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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 without a real understanding of the fiscal details related to such an enormous portion egislation of spending puts the fiscal stability of our state in serious jeopardy. Moreover, t these 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, the four most problematic proposals are as follows: he  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 in spending eduction on the long-term care services which ensure that our vulnerabl e elderly and disabled citizens can term vulnerable 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 lose services, with many becoming institutionalized. Removing current ould emoving 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 The bill does not provide sufficient specificity administration.

Representative Jim Abeler March 23, 2011 Page 2 regarding the program changes necessary to realize this level of savings. Moreover, recent nonnon 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 considering whether she even has legal authority to waive federal till law requirements known as our “maintenance of effort effort.”  DHS Fee for Service Caps and Care Management - $216million (FY 12-13) - This proposal imposes a freeze on fee-for-service health care spending for adults without children and elderly and service 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 insufficient detail provided to DHS on how these insufficient 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 c annot agree on cannot 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 es will be completed notes 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 on these proposals and we promise a genuine effort from our iscussions departments to complete a fiscal analysis of your ideas in a timely manner. Sincerely,

Lucinda E. Jesson Commissioner Department of Human Services cc: Governor Mark Dayton Senator David Hann Senator Linda Berglin

James Schowalter Commissioner Department of Management and Budget Representative Steve Gottwalt Representative Tom Huntley Representative Tina Liebling