Legislative Update: 5/21/10


Frantic Week Leads to Budget Compromise

The legislature adjourned sine die after a frantic two weeks that included conference committee meetings into the early morning, multiple budget packages, vetoes, and a final all-night session.  DFL Legislature and Republican Governor Tim Pawlenty finally reached a compromise on the state budget bills that required a short special session to get it all done.  This session could be labeled a missed opportunity.

With the Constitutional midnight deadline approaching, a final agreement was announced at 11:30 p.m. on Sunday, May 16.  Because the Constitution prohibits the passage of any bill on the last day of session, there was not enough time to process the bill before midnight.  At 11:55 p.m. both the House and Senate adjourned the 2010 regular session sine die and at 12:01 a.m. Pawlenty called the Legislature back for a special session to pass the one budget bill to complete the deal.  The Legislature then immediately recessed to await the printing of the final package.  Finally, after spending a sleepless night waiting, the House and Senate passed the budget deal at 10:30 a.m. Monday morning and adjourned the 2010 special session sine die.

The final package addresses a nearly $3 billion budget deficit with no new taxes, large cuts to local governments and additional cuts to health and human services programs. It also balances the budget without relying on an estimated $408 million of federal money from the next round of stimulus money.  This money is tied up in Congress and if it comes through it will go to the state’s cash account.

The major sticking point of the budget negotiations was whether to become an early adopter and enroll single adults with incomes less than 75% of the poverty level into the Medical Assistance (MA) program.  Minnesota was one of 14 states that could enroll this population in MA beginning April 1 under the federal health reform bill and receive 50% federal matching money.  Supporters argued that MA would provide much better coverage than the scaled back GAMC program that is only a hospital-based program and is funded with 100% state money.  Critics said it was too expensive to provide the 50% match and that Minnesota shouldn’t be the first state to enact “ObamaCare.”

To fund the early adoption, the original bill implemented a number of surcharges on hospitals, nursing homes, group homes and HMOs, and implemented other cuts to providers and HMOs.  These surcharges were used to draw down more federal money that could be targeted to this program.  Governor Pawlenty, Republicans and the HMOs opposed these surcharges because they viewed them as new taxes and created winners and losers between hospitals and HMOs.

In the end, the surcharges were not a part of the final budget bill and the early adoption can only take place by executive order of the current governor or next governor, with authority expiring on January 15, 2011.  In addition to the provider cuts, $177 million in FY 2011; $141 million in FY 2012; and $286 million in FY 2013 of the Health Care Access Fund (HCAF) is transferred to the general fund.  If at any time the governor issues an executive order not to participate in early MA expansion, no funds must be transferred from the HCAF to the general fund until early MA expansion takes effect.  Pawlenty has made it clear that he will not execute the executive order so the earliest any early adoption can take place is January 2011, even though the bill allows for retroactive enrollment beginning July 1, 2010.

Children’s Mental Health Grants

Other than the reductions to children and community services grants  that were made last July by the governor and were included in the unallotment article of this bill, children’s mental health grants were only reduced $200,000 and a proposal to shift the school-based grants to the K-12 budget in FY2012-2013 was not part of the final agreement.

State Health Improvement Program (SHIP) and Medical Education (MERC)

The agreement did not cut SHIP funding, which provides grants to local governments to fight obesity, nor MERC, which provides additional funding for medical schools, hospitals and clinics to pay for residency programs.  The governor had proposed a $10 million reduction to SHIP and virtually eliminated the MERC funding, which would have put all the residency programs at risk.

An amendment providing $150,000 of the funds distributed to the Academic Health Center under this paragraph shall be used for a program to assist internationally trained physicians who are legal residents and who commit to serving underserved Minnesota communities in a health professional shortage area to successfully compete for family medicine residency programs at the University of Minnesota.  This is to address the number of new immigrants who were trained as physicians in their home country and are not able to practice here.

Provider Reimbursement Cuts

The House and Senate closed the $3 billion budget hole primarily by ratifying the $2.7 billion in unilateral unallotment cuts that the governor made in 2009. As a result, the final budget included $293 million in health and human services cuts. The cuts include significant reductions in payment rates for medical services, including a 7% cut in the fee-for-service rate for non-primary care services provided to MA enrollees. This rate reduction, which takes effect July 1, 2010, comes on top of last year’s 6.5% specialist services rate reduction.  Payments to psychiatrists and advance practice nurses in mental health are also exempt.

In addition, rates paid by the state to managed care plans will be reduced by nearly 3% for MA enrollees and nearly 15% for single adults over 75% of poverty in MinnesotaCare enrollees for the next three years. The law does not guarantee that health plans will not pass on these reductions to providers.

The final piece of the budget that will result in even further payment cuts is a provision that caps MA rates for physician services at Medicare levels. These cuts will mostly affect surgical and other procedural payment codes.  A scheduled 21% cut to Medicare reimbursement taking effect June 1 could also impact the state MA payments.  This should not impact pediatric clinic services; however, it may impact certain surgical procedures if there is a corresponding Medicare code.  Rehab therapy services to certain providers that had add-ons for these services, like Courage Center, are also affected.

Hospitals also had a ratable reduction of 1.96%, delayed rebasing until 2013, and are affected by the 3% non-administrative HMO reduction and Medicare cap.

Other Provisions in HF1 of Interest

Asthma Demonstration Project
Adds home environmental assessment and management training by a certified asthma educator or public health nurse with asthma training, limited to two visits.

Health Disparities
The commissioners of health and human services shall conduct an inventory on the health-related data collected by each respective department, including, but not limited to, health care programs and activities, vital statistics, disease surveillance registries and screenings, and health outcome measurements.  The report is due January 15, 2011.

Birthing Centers
Independent birthing center licensure was in the final budget bill that was signed by the governor.  It creates a licensing process for birthing centers that are located outside a hospital or clinic setting.  Birthing centers can only provide care for uncomplicated pregnancies and cannot utilize surgery or anesthesia.  They can be staffed by physicians, nurse midwives, or licensed traditional midwives.  They must have an emergency backup plan developed for cases that need hospitalization.  DHS, along with providers, including a member of Minnesota American Academy of Pediatrics, will provide oversight and evaluate care.

Lead Levels
By January 1, 2011, the commissioner must revise clinical and case management guidelines to include recommendations for protective health actions and follow-up services when a child’s blood lead level exceeds five micrograms of lead per deciliter of blood. The revised guidelines must be implemented to the extent possible using available resources.  In revising the clinical and case management guidelines for blood lead levels greater than five micrograms of lead per deciliter of blood under this subdivision, the commissioner of health must consult with a statewide organization representing physicians, the public health department of Minneapolis and other public health departments, one representative of the residential construction industry, and a nonprofit organization with expertise in lead abatement.

Trauma Designation and Registry
This MDH provision deletes obsolete language and adds levels I and II to pediatric trauma hospital designations.  In addition, it clarifies that all information related to designation of trauma hospitals is private data on individuals and non-public data under Minnesota Statutes, chapter 13. It re-codifies the trauma registry statute that is repealed by requiring the commissioner of health to establish and maintain a major trauma registry.  Trauma hospitals will be required to participate in the statewide registry by electronically submitting information. As amended, it does not impact our current peer review process, which was a concern to hospitals as introduced.

Health Information Exchange
To the extent that the commissioner of health applies for additional federal funding to support the commissioner’s responsibilities of developing and maintaining state level health information exchange under section 3013 of the HITECH Act, the commissioner of health shall ensure that applications are made through an open process that provides health information exchange service providers equal opportunity to receive funding.

A Chemical and Mental Health Transformation Task Force is established to make recommendations on how to provide individuals with complex conditions, including mental illness, chemical dependency, traumatic brain injury and developmental disabilities, access to quality care and the appropriate level of care across the state to promote wellness, reduce cost, and improve efficiency

Vendor Accreditation and Simplification
The Minnesota Hospital Association must coordinate with the Minnesota Credentialing Collaborative to make recommendations by January 1, 2012 on the development of standard accreditation methods for vendor services provided within hospitals and clinics. The recommendations must be consistent with requirements of hospital credentialing organizations and applicable federal requirements.

HMO Reporting of Administrative Expenses
Every HMO must directly allocate administrative expenses to specific lines of business or products when such information is available. Remaining expenses that cannot be directly allocated must be allocated based on other methods as recommended by the Advisory Group on Administrative Expenses. Health maintenance organizations must submit this information, including administrative expenses for dental services, using the reporting template provided by the commissioner of health.  In addition, each HMO must allocate investment income based on cumulative net income over time by business line or product and must submit this information, including investment income for dental services, using the reporting template provided by the commissioner of health.  This provision was supported by providers to get some transparency in the way HMOs report expenses.  HMOs have been given increases from DHS over the years and it’s not clear that they have been passed along to providers or substantially increased access and care for the enrollees.

Food Support for Children with Severe Allergies
The commissioner of human services must seek a federal waiver from the federal Department of Agriculture, Food and Nutrition Service, for the supplemental nutrition assistance program to increase the income eligibility requirements to 375% of the federal poverty guidelines in order to cover nutritional food products required to treat or manage severe food allergies, including allergies to wheat and gluten, for infants and children who have been diagnosed with life-threatening severe food allergies.

Other Bills of Interest

Preventive Caries SF633 / HF984
The Legislature passed and the governor signed legislation that encourages physicians to provide preventive dental care as part of a child or teen checkup.  This dental care shall include a general visual exam of the mouth and application of fluoride varnish.  The MN-AAP supported this legislation after it was changed from a mandate on all physicians.  We have worked with the Minnesota Dental Association and the Minnesota Academy of Pediatrics Foundation to try to address dental access for low-income patients.

Physical Education Standards SF 2908 Chapter 396
This bill requires physical education standards for all schools by the 2012-2013 school year based on the standards developed by the National Association for Sport and Physical Education.  The bill also directs schools to post their wellness policies on its web site.  MDE will be encouraged to establish recess guidelines and include P.E. standards as well as local education graduation requirements as part of the common course catalog.  The bill also establishes a Health Kids Program to motivate kindergarten through grade 12 students to become active by rewarding them for their nutritional well-being and physical activity.

Complete Streets Provisions Stripped in Transportation Bill HF 2801
The “complete streets” mandate was stripped out of the final version of this bill sent to the governor.  MN-AAP had supported the concept of complete streets as it outlined development safe neighborhood environments, which would have encouraged physical activity  and healthy lifestyles in families. As introduced, the bill asked transportation planners and engineers to consistently design and alter the right-of-way with all users in mind.  The new mandate was controversial, especially in the House.

Mandatory Reporting –Pregnant Women  SF 2695 –Chapter 348
This chapter amends the current law that requires mandated providers to report a pregnant woman who they suspect might be abusing marijuana or alcohol.  As long as they are receiving a comprehensive set of prenatal care services, this reporting is no longer mandated.  The city of Minneapolis public health clinics experienced a “chilling” effect from women accessing prenatal services due to the reporting requirement.

Health Care Reform Task Force
The governor shall convene a health care reform task force to advise and assist the governor and the Legislature regarding state implementation of federal health care reform legislation.

Health Care Home
The commissioner shall provide medical assistance coverage of health care home services for eligible individuals with chronic conditions who select a designated provider, a team of health care professionals, or a health team as the individual’s health home. The commissioner shall implement this provision in compliance with the requirements of the state option to provide health care homes for enrollees with chronic conditions, as provided under the Patient Protection and Affordable Care Act.

Federal Health Care Reform Demonstration Projects
Requires the DHS to apply for grants in the federal reform, including:

  • Evaluation of integrated care around hospitalization (Section 2704)
  • MA global payment system (Section 2705)
  • Pediatric Accountable Care Organization (ACO) (Section 2706)
  • MA emergency psychiatrist (Section 3707)
  • Grants to provide incentives for prevention of chronic diseases (section 4108).

Hospice Care/Under Age 21
Medical assistance covers hospice care services under Public Law 99-272, section 9505, to the extent authorized by rule, except that a recipient age 21 or under who elects to receive hospice services does not waive coverage for services that are related to the treatment of the condition for which a diagnosis of terminal illness has been made.

Peer Grouping HF 3056, Chapter 344
The governor signed a peer-grouping bill that was an MMA initiative.  Peer grouping is a statewide initiative to compare clinics and hospitals based on the cost and quality of the care they provide. It was created through the 2008 Health Care Reform Act.

The 2010 legislation corrects some flaws in the initiative. It includes the following provisions that were endorsed by physicians:

  • a new requirement that the peer-grouping data must meet standards for reliability and validity before being released to the public;
  • a repeal of language that precludes providers who score in the bottom 10 percent on the quality and cost measures from treating patients covered by state-subsidized health insurance plans, and
  • an extension of the deadline for health plans to start using the data to January 2012.

The goal of the legislation is to create stronger assurances for the development of valid and reliable information, to remove the punitive aspects of the initiative, and to have a more realistic legislative timeline.

Electronic Medical Record HF 3279, Chapter 335
This MDH bill includes provisions that:

  • Ensure all information follows the patient across the full continuum of care.
  • Prevent fragmentation of health information that can occur when there is lack of interoperability or cooperation between health information exchange providers.
  • Ensures that organizations are adhering to nationally recognized standards.
  • Ensure patient privacy and security.
  • Ensure that MN infrastructure is in place by 2010 to allow Minnesota providers and hospitals to achieve meaningful data exchanges.
  • Provides definitions of meaningful use and meaningful use transactions.

Big Changes at the Legislature Next Session

Along with a new governor, there will be big changes at the Legislature next session as 13 members of the House and 8 members of the Senate have announced their retirements. In addition, all members of the House and Senate are up for re-election.
Six of the members are retiring because they are running for different offices. Those announcing their retirements include the following:


    • Karla Bigham (DFL-Cottage Grove-57A)
    • Jeremy Kalin (DFL-North Branch-17B
    • Margaret Anderson Kelliher (DFL-Mpls.-60A)—candidate for Governor
    • Cy Thao (DFL-St. Paul-65A)
    • Laura Brod (R-New Prague-25A
    • Rob Eastlund (R-Isanti-17A)
    • Randy Demmer (R-Hayfield-29A)—candidate for Congress
    • Tom Emmer (R-Delano-19B)—candidate for Governor
    • Paul Kohls (R-Victoria-34A)
    • Doug Magnus (R-Slayton-22A)—candidate for State Senate
    • Mary Seifert (R-Marshall-21A)
    • Dan Severson (R-Sauk Rapids-14A)—candidate for Secretary of State
    • Larry Haws (DFL-St. Cloud-15B)
    • Mary Ellen Otremba (DFL-Long Prarie—11B)


    • Terryl Clark (DFL-St. Cloud-15)—candidate for Congress
    • Steve Murphy (DFL-Red Wing-28)
    • Jim Vickerman (DFL-Tracy-22)
    • Steve Dille ( R-Dasssel-18)
    • Pat Pariseau (R-Farmington-36)
    • Dennis Frederickson (R-New Ulm-21)
    • Debbie Johnson (R-Ham Lake-49)
    • Mee Moua (DFL-St. Paul-67)

Annual Sponsors

Children's Minnesota
Gillette Children's
Hennepin Healthcare
University of Minnesota Health
Essentia Health
Mayo Clinic
Shriners Healthcare for Children-Twin Cities