Legislative Update

March 4, 2011

Updated Forecast Shows Improvement in State’s Budget
On March 1, Minnesota Management and Budget released its February forecast for the state’s budget.  This statutorily required update showed that the state budget problems improved since the last forecast done in November 2010.  The projected budget deficit shrank to $5.03 billion from $6.2 billion.

Based on this new improved forecast, Governor Mark Dayton released changes to his budget recommendations.  He removed his recommendation for a temporary 3% income tax surcharge on incomes over $500,000, reduced his cut to nursing homes from 4% to 2%, and eliminated his call to cut MinnesotaCare coverage for adults without children earning over 200% of the federal poverty level.

The fact that the new forecast shows an improvement to our budget problems is good news.  This is based on the fact that the economy is starting to pick up.  Even with this good news, however, we are still facing a deficit greater than $5 billion.  The other challenge is that most agree that the Governor’s budget will be the “high-water mark.”  Legislative leaders are still saying they intend to balance the budget with no new tax increases.  They have also removed any cuts to K-12 education, which is 40% of the state’s budget.  If they follow through with this plan, there are guaranteed to be large cuts to the health and human services programs.

Legislative Budget Schedule Takes Shape
With the new February forecast numbers announced this week and the Governor’s budget released, the task of crafting the budget moves to the Legislature.  The Republican majority has set aggressive timelines to complete the budget committees’ work, and have taken the somewhat unusual step of “flipping” the legislative deadlines that the body works under, moving the budget deadline several weeks prior to the policy deadline.  This, they say, demonstrates their belief that balancing the budget should come before all other work.  By March 25, all budget bills are now required to be completed by each individual committee and sent to the final finance committee where they will be assembled into a single budget document for all state operations. 

In the House, Representative Jim Abeler (R – Anoka), the Chair of the HHS Finance Committee has announced that he will introduce his proposal on March 22.  Testimony will be taken on March 23, and the bill will be acted upon on March 25.  Though the Senate HHS Chair Senator David Hann (R – Eden Prairie) has not announced his schedule, expect something similar.  It is likely that a budget bill will be sent to the Governor sometime in the first weeks of April. 

Tobacco Issues Resurface
Under legislation recently introduced by Senator Julie Rosen (R – Fairmont) and Representative Jennifer Loon (R – Eden Prairie), so-called “little cigars” would fall under the same tax regulation that cover cigarettes.  Because of a technicality in state law, these products, virtually indistinguishable from cigarettes save for a small percentage of tobacco in the wrapper, are treated as cigars under Minnesota statute and as such are taxed at a significantly lower rate than cigarettes.  These products are often found in flavors designed to appeal to youth, including peach, chocolate, and grape, and can be purchased for less than half the price of a pack of cigarettes.

The bills would amend the statutory definition of cigarette to include these products, and in doing so would close the tax and regulatory loopholes that have allowed them to remain so inexpensive.  The House and Senate bills have wide support and bi-partisan co-authors. 

As reported earlier, bills have been introduced that would have the effect of significantly weakening Minnesota’s landmark 2007 “Freedom to Breathe” law.  The bills, authored by Senator Michael Jungbauer (R – East Bethel) and Representative Tom Hackbarth (R – Cedar) would allow bars to establish special smoking rooms with ventilation systems.  While neither the House nor Senate bills have yet shown any signs of movement within either body, we continue to monitor them closely.  It’s possible that similar language might be added to a bill on the floor of the House or Senate, rather than taking the conventional route through the committee process.

The Minneapolis Star Tribune weighed in on the issue in a recent editorial, strongly opposing any weakening of the indoor smoking ban.

Community Paramedics Legislation Moves Forward
The proposal from the Minnesota Ambulance Association to create a new level of provider called a Community Paramedic (CP) continues to move in the Legislature.  The proposal has been the subject of some debate, especially among family physicians.  The biggest questions are how this new CP will work with the new health care homes and how the role of the patient’s primary physician and the ambulance medical director will work together.

The MAFP Legislative Committee recommended a number of amendments to address these questions.  Even with these amendments there are still some family physicians who are asking what role the CP will serve, what additional training will be provided to the CP, and how are the services provided by the CP differ from what the patient’s health care home offers.  The MAFP continues to push for further changes to clarify these roles.

There continues to be strong support for the CP concept from legislators, especially those representing rural areas.  This is viewed as a way to partially address our health care workforce shortages in many parts of the state. 

Continued Legislative Interest in PMAP Oversight and Transparency
Legislative interest in the management and operation of the PMAP program continued, with a number of legislative proposals coming forward in recent weeks.  PMAP, the Prepaid Medical Assistance Program, is the mechanism by which the state provides care for the majority of individuals enrolled in MinnesotaCare and Medical Assistance.  The program contracts with private health maintenance companies to provide managed care for low income Minnesotans. 

Critics both in the Legislature and the larger health care community have suggested that the program needs additional transparency and oversight, and with total yearly PMAP spending of over $3 billion, legislators are very interested in potential savings.  Questions center on the quality and validity of the data that the PMAP vendors are reporting to the state, and many have been critical of the rising spending on PMAP while physicians and other providers’ rates remain very low.  These critics have stated that the health plans’ contracts with the state are more profitable than their commercial business, and that the manner in which the plans intermingle accounting data between public and private contracts cloud the financial picture.  The health plans argue that they are already submitting vast data to the state for review and that they are presently operating under ‘actuarially sound’ criteria.  Providing certain additional data, they claim, would require them to disclose sensitive, propriety information that would leave them at a competitive disadvantage. 

Senator John Marty (DFL – Roseville) has introduced SF 457.  The proposal would end the current prepaid managed care system and return the state to a fee-for-service payment system until a competitive bidding process is set up for the health plans to compete for the state’s contract.  The bill does not currently have a House companion. 

Also noteworthy is HF 694, a proposal brought forward by Representative Larry Hosch (DFL – St. Joseph).  His bill, titled “The Transparency in Managed Care Act,” would require more comprehensive reporting of these managed care company’s financial information to DHS, with a new requirement that HMOs report their public contract details separately from their commercial lines of business.  Additionally, HF 694 continues work begun in the 2008 Minnesota health care reforms by setting performance-based guidelines for managed care plans involving patients with complex or chronic conditions.  Finally, the bill cuts payments to HMOs by 15%, though with specific language providing that the cut may not be passed on to providers via lower payment rates.  The bill has yet to be introduced in the Senate.

In a related proposal, Representative Greg Davids (R – Preston) has a bill, HF 773 that would simply cap the net income of PMAP vendors at 6%.  Davids, the chair of the House Tax Committee, would require that any additional income over that threshold would be deposited in the state’s general fund.  Like the other bills, this proposal has yet to be introduced in the other legislative body. 

Governor Dayton also weighed in on PMAP in his budget plan delivered in mid-February.  The budget also includes proposed reforms to the Medical Assistance and MinnesotaCare managed care programs that would generate savings of $115 million over the biennium  Elements of the proposal include a directive to health plans to find 2.75 percent in savings by implementing innovative provider payment reforms.

The proposal would also reduce the administrative portion from 6.6 percent to 5.3 percent of the total capitation amount that the state provides to participating health plans. In addition, a competitive bidding pilot project would be established beginning January 1, 2012.

Provider Tax Gets Attention
The provider tax became a subject of much discussion during a recent House HHS Finance Committee meeting.  Freshman Representative Duane Quam (R – Rochester) presented his bill, HF 113, a proposal to exempt certain revenue from the provider tax.   The bill would have the effect of exempting revenues of the Mayo Medical Laboratories (MML) from the 2% provider tax.  Arguing that the MML is a unique entity in that it serves patients from around the United States and the globe, Rep. Quam and individuals from Mayo Clinic testified that the provider tax inflicts a distinct competitive disadvantage on MML.  The bill was passed on a voice vote and referred to the House Tax Committee.

During the discussion of the bill, many members noted their dislike of the provider tax, including Representatives Erin Murphy (DFL – St. Paul) and Tina Liebling (DFL – Rochester).  The two Democratic members shared that they anticipate that soon a conversation about repealing the tax can begin in earnest, as the subsidies granted by the federal health care reforms will largely replace the current MinnesotaCare system beginning in 2014.  While agreeing with them that the provider tax is an unfair method of providing funding, Rep. Steve Gottwalt (R – St. Cloud) reiterated his opposition to the demands that the federal reforms will place on states. 

Legislation that seeks to reduce the burden of the provider tax is expected soon, and will be carried by Representative Matt Dean (R – Dellwood).  Rep. Dean is the Majority Leader of the House.  His proposal – expected to be introduced in the coming weeks – would seek to lower the provider tax rate contingent upon projected surpluses in the Health Care Access Fund (HCAF). 

While the HCAF is in balance presently, its future is somewhat unclear.  Analysts for the Department of Management and Budget currently show a deficit in the HCAF, but they acknowledge that they have not yet been able to calculate the effect of the federal health care reforms.  Most observers believe that once the health insurance exchange is operating and the federal subsidies begin to flow in 2014, the demands on the HCAF will be dramatically reduced.  At that point, the need for the provider tax will also be reduced, and many argue the tax should be phased out. 

Medical Malpractice Legislation Introduced
Senator Geoff Michel (R – Edina) has introduced a bill that would provide significant medical malpractice reform.  His bill, SF 432, would cap at $250,000 both non-economic and punitive damages that may be awarded to a plaintiff.  In addition, the bill also seeks to cap the amount of attorney’s fees via a sliding percentage scale, as well as establishing a “best practice” defense in malpractice cases.  This section would allow a defendant in a malpractice suit to cite adherence to a community-based clinical practice guidelines or that of a recognized specialty association as an absolute defense.    

While the Senate bill does not presently have a House author, one is expected soon.  Other legislative proposals to reform medical malpractice are likely to come forward, including efforts to change evidentiary rules and provide additional protections to certain “high risk” specialties like emergency medicine.  Majority Leader Matt Dean expressed a high degree of confidence that these proposals would move through committee and pass both bodies.  Governor Dayton’s position is uncertain at this time. 
 

- Dave Renner, MAFP Legislative Representative
(drenner@mnmed.org, 612-362-3750, 1-800-342-5662)