In a signal that Minnesota is now open for business with the new federal health care law, the Obama administration said Tuesday that it will send the state $40 million over five years to develop programs that help aged or disabled people move from care institutions into the community.

The demonstration grant, known as Money Follows the Person, will provide $187.4 million through 2016, but about $147 million of that already was expected by the state.

The announcement is the latest sign of the abrupt about-face Minnesota has executed on the landmark federal care overhaul since Gov. Mark Dayton took office. Former Gov. Tim Pawlenty barred state agencies from seeking such grants because they were authorized by the 2010 Affordable Care Act, which Pawlenty denounced as an "unwise and unsustainable federal takeover of health care."

A week ago, federal officials approved a separate request previously barred by Pawlenty -- one more central to the federal law -- to expand the state-federal Medicaid program. That will bring $1.2 billion in federal money to provide health coverage to about 95,000 poor childless Minnesota adults starting March 1. The state also is seeking two $1 million federal health grants previously prohibited by Pawlenty. One would help the state plan an online "health insurance exchange" to help individuals and small businesses find health insurance. The other would integrate care for people on Medicaid and Medicare.

Federal officials signaled last month that they were holding the door open for Minnesota grant applications after Dayton, a DFLer, replaced Republican Pawlenty.

Avoiding institutional care

Under the grant announced Tuesday, Minnesota will receive the largest share among 13 states of $621 million in federal funds.

It allows the state to develop training and programs to help people move out of nursing homes, psychiatric hospitals, regional treatment centers and other institutions. To qualify, the patient must have been in the institution for more than 90 days and be able to function in community settings with extra help.

"This is not a program to help us deal with the current budget deficit," said Loren Colman, assistant commissioner in the Department of Human Services. "But in the long term, it generally is cheaper and more effective to help people in home and community-based settings instead of institutions."

The additional $40 million will match $56.2 million in previously budgeted state funds, Colman said.

Pawlenty stopped the agency from seeking a $100,000 planning grant for the program.

But the program itself was not open for applications until after Pawlenty left office, and the department submitted its application Jan. 7.

Although the program was part of the Affordable Care Act, it was an extension of an earlier program set to expire this year, Colman said, rather than an integral part of the health system overhaul.

About 75,000 Minnesotans are supported each month in Medicare long-term care programs, and fewer than half are in institutions.

Warren Wolfe • 612-673-7253