The economic recession, whether it is over or not, has pushed record numbers of Minnesotans into state-subsidized welfare and health insurance programs, according to figures published this week by the Department of Human Services.

The number of Minnesotans eligible for Medical Assistance, the state's version of Medicaid, climbed to 610,000 in an average month in fiscal 2010, compared with 557,000 on average in 2009. That is the largest one-year increase in at least the past decade and represents more than one in 10 Minnesotans. Enrollment rose as well for the state's various welfare-to-work programs and for MinnesotaCare, a subsidized health insurance plan.

Health officials say the enrollment surge will exacerbate the state's budget and economic woes for years to come, even though federal stimulus money reduced the financial impact of the spike in Medical Assistance cases in 2010.

"We have seen over the last year, particularly, an increase in people who have never had to face this dilemma before -- people who have always had employer insurance and were recently laid off," said Julia McCarthy, outreach director for Portico Healthnet, a St. Paul agency that connects people to health programs for which they are eligible.

On the positive side, growth in public insurance caseloads has prevented Minnesota's remarkably low uninsured rate, 8.7 percent, from rising. U.S. Census figures released last week showed a sharp decline in Minnesotans covered by workplace benefits in 2009, but that an increase in public program enrollment made up the difference.

While the cost of covering impoverished Minnesotans can be hard on the state, health officials pointed out that a rising uninsured rate can be harder. The uninsured tend to avoid seeking health care and end up with worse and more expensive medical problems in the end. The entire state bears that cost through rising health insurance premiums.

Trouble is, the trend toward more public assistance isn't likely to reverse itself. The number of Minnesotans with workplace benefits isn't dropping just because more people are out of work, but because more employers no longer offer affordable benefits. Even as the economy stabilizes, people are likely to find jobs that don't offer health plans, said Christina Wessel, deputy director of the Minnesota Budget Project, an advocacy group.

"We may be emerging from the recession," she said, "but the world has been changing around us."

Feeling the squeeze

Consider Sammy Yang of St. Paul, who enrolled his two children on Medical Assistance because he couldn't afford the higher co-pays and deductibles of his employer's health plan for them. He applied when his youngest daughter was born in April, because of the $2,600 bill for her delivery.

"I didn't have the money to pay," he said in an interview Wednesday.

Clinic and hospitals groups, too, are feeling the financial impact of this trend -- few more than Children's Hospitals and Clinics of Minnesota. The share of Children's patients covered by Medical Assistance jumped from 28 percent in 2003 to 44 percent this year.

That's significant because Medical Assistance pays 80 cents for every dollar Children's spends on patients, said Scott Leitz, Children's public policy director. The hospital system recently announced a series of cuts, including the reduction of 200 to 250 full-time jobs, to compensate for its reliance on an underpaying source of revenue.

The impact on the state budget itself is unclear.

The federal government has extended its stimulus funding for Medical Assistance through June 2011. Without another extension, however, the state will resume a greater cost for people enrolled in the program -- already a large and growing share of the state budget.

The Human Services Department is projecting that the state share of Medical Assistance costs will increase from $2.7 billion in 2010 to $4.5 billion in 2012. That is partly based on an increase in monthly enrollment to 750,000 if the state accepts an early option of federal health reform to expand Medical Assistance benefits to adults without children. Medical Assistance is currently available to low-income children and families and to elderly and disabled Minnesotans.

The largest components of federal health reform don't take effect until 2014. While designed to reduce the number of uninsured in Minnesota at that time, there is limited data yet on how it will affect the state budget.

MinnesotaCare, which provides basic health benefits for children and working families that are above the poverty threshold but can't afford private insurance, saw its monthly enrollment figures rise from 125,000 in August 2009 to 150,000 last month -- beyond state forecasts. The economy has mostly fueled that enrollment increase, but so have reductions to the state's General Assistance Medical Care program, which resulted in some impoverished and disabled adults being transferred to MinnesotaCare.

Programs under pressure

Lawmakers will review the financial state of MinnesotaCare at a hearing Thursday. Rep. Tom Huntley, DFL-Duluth, fears that the program -- funded by the "sick tax'' on health care providers -- will be insolvent by 2011. Then the only recourse might be to raise the tax or reduce eligibility, he said, putting more working families into dire situations.

"If that goes into deficit," he said, "the first thing we will have to do is start denying enrollment to working people that don't have children. That's who the program was designed for. It was not designed for the GAMC population that virtually cannot work because of their various conditions."

Whether Minnesota will be able to maintain its investment in welfare-to-work programs in the face of looming budget deficits is unclear as well. Enrollment in the Minnesota Family Investment Program and two related programs increased from 39,000 in August 2009 to 42,000 last month. The state's 7 percent unemployment rate, which remains above the pre-recession rate of 4.2 percent, is the primary reason.

Deborah Schlick of the Affirmative Options Coalition, a St. Paul-based advocate for the impoverished, said the pressure on state programs will continue as long as unemployment remains high.

"There is a disconnect" when people claim the recession is over, she said. "The economy with a capital E is measured with all sorts of data -- corporate revenues, number of goods put out. All of that adds up. But in our day-to-day lives, we measure the economy on whether we are working, and whether our neighbors and friends are working."

Jeremy Olson • 612-673-7744