Pawlenty Budget Reams Health Care Funding

Once again, MNCare would take the biggest hits

The next time you hear Gov. Tim Pawlenty say that health care costs are out of control, or that Minnesota has a spending problem, not a revenue problem--or anything about accountability, for that matter--remember the way he has plundered the state's health care access fund to fund pet programs and delay a reckoning with his no-new-taxes pledge.

The state's health care access fund was launched in 1993 as a mechanism to pay for the state-supported health insurance program known as MinnesotaCare. The largest revenue source behind this fund has been a 2 percent tax levied on patients by hospitals and doctors for the health care services they provide. Another source is a 1 percent tax on our health insurance premiums. A third funding stream consists of the health insurance premiums paid by MnCare enrollees. In an age of rapidly escalating health care costs, this system proved to be remarkably stable. By 1998, the access fund showed enough of a surplus that the provider tax was reduced and the premium tax was eliminated altogether.

But that system fell prey to the budgetary bloodletting Pawlenty executed two years ago in order to make up more than $4 billion in red ink without raising taxes. The $192 million surplus in the access fund was raided for general fund spending, even as eligibility and benefits for MnCare enrollees were drastically reduced, forcing tens of thousands of people off the health care rolls. Last year, $110 million in federal Medicaid money that the governor had pledged toward replenishing the health access fund instead was deployed yet again to patch holes in the general fund budget. This year--surprise--Pawlenty's budget taps all but about $10 million of the $204 million surplus in the access fund for patching up the general fund, while continuing to hack at eligibility guidelines. As a result, an estimated 47,000 Minnesotans whose MnCare insurance premiums have gone toward creating the access fund surplus will be bumped out of the program.

But hey, it's not that bad, Pawlenty assures us. His administration estimates that as many as 10,000 of these folks will be able to qualify for another state-supported health insurance program, known as General Assistance Medical Care--so long as they "spend down" their personal income to the point where they are below the poverty line. That way, the next time the governor castigates Minnesotans for using "welfare health care," the smear won't be quite as inaccurate. Meanwhile, the doctors, hospitals, and private health care insurance plans that have been contributing to the access fund will be forced to absorb the medical costs of the 30,000 or so residents that even the governor admits will be bumped from the insurance rolls. Or, more accurately speaking, these providers will pass the costs along to the paying customers.

Tapping health care-related revenue to fund programs that have nothing to do with health care has been such a handy budget tool that the governor has recently expanded the practice. His own advisers admit that only $100 million of the estimated $380 million to be generated each biennium by his proposed cigarette "fee" would actually go toward health care. The rest would be used to bolster funding for education. Add the $280 million in cigarette "fees" to the $194 million from the health care access fund, and you see that Pawlenty plans to siphon near half a billion dollars from health care-related taxes and fees and use them on programs unrelated to the health care over the next two years.

Once again, Senate health and human services chair Linda Berglin (DFL-Minneapolis) has thrown herself in front of Pawlenty's draconian health care budget in an attempt to mitigate the damage. As the special session inexorably moves toward a government shutdown this week, it has become fashionable to criticize the pigheaded legislators for refusing to compromise and get a deal done. In that light, it might be enlightening to note that Berglin offered to shave $62 million from the Senate's health care budget the day before the regular session ended, then came back the second day of the special session with a proposal to save the state tens of millions of dollars more without throwing anybody off of MnCare. Even the governor and his trusty yes-man, Speaker of the House Steve Sviggum, were forced to label Berglin's proposal "intriguing" and something to be studied. But since the proposal uses health care access fund monies on the MnCare enrollees it was intended for, the governor and Sviggum haven't embraced it.

Undaunted, last week Berglin offered to hack another $45 million out of her health care budget. She now has proposed $255 million in reductions from the Senate's original health care budget, almost exactly half the $511 million gap between the Senate plan and the governor's budget for health care. During that time, Pawlenty's only concession has been $100 million of the cigarette "fee," leaving the sides about $155 million apart. "It hasn't really been a negotiation," Berglin complains. "It has been more like the governor waiting for me to keep making offers for reduction until I am down at his number."

Berglin and the DFL's tenacity has thus far prevented Pawlenty from taking that health care-related money in order to trumpet his plan to increase funding for education while polishing the fig leaf that remains on his no-taxes pledge. Even without the cigarette fee revenue, Berglin's original senate budget had no one getting bumped off health care and some of the previous biennium's benefit cuts being restored. But that budget required an income tax increase on the 42,000 Minnesotans who make more than $250,000 per year even after all their federal tax deductions are calculated. Pawlenty has infamously referred to the tax as "profoundly stupid" and a "job killer." (As City Pages went to press, there was talk of using gambling dollars through a "racino" to raise health care revenue instead of the more progressive income tax increase.)

Say what? In fact, nearly all of the people enrolled in MnCare are workers with jobs. Their numbers are rising in part because private companies are increasingly declining to provide health care for their employees. How is providing a cost-effective safety net for employees going to "kill jobs"? Pawlenty cites small business owners as being particularly aggrieved by the Senate's income tax proposal, but, as Berglin notes, "We have many small business employees and small business owners who are enrolled in MnCare. Many of them have contacted me and said, 'If not for MnCare, I wouldn't have dared to try and start a small business on my own.'"

Indeed, Berglin's Senate health care budget would encourage more partnerships between small businesses and MnCare by offering to subsidize small business health insurance plans with the health access fund. To make a partnership attractive, Berglin would remove the $5,000 cap on insurance coverage imposed by Pawlenty two years ago. "Just this week I've had two women call me, both diagnosed with breast cancer. Under MnCare, they can only receive one round of chemotherapy when eight to ten rounds are called for," Berglin says. "We can't offer that kind of a plan to small businesses."

But as Pawlenty's intransigence on taxes brings a government shutdown into focus, the idea of using health care-related taxes and fees to create such partnerships becomes a moot point. "I've agreed to cut my budget pretty significantly," Berglin says ruefully. "Something like the small business partnerships aren't going to be possible."

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