepared.

We look forward to further discussions

iscussions on these proposals and we promise a genuine effort from our
departments to complete a fiscal analysis of your ideas in a timely manner.

Sincerely,

Lucinda E. Jesson James Schowalter

Commissioner Commissioner
Department of Human Services Department of Management and Budget

cc: Governor Mark Dayton Representative Steve Gottwalt

Senator David Hann Representative Tom Huntley
Senator Linda Berglin Representative Tina Liebling