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Federal government finalizes changes that will cost MinnesotaCare millions

When the changes were proposed earlier this year, they were widely condemned by Minnesota policymakers.

photo of cms administrator seema verma
Earlier this year, the Minnesota congressional delegation sent a letter to Center for Medicare and Medicaid Services Administrator Seema Verma objecting to proposed Basic Health Program funding changes.
REUTERS/Kevin Lamarque

The Centers for Medicare & Medicaid Services (CMS) will change how they fund Minnesota’s health care system, resulting in a projected loss of millions in federal health care funding used by the state.

Since 2015, funding provided by the Affordable Care Act’s Basic Health Program has been used to support MinnesotaCare, the state’s health insurance program for those that earn too much to receive Medicaid, but have incomes below 200 percent of the federal poverty line.

Only two states currently use the funding: Minnesota and New York. With the new rules, the states are set to lose a combined $151 million in 2019, according to CMS’ own analysis. New York’s program is significantly larger, and the state is projected to lose the lion’s share of that amount. In May, Minnesota was projected to lose $24 million for 2019 and 2020, but the Minnesota Minnesota Department of Human Service (DHS) is still calculating the fiscal impact of the final rule.

In 2017, the MinnesotaCare program paid out $397.2 million for medical services.

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Years-long fight

The funding changes close a chapter in a years-long fight between Minnesota and the Trump administration over Basic Health Program funding.

In 2018, New York and Minnesota sued the Trump administration after the administration argued that CMS should not be providing a portion of Basic Health Program funding without an explicit appropriation from Congress. They settled in court; the administration agreed to pay $17.3 million to Minnesota and $151.9 million to New York. Following the settlement, the administration committed to working with states to develop a new formula.

But in April of 2019, HHS proposed the new funding formula. At the time, The Minnesota DHS said a change to the funding formula would result in around $24 million in lost health care funding for both 2019 and 2020. In the finalized rule, the changes will only impact 2020.

Changes condemned

The finalized funding formula has been denounced by Minnesota’s DHS, the Minnesota Hospital Association, and Sen. Amy Klobuchar.

“Federal funding instability challenges the state’s ability to plan for the future and creates instability for our clients,” said Tom Moss, Acting Commissioner for DHS’s Health Care Administration.

The Minnesota Department of Human Services said that while some of the changes to the final ruling from the draft form are positive, they are considering all options to challenge the new payment structure. “This is a cost-shift from the federal to the state government that does not occur in other states,” the agency said.

Matt Anderson, interim president and CEO of the Minnesota Hospital Association, said the changes are a way “CMS can save money without a huge outpouring or outcry from the rest of the country.”

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Sen. Amy Klobuchar condemned the finalized rule change: “As I warned the administration months ago, the adjusted MinnesotaCare payment methodology could jeopardize coverage for Minnesotans as the state is forced to confront the funding shortfalls that are created by a dramatic reduction in federal funding. I will continue to fight to protect the health coverage of the more than 84,000 MinnesotaCare enrollees in our state.”

When the formula changes were initially announced, almost every member of the congressional delegation denounced the changes in a letter to CMS Administrator Seema Verma. “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 by nine of the delegation’s ten members, reads.

The only member not to sign on was the First District’s Rep. Jim Hagedorn, who sent his own letter. At the time, his office said that he did not yet have enough information to ask CMS to reconsider the changes. Hagedorn’s office did not respond to a request for comment on the final rule change.

“This is not a Republican or Democrat issue. This is about making that low income working Minnesotans have affordable access to healthcare. And that’s what we’re all about. And that’s what our congressional delegation is about,” said Anderson.

“We wish that was what the federal government was about.”