Medicaid cut means less for kids at risk, state officials say

After waiting most of the year for a restrictive new Medicaid rule, Minnesota counties got the bad news late last week.

The rule apparently will cut about $50 million in federal Medicaid money for an innovative service that helps 70,000 troubled, abused or foster children and their families in Minnesota.

It also may cut deeply into $38 million that counties receive from Medicaid for 20,000 adults and children with mental health problems and 7,000 retarded adults.

"It looks like all of that [child welfare] money is gone," said Deborah Huskins, the county's director of children, youth and families. "I'm quite worried about what we'll have to do."

State officials have known for a year that some restrictions were likely. Many counties cut services this year in anticipation. But the rule appears to cut deeper than they expected.

The service is called targeted case management, which has been used by counties to revamp a cumbersome social service system in which people with multiple problems often had to deal individually with myriad complex public and private agencies.

In targeted case management, social workers may assess needs for the whole family, develop a comprehensive plan and then coordinate medical and psychological help, housing, jobs, education, parenting help and other services.

The new rule appears to narrow the range of services covered to just medical and psychological care. It also requires states to bill Medicaid for each 15-minute increment of service instead a flat monthly payment of $400 or so for multiple services.

When he signed the law in February on which the rule is based, President Bush said this and other cuts would bring needed restraint to Medicaid spending. The administration wants to cut $25 billion from Medicaid over the next five years. Next year, the federal portion of Medicaid is estimated at $196 billion.

But state officials call the rule a short-sighted strategy that will cut sharply into programs that not only are effective, but also will reduce government costs down the road by limiting the number of broken families and children who fail at education and at life.

Some help less affected

At least 38 states use targeted case management. The local match for the federal dollars is different in each state. In Minnesota it is matched by an equal amount from counties.

State and county officials said Monday that it will take weeks to calculate how the 27-page rule affects Minnesota.

"We're still trying to get a handle on all of this," said Patricia Coldwell, health and human services policy analyst for the Association of Minnesota Counties. I brought the rule home to read over the weekend," she said late Friday.

The rule takes effect March 4, after a comment period that ends Feb. 4. States and counties will ask that the rule be eased.

"We'll tell them that targeted case management helps our counties keep children safe, helps keep families together," Coldwell said.

The timing is difficult for Minnesota counties. Hennepin County is about to approve its 2008 budget -- too late to make changes and pick up some of the slack left by the new rule.

"Even if we had the money, we're still trying to figure out exactly how much we'll lose," Huskins said. "We had thought it might be $9 million. Now it looks like $12 to $14 million."

Describing how the service helped a 13-year-old runaway, state Human Services official Erin Sullivan Sutton testified in July before Congress that without it, "Anna would ... have been hospitalized or placed in a residential treatment [center], costing large amounts of Medicaid dollars and placing Anna's life into utter chaos."

Services cut already

Expecting the new rule much earlier, Minnesota counties this year cut services to some of their clients -- mostly to children and families.

For 2007, Hennepin County slashed $9 million from its health and human services budget, which meant that 700 clients got no targeted managed care and the other 20,000 received partial or delayed services, Huskins said.

The Legislature last session set aside $32.7 million to help counties cope. The state money may replace less than half the lost Medicaid money, and the one-time appropriation won't help in future years.

That could change if the Legislature decides that the state -- now providing 14 percent of the money for child welfare programs -- should pay a greater share. That's not likely next session, although counties will ask for action. The state now estimates that it will face a $373 million budget shortfall for this biennium.

In fact, the first $3.8 million from that $32.7 million pot may go back to the Medicaid to replace money it says counties improperly spent. In an audit released last month, Medicaid found that seven of 118 county claims from 2003 and 2004 were "insufficiently documented or unsupported by case records." The state may appeal.

Senators try to help

In an attempt to blunt the effect of the new rule, a bill sponsored by Minnesota's U.S. senators would delay implementation for six months. So far, it hasn't gained traction.

"We've worked for years to integrate services so that a child in a troubled family can get the help that makes sense," said Huskins, the Hennepin county official.

"We know this works," she said. "From what we can tell, these new federal rules will be a step backward."

Warren Wolfe • 612-673-7253