Minnesota Eats Itself

Another Pawlenty budget, another round of bloodletting

Pawlenty's approach to health care bears his usual trademarks--a preponderance of fees and a desire to shift costs onto other units of government. Even low-income citizens face new or increased payments for eyeglasses, dental care, and prescription drugs, and working poor families face increased insurance premiums that jeopardize their ability to stay on the insurance plan. Thousands of "noncitizens" and single adults have already been bumped off the insurance rolls, shifting the cost of their care to locally supported hospitals and community clinics. But Pawlenty's fiscal approach demands the ongoing diversion of tax dollars ostensibly dedicated to assisting poor, sick people to prop up the state's general fund.

Half of the governor's total budget cuts in the last biennium, nearly $1 billion, came out of health and human services. Prominent among them were curbs on benefits and tighter eligibility standards for citizens enrolled in the state's three public health insurance plans--Medical Assistance (or Medicaid), General Assistance Medical Care, and MinnesotaCare. General fund dollars sustain approximately half of Medical Assistance (with the feds supplying the other half) and all of GAMC.

But since its inception in the early '90s, MnCare has been bankrolled primarily through various taxes that go into a health care access fund. The largest revenue source is the provider tax, which accrues through a 2 percent fee levied on patients by hospitals and doctors for the health care services they provide. Another contribution stems from a 1 percent tax on health care premiums. Then there are the MnCare premiums paid by those enrolled in the program.

Steve Johnson and Lou Fancher

Until recently, MnCare operated exactly as intended for more than a decade. The number of enrollees, whose ranks consisted mainly of working poor families, was relatively stable, and the taxes paid into the health care access fund provided an adequate and reliable source of revenue. In January 1998, the fund showed enough of a surplus to reduce the provider tax from 2 to 1.5 percent, and eliminate the premium tax altogether.

That all changed when Pawlenty pledged to balance the state's $4.2 billion budget deficit without raising taxes. Along with the drastic cuts in the benefits and eligibility guidelines of the three state health insurance plans, he raided the $192 million surplus in the health care access fund and put it into the general fund. Suddenly, provider tax money collected from sick patients by hospitals and doctors in order to reduce the number of costly uninsured people in the state was being used to stanch the red ink caused by other areas of the budget. When the provider tax was first implemented, doctors and hospitals were told that the money would be used only for health care. Pawlenty's budget fix violated that agreement.

During the frenzied last-minute budget negotiations two years ago, the governor assured Sen. Linda Berglin (DFL-Minneapolis), who co-authored the legislation that created MnCare, that he would use $110 million in federal Medicaid money to help replenish the access fund. But last spring, he reneged on his word, using the money to help balance another of the chronic general-fund deficits that have occurred on his watch. To top it off, because the health care access fund no longer contained a surplus, the provider tax was bumped back up to 2 percent and the premium tax was reinstated. (Again, so much for the no-taxes pledge.)

Over the past two years, the intended savings from Pawlenty's eligibility and benefit reductions have created even more instability in state finances. The changes made to MnCare now make it more advantageous for many low-income people to instead enroll in Medical Assistance or GAMC. While MnCare enrollment is projected to drop from 120,000 to 111,000 from fiscal year 2003 to fiscal year 2005, enrollment in Medical Assistance is expected to climb from 301,000 to 336,000 over the same period. And despite throwing 3,000 "noncitizens" off the GAMC rolls and cutting the eligibility of at least 1,500 others, total enrollment in that insurance plan is expected to hold steady at 37,000 people between 2003 and 2005.

Not all of this fluctuation is related to citizens shifting from one plan to another. The state's lackluster ability to create jobs and the decision by many employers, especially Target, to reduce or eliminate health insurance for some of their part-time or low-level workers is contributing to the growth of demand for government assistance. (One University of California study, for instance, recently claimed that Wal-Mart's inadequate wages and benefits forced the company's employees to seek $86 million in state aid.) The result is that fewer needy citizens are getting their health insurance from a program that happens to have a stable funding source apart from the general fund, while enrollment in two other programs that rely heavily on general fund dollars is swelling.

One of the figures Pawlenty cites to dramatize his claim that health care costs are "out of control" is the forecasted 32 percent increase in GAMC costs during the next biennium. But that's because those setting the budget targets had assumed that GAMC's enrollment, and hence its costs, would go down. Pawlenty's last budget "fix" is one of the reasons it hasn't. A state economy rendered sluggish by a lack of government investments is another.

Health care professionals are expecting another round of carnage when Pawlenty delivers his biennial budget proposal next week. If education is spared, the Department of Corrections is given more money, and new taxes are kept off the table, health care programs will bear the brunt of the $1.4 billion in cuts needed to balance the budget. In recent weeks, Pawlenty and Sviggum have indicated that their "solution" will likely involve another raid on the health care access fund, which will have amassed a surplus of $226 million by fiscal year 2007, and the elimination of all state-funded health care and health insurance for childless adults, creating an annual "savings" of nearly $800 million. Such a plan would lead to the near-total dismantling of GAMC. Speaking to the Pioneer Press two days after Christmas, Pawlenty explained, "If you are an able-bodied single adult, who can otherwise perhaps find an opportunity in the marketplace, those are the people we are going to look at and say: 'Are our benefits out of line?'"

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