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Medicaid savings unrealistic, study says

  • Article by: WARREN WOLFE and RACHEL STASSEN-BERGER
  • Star Tribune s taff w riters
  • March 22, 2011 - 10:34 PM

Faulty information is driving a plan by Minnesota House Republicans to save $300 million in Medicaid spending over the next two years by seeking to exempt the state from some federal rules in exchange for a lump-sum block grant, a Washington think tank says.

The House proposal is based on a 2009 "global Medicaid waiver" for Rhode Island that some former officials say saved the state about $150 million in its first 18 months.

But the "savings" actually came from extra federal Recovery Act money to states -- including $400 million to Rhode Island -- to help them cope with the recession, said the report by health policy analysts at the Center on Budget and Policy Research, published last week and updated Tuesday.

The waiver was "a sweetheart deal between the Bush administration -- in its final week in office [in January 2009] -- and the Republican governor of Rhode Island," said author Judith Solomon, the center's vice president for health care policy. "You could not get a deal like that now."

In addition, the waiver did not seek permission to cut people and services from Medicaid, something Minnesota Republicans say they want.

Instead, Rhode Island got permission to spend up to $12.1 billion in state and federal money through 2013, although the state had projected spending only $10.8 billion. It also was allowed to get Medicaid coverage for some state-funded programs.

"Essentially, Rhode Island got a very good financial deal and permission to help care for people at home instead of nursing homes, and to negotiate harder on contracts -- things many states are doing on their own," Solomon said.

'Fantasy Island'

Minnesota DFL legislators have been skeptical of the $300 million savings included in the budget bill by Rep. Jim Abeler, R-Anoka, who heads the Health and Human Services Finance Committee. His committee will take testimony on the bill Wednesday and is likely to approve it Thursday. A Senate budget bill will be offered Wednesday.

DFL Gov. Mark Dayton on Tuesday called the House Republican plan for health care spending "just 'Fantasy Island.'"

The bill would trim $1.6 billion from projected state spending, part of Republicans' goal to erase a $5 billion budget deficit by cutting spending and not raising taxes.

The waiver proposal is one of the largest chunks of budget savings in the bill. As is typical of bills that would alter state finances, Abeler sought a fiscal assessment by the Department of Human Services, but the department said it could not estimate savings without more detail about the money and the program flexibility that Minnesota would seek.

Abeler said his estimate of $300 million in savings is "conservative. We should be able to save twice that. We're a good state. We're not Mississippi [in terms of spending on health and social services]. ... We care about our people and we can do this better and cheaper if our hands are not bound" by federal rules.

Dayton said Republicans have not discussed the proposal with him and predicted that federal officials would not approve. "If you start making up these assumptions, where there is no basis in reality to them, it is a convenient gimmick to obscure the real consequences of some of these proposed cuts on real people's lives."

The Center on Budget and Policy Priorities report is at www.startribune.com/a268

wolfe@startribune.com • 612-673-7253 rachel.stassen-berger@startribune.com • 651-292-0164

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