A plan to cut state funding for services that help thousands of Minnesotans with disabilities live more independently will be allowed to proceed after a federal judge rejected a challenge by service providers.

Two large organizations that represent hundreds of disability service providers filed a lawsuit this month seeking an emergency injunction to halt a 7 percent cut to the rates paid through the state's Medicaid "waiver" program. The rate cuts could affect a host of services that help more Minnesotans with disabilities on waiver programs live more independent lives in the community and outside of institutional settings, the groups argued. These services include personal caregiving, transportation, independent living supports and employment counseling, among others. The cuts will start to go into effect Sunday.

In a ruling Thursday, U.S. District Judge Wilhelmina Wright denied the request for an emergency injunction, saying the disability organizations failed to demonstrate that the rate cuts would create either imminent or irreparable harm. Instead, the injuries alleged by the groups were "speculative," and based on possible events — such as the discontinuation of a particular service — that may or may not occur in response to the rate cuts, the judge said in the 13-page ruling.

In response, Human Services Commissioner Emily Piper said her agency would move forward with adjusting some rates for disability services on July 1 and reversing scheduled rate increases as required by the federal government. "DHS will continue to work with our partners to ensure Minnesotans with disabilities can access services that help them live and work as part of our communities," Piper said in a written statement.

The cuts were triggered by changes to the complicated formula, known as the Disability Waiver Rate System (DWRS), for calculating rates for services provided through the Medicaid waiver program. A proposal to prevent the cuts by funding the shortfall was included in a 990-page budget bill that was vetoed by Gov. Mark Dayton in the acrimonious final days of the 2018 legislative session.

The disability service groups said the cuts would affect about 32,000 individuals across the state who rely on Medicaid waivers, a coveted form of Medicaid assistance that pays for supportive services in home and community-based settings. They also come at a time when a wide range of disability service providers, including group homes, personal care agencies and day activity centers, are feeling the strains of a critical workforce shortage. The cuts could make it more difficult for providers to keep pace with rising wages and could force providers to reduce their service offerings, warned members of the disability service groups.

"The great tragedy here is that Minnesotans with disabilities and the hardworking staff who support them have been allowed to become collateral damage of partisan battles at the State Capitol," said Julie Johnson, president-elect of the Minnesota Organization for Habilitation and Rehabilitation (MOHR), which represents 100 day-service providers statewide, in a statement issued Friday.

Direct care workers in Minnesota are now making an average of $12.50 an hour, and the industry as a whole has 40 percent turnover rates for first-year staff, according to a recent survey by the Association of Residential Resources of Minnesota (ARRM), a nonprofit representing more than 200 disability service providers.

"Our members are competing for staff with other employers offering a $15 per hour starting wage for entry-level food and retail service jobs, while demands for the support services our members provide continue to go up and up," Johnson said.

Chris Serres • 612-673-4308 Twitter: @chrisserres