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Funding for MinnesotaCare is already complicated at the Legislature. The Trump administration may be about to make it slightly worse

doctor's office
REUTERS/Jim Bourg
The Affordable Care Act’s Basic Health Program provisions were intended to give states an option to offer programs that provide health coverage for low income Americans who would otherwise purchase coverage directly through the marketplace.

The Centers for Medicare & Medicaid Services (CMS) administrators are set to decide whether or not Minnesota will lose millions in Federal health care funding currently used to provide health care to around 89,000 Minnesotans.

Since 2015, funding provided through The Affordable Care Act’s Basic Health Program provision has been used to support MinnesotaCare, the state’s health care plan that subsidizes health care for those who earn too much to receive Medicaid, but have incomes below 200 percent of the Federal poverty line.

Minnesota is only one of two states (the other being New York) using the Basic Health Program. New York’s program is significantly larger, serving around 700,000 people, and if these changes go into effect, the projections for loss of funding are in the hundreds of millions.


Now, CMS seems intent on restructuring the way funding is allocated for the program. A small tweak to the formula will result in a $24 million reduction of the federal contribution to Minnesota over the course of 2019 and 2020, according to the Minnesota Department of Human Services. To put that number in perspective, in 2017, the MinnesotaCare program paid out 397.2 million for medical services.

The new proposed formula changes are an additional bump in a multiple year battle with the Trump administration. The recent proposed changes are a drop in the overall bucket of health care funding, but are part of a much more complicated battle for health care funding in the state Legislature.

A new formula

In 2018, both New York and Minnesota sued the Trump administration after the Justice Department provided a legal opinion to HHS, which oversees the CMS, that argued they should not be providing a portion of Basic Health Program funding without an explicit appropriation from Congress. They settled in court after HHS agreed to pay $17.3 million to Minnesota and $151.9 million to New York.

The Affordable Care Act’s Basic Health Program provisions were intended to give states an option to offer programs that provide health coverage for low income Americans who would otherwise purchase coverage directly through the marketplace.

Following the settlement, HHS said they would work with states to create a new acceptable funding formula for the program, but in April of 2019, HHS proposed a new funding formula that will again reduce Federal funding to the program.

The new formula has been denounced by the Minnesota Medical Association, the Minnesota Hospital Association, and most of the Minnesota congressional delegation.

“What we’re simply seeking is that the Federal Government adhere to to the Affordable Care Act in providing the resources to the Basic Health Plan,” said Doug Wood, a doctor at the Mayo Clinic and President of the Minnesota Medical Association.

The Minnesota Hospital Association called the recently proposed changes to the formula an “arbitrary, capricious and blatantly self-serving decision based on how a formula can be manipulated to reduce the amount of BHP payments to states.”

In a bipartisan show of support, nine members of the ten member Minnesota congressional delegation sent a letter to Centers for Medicare and Medicaid Services Administrator Seema Verma asking them to reconsider the methodology change. (Rep. Jim Hagedorn, MN-1, sent his own letter that did not take the same stance. His office said that he does not yet have enough information to ask CMS to reconsider the changes.)


“An abrupt shift in BHP payment methodology could jeopardize coverage for Minnesotans as the state is forced to confront the funding shortfalls that would be created by a dramatic reduction in federal funding,” the letter, signed onto by both National Republican Congressional Committee Chair Tom Emmer and Progressive Caucus Whip Ilhan Omar, reads.

“In light of the significant consequences that this proposal could have for Minnesotans who now depend on our state’s BHP, we urge CMS to reconsider its proposed adjustment to the BHP rate structure.”

And if it goes away?

The public comment period on the policy change ended on May 2nd. Verma’s agency must respond to all comments before issuing their decision.

“If we lose that funding, it simply has to be made up from other state revenue sources,” said Wood. “There are some sources that are available under the current Minnesota budget to be able to do that.”

And there is precedent for this. Less than two decades ago, the state paid for a majority of the program. But state legislators are already dealing with a crisis in health care funding: the planned end of 2 percent tax on health care providers.

Lifting the sunset on the provider tax is at the center of the session-long conflict that pits Gov. Tim Walz and DFLers in the Legislature against the GOP majority in the Senate. The sunset was put in place as part of the compromise to settle the 2011 state government shutdown and even though the DFL held the governor’s office and both houses of the Legislature in 2013 and 2014, they didn’t cancel the sunset.


Without the nearly $700 million that the tax on medical providers from doctors to hospitals collects each year, health programs including Medical Assistance, a reinsurance program to help stabilize the individual health insurance market and MinnesotaCare will eventually be scrambling for funding. That scramble, however, won’t hit until the start of the next two year budget period once surpluses in the Health Care Access Fund are exhausted.

“That would be an additional hit and the Health Care Access Fund’s primary purpose in statute is to be the state investment in Minnesota Care,” said Tony Lourey, commissioner of the state Department of Human Services. So any reductions in the federal contribution to MinnesotaCare means more money must be found to replace it.

For Lourey, the additional Basic Health Program cuts and how to make up for them tie into the Walz Administration’s request that the sunset on the state’s 2 percent provider tax be lifted and the tax stay in place.

“The $24 million is not incorporated into our forecast yet,” Lourey said. That just adds to the losses of federal funds that Lourey said will reach $116 million by the 2023 budget year “because of much of the damage the current administration has done to the BHP funding.”

Lourey said he thinks the state has “the better of the legal argument” that it is entitled to those funds, although being right “doesn’t put money on the spread sheet.

“MinnesotaCare is really an important piece of our healthcare fabric and we do need this funding stream to maintain it.”

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