Earlier this week, Governor Mark Dayton released his budget, saying it reflects a "fair, responsible, and balanced" approach to solving the state's $6.2 billion deficit. The Governor relied on raising taxes by approximately $4 billion dollars to produce a budget that cuts nursing homes and home and community-based services providers a total of approximately 8% while increasing education funding, local government aid and credits.

Dayton's budget cuts nearly $87 million, or almost 8%, from Minnesota's nursing homes and assisted living providers. There is an additional $26 million increase in the nursing home surcharge or “Granny Tax” as well, to help balance the budget.

In his initial statements, the governor indicated his budget cuts nursing homes by 2 percent and home and community-based services providers, including Elderly Waiver providers, by 4.5 percent; however, the cuts to older adult service providers are actually much deeper than the Governor portrayed. Upon further analysis, the budget includes the following list of massive cuts to seniors and older adult services providers.

Nursing Facility Reductions: Total of Nearly $50 Million

• 2% rate reduction across the board to nursing facilities ($15.5 million for 2012-2013)
• 25% cut for lowest-needs case mixes in nursing homes ($17.367 million savings for 2012-2013).
• The following changes have the cumulative effect of $16.809 million in reductions:
  1. Eliminates new planned closure rate adjustments.
  2. Eliminates new single bed incentives.
  3. Reduces enhanced rates for the first 30 days from 20% to 10%.
  4. Reduces bed hold payments from 60% of the established rate to 30% and increases the eligibly test from 93% occupancy to 96% occupancy.
  5. Reduces the payments for single bed rooms for medical necessity from 11.5% to 5.5%.

In addition, the budget increases the nursing home provider surcharge by $635 per year per bed on July 1, 2011 and another $350 on October 1, 2011. It provides a rate increase for nursing facilities of $2.17 effective on June 1, 2011 and another rate increase of $1.20 effective September 1, 2011, in order to pay back the facility for the increased surcharge payments (taxes) it paid. Note that there will be no return payments for surcharge payments made on empty beds or Medicare covered stays. Private pay residents pay the increase in the surcharge but do not receive payment back for that increase.

Home and Community Based Services Reductions: Total

• 4.5% cut to most home and community based services (excluding customized living) (HCBS) ($144.6 million)
• De-link Elderly Waiver monthly case mix caps from rising when nursing facility provider rates are increased ($1.239 million in 2012-2013).
• Reduction in Elderly Waiver (EW) and Alternative Care programs ($26.138 million savings for 2012-13).
• Changes definition of “low need.”
• Reduces community budgets for low need EW individuals.
• Reduces the service rate limit for Customized Living Service for Case Mix L.
• Reduces rates by 10% for services included under Customized Living and 24-hour Customized Living.
• Increases criteria for 24-hour Customized Living to direct the highest cost service to the highest need people.
• Reduces waiver spending in Customized Living and 24-hour Customized Living by auditing the rate-setting tool to achieve greater program integrity.

• Reducing the CADI, DD and TBI waiver programs by reducing rates paid to congregate living settings for lower needs residents by an average of 10% in 2012-13 and 15% in 2014-15 ($12.185 million savings in 2012-13).
• Continues growth limits for the CADI, DD and TBI waivers for 2012-13 ($45.763 million savings).

Other Reductions

• Changes background study fee to over 4,000 DHS licensed programs by charging $20 per background study ($650,000 savings per year).

• Continues for two years a reduction in Community Services/Community Services Development (CS/SD) grants ($7.2 million savings for 2012-13).

• Rehab service coverage and Physician Assistance changes include: modernizing the prior authorization system to improve program oversight; specialized maintenance therapy will no longer be covered; all providers must submit electronically; rehab services will no longer be subject to one-time services thresholds, but instead require prior authorization for an episode of treatment ($1.070 million savings in 2012-13).

• Limiting MA payment for Medicare crossover claims to the MA payment rate ($43 million savings in 2012-13).

Governor Dayton increases over $4 billion in new revenue by creating a fourth tier income tax bracket, creates a third property tax bracket, implements a temporary three percent surcharge on income over $500,000, and closes some loopholes. This approach is not likely to be taken by the GOP controlled house or senate. The proposal includes nearly $2 billion in cuts, including $680 million in health and human services.

The legislature will be digging into the details of the Governor’s budget proposal in the coming weeks, starting with an overview hearing in the House Health and Human Services Finance Committee.

The Long-Term Care Imperative, in response to Governor Dayton's budget, released some basic talking points that we encourage you to also use when responding to media or others:

• Minnesota's nursing homes and assisted living providers contribute over 112,600 jobs and over $6.7 billion to the state economy. Over 70 percent of providers' budgets go to wages and benefits for their employees.
• The cuts proposed by Governor Dayton represent $71.4 million in lost economic activity for Minnesota at a time when the state's chief executive should be focused on economic recovery.
• The Governor's proposal to cut the state's Elderly Waiver program will mean that nursing homes will be the only option left for thousands of low-income Minnesota seniors.
• The short-sighted elimination of options for poor seniors will only cost the state more money, as these individuals are forced to seek care in higher cost nursing home settings.
• Cuts to Elderly Waiver will also hit informal caregivers. Already doing their best to provide care and support to an aging loved one, these caregivers will be forced to stretch further to continue to provide care with no formal support.
• The cuts proposed by Governor Dayton will have a triple impact on Minnesota seniors in nursing homes. The state's failed rate equalization policy mandates that nursing home providers charge private pay residents the same as the Medicaid rate, which means that each $1 of state Medicaid cut from nursing homes equates to a loss of $3 in revenue.

If this is his way of "protecting health care services for Minnesota's most vulnerable residents," his view of protection is severely misguided. We have to make it very clear to the Governor and to the Legislature that the Governor's budget is very damaging to our nursing homes and housing with services which are charged with actually protecting vulnerable people. We need to communicate far and wide that this is too much as a starting point, let alone an end point.

If you have questions or comments, please contact Toby Pearson, vice-president of Advocacy at 952-851-2480 or tpearson@careproviders.org.

The detailed pages of the Governor’s budget proposal can be found at http://www.mmb.state.mn.us/rec-2011.

Toby Pearson
952.851.2480
tpearson@careproviders.org

Resources