Legislative Update
July 25, 2011

Health & Human Services Budget Agreement
Chapter 9: A Summary for Physicians

- Dave Renner, Director, State and Federal Legislation, Minnesota Medical Association; MAFP Legislative Representative

-  Eric Dick, Manager of State Legislative Affairs, Minnesota Medical Association

Overall, the new state budget that was passed by the Legislature and signed into law by Governor Dayton during the recent one-day Special Session spends $35.4 billion over the next two years and authorizes $12.4 billion in total health and human services spending for fiscal years 2012-2013.  This represents a spending reduction of 8.4 percent over what was projected to be needed during that period, but is an 11.6 percent increase over what was actually spent in the previous biennium.

Below is a summarize many of the provisions included in the Health and Human Services Budget Act, Chapter 9 (HF 25)  [Click on the hyperlink to see the actual language of the act.].  This is not intended to be a comprehensive summary of the entire 286-page act, but instead is an attempt to identify the key provisions that will most directly impact physicians and the patients they serve.

Reimbursement Cuts
To achieve the $1.23 billion in savings in the health and human services area, funding for a number of programs was cut.  Not surprising, reimbursement levels for physicians, hospitals, health plans, and other providers were cut.  While the authors of the act made a point of stressing that direct physician payments were only cut 3 percent, there are a number of other reimbursement cuts that will affect physician practices. 

Specifically, the act cuts fee-for-service payments under Medical Assistance (MA) by 3 percent for services provided after September 1, 2012..  This cut, slated to save $18.6 million for the biennium, only directly impacts services to the elderly and disabled since all other MA and all of MinnesotaCare is provided through managed care.  In addition, the budget caps payments for service to enrollees who are covered by both Medicare and MA at the MA rate, a change estimated to save $39.7 million for the biennium.

Payments to hospitals are affected in several ways.  Hospital fee-for-service reimbursements are cut by 10 percent starting September 1, 2012, though children’s hospitals, long-term care hospitals, and Indian health services facilities are explicitly excluded from these reductions.  Starting July 1, 2013 this cut can be reduced to 5 percent if the hospital meets certain performance targets related to hospital readmissions.  These changes are estimated to save $42.7 million for the biennium.  Also of note for hospitals, the scheduled January 2013 “rebasing” is repealed for 2013 to 2015.  This change is slated to save the state $106 million in 2013, $237.8 million in 2014, and $253 million in 2015.

The budget act also makes a number of cuts to the Prepaid Medical Assistance Program (PMAP) that are likely to be passed on to physicians and other providers.  These cuts are to the payments the state makes to managed care plans.  Under the title of “managed care reforms” the state books $277.5 million in savings by cutting the rates paid to health plans by the following percentages:

• 2 percent for Medical Assistance elderly basic care,
   
• 2.82 percent for Medical Assistance families and children,
   
• 10.1 percent for Medical Assistance adults without children, and
   
• 6.0 percent for MinnesotaCare families and children.

The act also saves $22.9 million by establishing performance targets for PMAP companies to reduce emergency room use and hospital readmissions.  In addition, the budget delays PMAP payments in May and June 2013 to July 13.  This “shift” in payments, similar to the “K-12 shifts” that received considerable attention, is estimated to save $135 million in this biennium. 

PMAP Changes
The act makes changes in how Minnesota’s managed care public programs work.  All of MinnesotaCare and all of MA, other than care for the elderly and disabled, are currently offered through our managed care programs.  A provision of the budget establishes a pilot program in the seven-county metropolitan area to create a competitive price bidding process for health plans to participate to serve nonelderly, nondisabled adults and children in MA and MinnesotaCare.  The pilot must allow a minimum of two managed care organizations to serve the area and it expires after two full calendar years on December 31, 2013. The Commissioner of Human Services shall conduct an evaluation of the pilot to determine the cost-effectiveness and impacts to provider access at the end of the two-year period.

Beginning January 1, 2012, PMAP is expanded to include enrollees with disabilities.  All enrollees with disabilities will be enrolled in a managed care plan with the option to opt out and continue with fee-for-service.  The state saves $26 million from this change.

The act attempts to provide more transparency and accountability within the PMAP program.  It requires health plans to submit to the Commissioner of Human Services detailed data regarding financials, provider payments, provider rate methodologies, and other data as determined by the commissioner to ensure that the payments made to health plans are being used on patient care.  Each health plan must submit administrative expenses, revenues, including investment income, non-administrative service payments, provider payments and reimbursement rates, the amount of reinsurance or transfer of risk, and the amount contributed to reserves.  The data is non-public but DHS shall report summary data annually.

Medical Education
Chapter 9 makes a number of cuts to programs related to medical education.  The biggest of those are related to cuts to the state’s Medical Education and Research Cost (MERC) program that is used to help fund medical residency programs.

MERC funding is reduced by $12.8 million each year, a cut of approximately 50 percent.  Direct appropriations that went to the University of Minnesota Medical Center-Fairview, the University of Minnesota School of Dentistry, and the Academic Health Center are specifically reduced.  The budget also reduces the amount of the tobacco tax dedicated to MERC from $8.55 million each year to $3.937. 

Funding for the state’s loan forgiveness programs was cut by $155,000 each year.  These funds are used for physicians, dentists, pharmacists, advance practice nurses, and other practitioners willing to practice in rural areas.  The savings come from narrowing the number of rural areas that qualify for loan forgiveness.

And finally, funding for the state’s Summer Health Care Internship program was discontinued for 2012 and 2013.  This program provides stipends for high school students who are interested in pursuing health careers.  The savings is $300,000 each year.

Healthy Minnesota Contribution Program
Capping an effort that received significant attention from legislators during the regular session, the final budget agreement contains language that shifts a number of MinnesotaCare recipients from the current defined benefit program to a defined contribution program.  The new program, to be known as the “Healthy Minnesota Contribution Program,” will privatize health care insurance for adults without children who earn between 200 percent and 250 percent of the federal poverty level. 

Under the new program, eligible individuals will be given a monthly voucher to purchase health care insurance in the private market.  Payments to enrollees are set by a sliding fee schedule, and range from $125 per month for individuals aged 19 – 29 to $360 per month for those over 60.  The individual may combine these funds with additional dollars to purchase an insurance product of their choosing.  It is likely that many, if not most, of the insurance products that will be available for premiums at these relatively inexpensive levels will be “high deductible plans.”  Of note, the new program requires that the available health plan products cover both mental health and chemical dependency treatment services. 

Under a provision in the new law, those individuals who are denied coverage by a private insurer will be directed to the Minnesota Comprehensive Health Association (MCHA), a “high risk insurance pool” for those with pre-existing conditions.  These individuals will be allowed an enhanced monthly premium payment to purchase from MCHA. 

Supporters of the program argue that this program will allow individuals to pick an insurance product better suited to their individual needs, and that clinicians and hospitals will be paid at market rates rather than the anemic rates paid by MinnesotaCare.  Opponents spoke of their concern that this effort will lead to less effective outpatient care, as enrollees sought to avoid the cost of routine visits.  The high deductibles, they argue, would be a barrier to regular preventative outpatient care.     

Earlier versions of the legislation, authored by Rep. Steve Gottwalt (R – St. Cloud) and Sen. David Hann (R – Eden Prairie), applied the program to individuals earning as little as 75 percent of the federal poverty level and contained no language requiring coverage for mental illness and chemical dependency treatment.

Provider Tax Phased Out, Repealed
The final budget deal contained language that will serve to phase out and ultimately repeal the state’s 2 percent tax on providers.  The tax is commonly referred to as the ‘sick tax’ for its heavy, regressive burden on those receiving medical care.

Proceeds from the provider tax are collected within the Health Care Access Fund (HACF), and are used to fund MinnesotaCare.  Under this act, the state's budgeting department, Minnesota Management and Budget (MMB), will determine the estimated surplus within the HCAF for the upcoming year and, if a surplus exists, lower the provider tax levied during the next year so that the HCAF does not exceed 125 percent of projected outlays.  The tax is completely repealed effective December 31, 2019. 

Many have noted that the need for MinnesotaCare will be reduced as the Affordable Care Act becomes effective and many recipients receive care with the federal subsidies available under the Health Insurance Exchange.  Repeal of the provider tax has long been a high priority of the MMA.  Language similar to this provision was authored by Rep. Matt Dean (R – Stillwater) and Sen. David Hann (R – Eden Prairie) during the regular session. 

Changes to Health Care Homes, Care Coordination Services
Chapter 9 contains a number of minor changes to the state’s health care home requirements.  While current statute already provides for alternate means for the certification of health care homes, a new provision will allow the Commissioner of Health to waive certification requirements if it is determined that a certification requirement would create a significant financial burden or is not feasible for the applicant.

Also related to health care homes, the act contains a new requirement that health care homes with patients with complex medical needs or disabilities must coordinate services with county social services if the patients are eligible for those services.  Additional county-based services include waivered services, public health services, transportation, and housing.  This provision is effective September 1, 2011. 

In an effort to combat the high costs associated with frequent use of hospital emergency rooms, the act requires “In-Reach” community-based service coordination be covered under the state’s Medical Assistance program.  Under the language, In-Reach service coordinators will be reimbursed for providing assistance to individuals who have frequented a hospital emergency room three or more times in the previous four months.  The coordinators are to address the patient’s mental health, chemical health, social, economic, and housing needs with a focus on reducing the incidence of emergency room utilization. 

Chapter 9 directs DHS to develop a plan to provide care coordination to children with high-cost mental health conditions who are enrolled in Medical Assistance or MinnesotaCare.  This plan is due to the legislature by January 15, 2012.  A “high cost mental health condition” is defined as incurring mental health and medical care costs in excess of $100,000 in the previous year.  Care coordination is to include collaboration between a patient’s primary care physician, advance practice registered nurses, and other specialists, as well as care management planning, organization of medication and therapy information, and information and assistance in accessing available resources.

New Studies and Task Forces Created
Chapter 9 includes a number of new studies and task forces.  One provision in the act tasks the Minnesota Department of Health with reviewing currently available quality measures related to improving both the assessment and care of patients with Alzheimer’s Disease and other dementia diagnoses.  MDH, in partnership with the Department of Human Services, the Minnesota Board on Aging, and other appropriate entities are to review relevant research on the value and potential cost savings associated with earlier identification and diagnosis, greater support for family and caregivers of patients, and improved collaboration between medical providers and community supports.  The Commissioner must report findings to the Legislature by January 2013.  

This provision also requires MDH to establish a health care home learning collaborative curriculum that identifies best practices related to early identification of Alzheimer’s Disease and related disorders.  The curriculum is to be available to providers, clinics, patient partners, and public health resources. 

Also established under the budget act is a new group to evaluate and make recommendations on methods for reducing prematurity and improving premature infant health.  The “Minnesota Task Force on Prematurity” will be comprised of fifteen members appointed by the Minnesota Prematurity Coalition, including health care providers who treat pregnant women and neonates.  Other members of the task force are to include officials from DHS, MDH, the Department of Education, and legislators.

The Minnesota Task Force on Prematurity is tasked with reporting on the current state of prematurity in Minnesota, as well as developing strategies to reduce premature births and improve premature infant care.  The group is to meet quarterly and prepare an update to the Legislature by November 2011, with a final report including possible draft legislation by January 2013. 

Also of note, the budget act extends the charge of the Minnesota Autism Spectrum Disorder Task Force.  Originally formed by the Legislature in 2009 and slated to finish its work this year, the new language extends the task force’s operations until 2015.  The group, comprised of fifteen individuals including representatives of the Minnesota chapter of the American Academy of Pediatrics and the Minnesota Academy of Family Physicians, is to develop a strategic statewide plan that focuses on improving awareness, early diagnosis and intervention, and on ensuring delivery of treatment for those with autism and related disorders. 

Miscellaneous Policy and Budget Provisions
Chapter 9 contains a number of other notable provisions of interest to health care providers, including:

• The act appropriates $15 million in 2012 for the Statewide Health Improvement Program (SHIP).  SHIP is a program that provides local units of government with grants to pursue public health initiatives around smoking cessation, obesity, and the like and began in 2008 as part of a series of health care reforms.  While the total funding is considerably less than years past, the legislature’s original budget contained no funding for SHIP. 
   
• Contained within the act is new requirement that MDH use the funds to implement a plan for “evidence based strategies” related to public health.  The legislation further states that future state budget forecasts are to include estimates of budget savings attributable to the plan.
   
• In an effort to promote fewer elective inductions of labor prior to 39 weeks of gestation, the act contains a provision that will require DHS to promote policies within hospitals that prohibit the use of elective inductions prior to 39 weeks for Medical Assistance and MinnesotaCare clients.  Under the act, hospitals will be required to submit information to DHS regarding the nature of labor and delivery of all births covered by Medical Assistance or MinnesotaCare, unless that hospital already has a prohibition on such elective inductions.
   
• The act requires DHS to begin a five-year demonstration project to study the effectiveness of alternative and complementary medicine in the treatment of back and neck pain.  The project, to be conducted by an academic or clinical research institution based in Minnesota, will be based in a Federally Qualified Health Center (FQHC) or a related FQHC “look alike” clinic, and is to be designed to significantly improve the physical and mental health of patients with neck and back problems while decreasing the cost of medical treatment.  The demonstration project is to incorporate holistic medical care, appropriate nutrition, exercise, medications, and conflict resolution techniques, and is to make use of a range of providers, including primary care physicians, chiropractors, nurses, and others.