Thousands of Minnesotans struggling with physical and mental disabilities have been deprived of basic services and therapy because county governments are failing to spend millions of dollars set aside for disability services.

In the last two years alone, nearly $200 million in state and federal money that was allocated by the state for people with disabilities went unspent by counties, state records show. As a result, disabled people were placed on long waiting lists for services and wrongly told that funds were unavailable.

The situation has inflamed advocates and state lawmakers, who are now pressing the administration of Gov. Mark Dayton to accelerate long-stalled reforms that would expand access to independent housing, transportation and other services for the disabled.

In a letter to Human Services Commissioner Lucinda Jesson last week, Minneapolis attorney Shamus O’Meara accused her agency of mismanaging at least $1.1 billion over the last 15 years and threatened a class-action lawsuit on behalf of a large group of disabled clients. If the state had managed the money better, prolonged waits for disability benefits, which can last a decade or more, would have been dramatically reduced or eliminated, O’Meara argues.

Later this month, a coalition of disability rights advocates and providers expect to introduce a bill that would force counties to spend more of the available money or face action by the state. The advocates blame what they see as a series of “perverse incentives” that encourage counties to be overly stingy with Medicaid benefits, known as waivers, which represent the largest source of money for social services for disabled Minnesotans.

“This is a blatant mismanagement of public funds that flies in the face of everything government agencies should be doing to serve vulnerable populations,” said Sen. John Hoffman, DFL-Champlin, who plans to introduce the waiver legislation. “It simply has to stop.”

Human Services officials argue that the advocates are exaggerating the scope of the problem, but say they are preparing to take unprecedented steps to eliminate large disparities among counties in the use of waiver funds. Some counties fail to spend 20 percent to 40 percent of the money allocated to them by the state, while others spend nearly all of what they receive. “Clearly, we need to manage the dollars better,” Assistant DHS Commissioner Jennifer DeCubellis said in an interview Friday. “There is a significant need.”

At the same time, these officials say critics have failed to grasp the complexities of waiver funding and the challenge of forecasting demand for disability services. In small counties, just one or two complex disability cases could cause overspending. As a result, the state allocates more waiver money than is legislatively mandated to give counties more flexibility.

“It’s really hard for counties to hit a number year after year, given their changing needs,” said Deputy Human Services Commissioner Charles Johnson.

‘Too conservative’

The legislation and threat of legal action are likely to shine a bright light on the arcane but vital process by which counties divvy up more than $1 billion in annual spending on Medicaid waivers. The waivers pay for an array of services, from personal care assistants to adult day care and integrated work opportunities, which enable thousands of Minnesotans to live in their own homes rather than in institutions, such as nursing homes.

The backlog of unused waiver funds originated, in part, from changes the Legislature adopted nearly a decade ago. Counties were required to reimburse the state if they overspent their waiver funds; as a result, they became overly cautious, say disability advocates.

A coalition of disability advocacy groups, including Arc of Minnesota and the Minnesota Disability Law Center, are preparing legislation that would reverse the payback provision but require counties that overspend to develop a correction plan.

“Right now, too many counties are far too conservative,” said Bud Rosenfield, a supervising attorney with the Disability Law Center, a state advocacy agency for people with disabilities. “The money is frustratingly unused, while people are not getting access to supports that would help them live better lives.”

In pressing for reform, disability rights advocates are emboldened by a 1999 federal civil rights ruling by the U.S. Supreme Court, known as Olmstead, that said states cannot keep disabled people in segregated settings if less-segregated alternatives are available in the community. In recent years, the Justice Department has applied Olmstead broadly, using it against government agencies with long waiting lists for community services.

Under pressure from a federal court, the state developed a detailed plan in late 2013 to demonstrate that it is complying with the Olmstead ruling. A key piece of the plan called for reduced waiting lists for disability waiver benefits. As of November, nearly 5,000 Minnesotans were on waiting lists for the disability waivers through Medical Assistance, the state’s version of Medicaid, the federal-state insurance program for the poor.

A federal judge overseeing the Olmstead plan has repeatedly admonished DHS for failing to move quickly enough on steps that would reduce the wait lists.

“DHS has ignored the problem … and now they’re forced to explain how they failed to ensure that the money gets to the people it was meant to help,” said O’Meara, managing partner with O’Meara Leer Wagner and Kohl and lead counsel for the families.

Candy Hoover, 46, of Cambridge, is among those eager to see reforms. Thirteen years ago, she adopted two children, Cory and Brianna, who have fetal alcohol spectrum disorder (FASD). Both children have severe cognitive impairments and are prone to occasional bursts of rage.

She said her son, Cory, 18, was approved by Isanti County for a developmental disability waiver after he punched his hand through the window of their kitchen door, cutting a deep gash in his forearm, and was admitted to a psychiatric ward. Because waivers are based on imminent need, the incident moved Cory to the front of the waiver list.

But Cory’s twin sister, Brianna, is less prone to violent rages and is still waiting for a disability waiver after more than four years. So while Cory gets to go on recreational outings with his peers after school with a community caregiver, Brianna must stay at home. Cory has learned basic social skills, such as how to order food from a restaurant menu and interact with his peers, while Brianna still looks away nervously when people talk to her.

“It’s perverse, but my hope is that my daughter will put her arm through a window just to get bumped up” on the waiting list, Hoover said. “It’s so sad that it takes something horrific to get basic social services for my children.”


Twitter: @chrisserres