Lesson from Illinois: Use of outside contractors to verify health care eligibility unlikely to deliver promised savings

In 2012, Illinois policymakers authorized about $70 million to hire a private contractor to redetermine whether people enrolled in the state’s Medicaid health care coverage were still eligible. After predicting $350 million in savings for FY 2013, the state saved only $2.6 million during that year. The effort also resulted in lost health care coverage for thousands of people who were likely eligible.

Despite this cautionary tale, two bills being considered in Minnesota this session – HF 1460 and HF 1936 – would pay a contractor to re-examine the eligibility of participants in Medical Assistance and MinnesotaCare. A deeper dive into the “Illinois approach” reveals this effort is likely to cause many Minnesotans to wrongfully lose their health care coverage while also falling well short of the savings that proponents hope to achieve.

In Illinois, the contractor cross-referenced data on Medicaid enrollees to prioritize cases for review. Almost all of this data — aside from a credit check — came from the state. Paying a contractor millions of dollars to use Minnesota’s own data doesn’t seem like the wisest use of state resources.

Once Illinois’ contractor and state workers sorted through their caseloads, they sent some households requests for more information. Benefits would be discontinued if those households didn’t respond, or if they responded with information confirming their ineligibility.

The State of Illinois estimates that the majority of households losing coverage had their coverage cancelled because of a paperwork issue, rather than because of an actual problem with their eligibility. Three percentages drive this home:

  • 84 percent of cancellations from February to December 2014 occurred because households did not respond to the request for more information.
  • 89 percent of households whose health care coverage was cancelled due to a non-response were “likely eligible,” according to a report by the Illinois Department of Healthcare and Family Services.
  • So far, more than a third of households whose health care coverage was cancelled in FY 2015 had their coverage reinstated within three months.

In short, Illinois spent tens of millions of dollars on a private contractor who used already-available information to cancel health care coverage for likely-eligible people. Minnesota should learn from their example and invest our resources more wisely.

-Ben Horowitz

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Latest state economic update shows higher revenues but slower economic growth

Minnesota’s spring is arriving with mixed economic news. State revenues have come in higher than expected, but the U.S. economy is not expected to grow as quickly as earlier predicted. That’s according to the April Economic Update from Minnesota Management and Budget.

State revenues in February and March came in $100 million, or 4.6 percent, higher than expected. Most of this is due to higher corporate income tax revenues. However, Minnesota Management and Budget assumes that part of this amount is a one-time occurrence that will not contribute to increased revenues in the future.

The update shows that the U.S. economic outlook for 2015 is weaker than projected in the February forecast. The U.S. economy is now expected to grow at 2.8 percent in 2015 while the February forecast predicted 3.0 percent. The lower growth is due to short-term factors like slower economic activity in early 2015; forecasters continue to expect strong growth this summer. The economy is still expected to grow at 2.7 percent in 2016, but growth in 2017 and beyond is expected to be slightly lower than projected in February.

april 2015 update gdp

Forecasters continue to assign a 70 percent probability to their baseline economic scenario, with a 15 percent chance for more optimistic or pessimistic scenarios. In the pessimistic scenario, lower consumer spending and a weaker housing market put a damper on the economy, and in the optimistic scenario, improvements in jobs and incomes spur the stronger economic growth.

The April Economic Update shows the state is on track for revenues. But this update is also a good reminder that forecasts are projections, not guarantees. The February forecast projects a $1.9 billion surplus for the FY 2016-17 biennium, which has yet to begin. The state’s economic picture could swing in a positive or negative direction in the next two years.

That’s a good reason for policymakers to be cautious as they put together the budget this session. Both the House and Senate budget targets put money into the state’s rainy day funds – that’s a smart move. Policymakers also should not pass proposals whose costs grow significantly in future years and may not be sustainable. Unfortunately, several tax proposals under consideration do just that, phasing in tax cuts over many years, which disguises their full cost and divorces decisions made today from the consequences of doing so.

-Clark Biegler

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Voices for Racial Justice offers equity agenda for Minnesota

Despite Minnesota’s economy showing signs of recovery, we know we still have work to do to achieve economic prosperity for all.

The fact remains that Minnesota has among the highest racial disparities in the country on a range of indicators. For example, in 2013 Minnesota’s median household income increased to $60,702, but there are stark disparities in income by race: $63,028 for white households versus $31,021 for black and African American households and $35,764 for American Indian households. The disturbing pattern of inequity persists in other areas including education attainment, employment and health outcomes.

The good news is that policy solutions to address racial disparities have been identified, with those impacted at the center of the discussion. Voices for Racial Justice works with communities of color and American Indian communities from around the state to determine what policy solutions will best advance racial equity in Minnesota.

Voices for Racial Justice recently published their 2015 Racial Equity Agenda, which highlights policies including:

  • Creating healthier work-life balance by supporting earned sick and safe time for workers currently forced to choose between earning a paycheck and taking care of themselves and their families. Currently, 41 percent of Minnesota’s workforce does not have earned sick time, including about half of people of color in our workforce.
  • Expanding health coverage to undocumented immigrants. Currently undocumented Minnesotans cannot access support through MNsure, often forcing them to resort to care in emergency rooms with high out-of-pocket expenses.
  • Allowing Minnesotans to obtain driver’s licenses regardless of immigration status — making safe, lawful driving an option for all residents.
  • Supporting Minnesota’s councils of color as critical voices for equity in public policy and important connectors to communities of color. Voices for Racial Justice supports the councils continuing as separate entities and having sufficient funding in order to be successful building bridges between their communities and state policymaking.

As we get into crunch time in the legislative session, the Voices for Racial Justice 2015 Racial Equity Agenda and Bill Watch serve as great resources to those who want to prioritize community-identified policy solutions that advance racial equity in our state.

-Leah Gardner

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Resource measures basic needs budget for Minnesota counties

The typical family in Minnesota needs to make $16.34 an hour to make ends meet. That’s according to data from the Minnesota Department of Employment and Economic Development (DEED).

The analysis from DEED takes into account the expenses that Minnesota families face, including child care, housing costs and health care, to create a basic needs budget. It is a very rudimentary budget that includes no money for entertainment, eating out, savings or vacations. When a basic needs budget is converted to an hourly wage, it’s often called a “living wage.”

DEED’s analysis is an important tool to judge the quality of jobs available in our state. We’re lucky in Minnesota that we’ve had a good idea of what families need to earn to make ends meet, thanks to the long-running work of the JOBS NOW Coalition.

The living wage for the typical Minnesota family (a family of three, with one adult working full-time and the other working part-time) varies from $11.59 in Stevens County to $19.05 in Isanti County. But families with more than one child, or only one parent working, need to earn higher wages to pay for the essentials.

Minnesota workers need to be able to get and keep quality jobs to support themselves and their families. In the 2014 Legislative Session, policymakers increased the minimum wage for Minnesota workers. This past summer, the first of three minimum wage increases went into effect, and large employers in Minnesota now pay employees a minimum wage of $8.00 an hour, on its way to $9.50 an hour by 2016. This brings the minimum wage closer to what it takes to support a family, but a meaningful gap still remains.

There are more steps policymakers can take so more Minnesotans can have good jobs with family-supporting wages. Currently, about 1.1 Minnesota workers lose wages or even their jobs if they take time off when they or a family member are sick. For many of these workers, one or two days of lost wages can mean difficulty paying the rent, or the family’s transportation and child care costs. Expanding access to earned sick and safe leave would mean more Minnesotans can keep their wages and jobs and afford the necessities.

-Clark Biegler

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Investing in our current and future workforce through Basic Sliding Fee

Ensuring more Minnesota families have affordable child care is one of our top priorities. It is no secret that child care is expensive; no parent would be surprised to learn that Minnesota is in the bottom five states for affordability when it comes to center-based care for infants or four-year-olds.

Our latest issue brief, Time to Invest in Affordable Child Care through Basic Sliding Fee, describes why Basic Sliding Fee is an important tool in achieving that goal. Basic Sliding Fee reaches across the state, supports parents’ efforts to attend school or work and provides care year-round for children from birth until age 12 (and age 14 if they have special needs).

Since the 1980s, Basic Sliding Fee has used a simple approach so that families can meet their child care needs. Parents make an income-based co-payment, and the state pays an additional amount to child care providers based on a child’s age, location and type of care. This allows parents to get to work, job training or class while their children can thrive in reliable, consistent settings. Thanks to Basic Sliding Fee, employers have access to a broader workforce when they need to fill crucial vacancies.

Unfortunately, inflation-adjusted state funding for Basic Sliding Fee has decreased by 44 percent since FY 2003. More than 5,500 families were on the waiting list at last count, and thousands more are eligible but have not signed up. Meanwhile, for families using Basic Sliding Fee or other forms of Child Care Assistance, a shrinking state reimbursement rate for child care providers has made it harder for parents to find consistent care.

BSF decline

As state policymakers build the budget this session, they should keep all of these facts in mind. As the economy recovers, Minnesota’s businesses can’t afford to have willing-to-work parents sitting on the sidelines. Investing in affordable child care through Basic Sliding Fee would help ensure that the high costs of child care don’t leave children, parents and employers out of our improving economic picture.

-Ben Horowitz

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Proposal would end affordable health care for more than 100,000 Minnesotans

On March 10, Representative Matt Dean introduced a bill that would dismantle a path to affordable health care for more than 100,000 Minnesotans. MinnesotaCare is a successful, decades-old health insurance option for working Minnesotans. MinnesotaCare offers these Minnesotans affordable health insurance that meets their health care needs – something they can’t find in the private market. The large, negative budget target given to the House Health and Human Services Committee lends dangerous momentum to this proposal that would have serious consequences across the state.

Currently, households earning 133 percent to 200 percent of the federal poverty guidelines pay income-based premiums for health insurance through MinnesotaCare. That translates to an annual income of $15,654 to $23,540 for a single individual. Budgets that small are already squeezed to capacity by the demands of basic necessities like transportation, housing and food.

MinnesotaCare spans the state to serve Minnesotans who may otherwise be unable to find affordable health care:

  • MinnesotaCare covers mental health needs often left out of private plans.
  • Certain legal immigrants are ineligible for Medical Assistance, but can get coverage through MinnesotaCare.
  • Farmers, entrepreneurs and small business employees can rely on MinnesotaCare when affordable health insurance isn’t available through their job.

House File 1665 would completely repeal MinnesotaCare. People who currently qualify for MinnesotaCare would instead pick an insurance plan from the MNsure exchange. Monthly premiums for some could more than double, according to a handout Dean brought to the bill’s first hearing, though the bill provides an unspecified amount to reduce premiums.

Dean’s examples demonstrate the harmful costs imposed by his proposal by comparing the exchange’s “silver” plans to current MinnesotaCare coverage. Silver plans are the second-lowest “metal level” on MNsure. Silver plans generally have higher premiums than bronze plans, but may offer lower deductibles and co-pays. Under House File 1665, insurance companies would receive subsidies to lower some out-of-pocket costs for the people formerly covered by MinnesotaCare, but their costs would be higher than under MinnesotaCare.

Facing higher premiums than under MinnesotaCare, families could fall into the so-called “bronze trap.” MinnesotaCare participants facing already-tight budgets may only be able to afford the premiums for bronze plans, which may have lower premiums but higher out-of-pocket costs. The trade-off for lower premiums is that when medical care becomes necessary, the family’s costs will be higher. And when people face higher out-of-pocket costs, they simply delay needed care.

If something ain’t broke, don’t fix it. Ending MinnesotaCare would mean 100,000 Minnesotans would suddenly be left wondering how they’ll pay for their medication or if they can afford a trip to the doctor when they get ill.

-Ben Horowitz

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Senate targets focus on education, more limited tax target

With an eye on learning from the past and preparing for the future, Senate leadership today released their budget targets, charting a much different path from the House’s proposal earlier this week.

The Senate proposes a strong focus on education and more limited tax cuts, while the House suggested severe cuts to Health and Human Services and an unsustainable tax target.

Taxes: Senate leadership has proposed a $460 million tax target, a portion of which will focus on property taxes. About half will be used to reverse accounting measures used in the 1980s to balance the budget. This is far less than the House’s $2.3 billion tax target, and seems to prioritize not going too far with large permanent tax cuts. The history on this is clear: when policymakers do too much tax cutting in good times, it is harder to respond when the next economic downturn comes along.

In addition to the size of tax changes, the other key issue is who will benefit. We urge the Senate to continue to make our tax system more fair, as it is still the case that the highest-income Minnesotans pay a smaller share of their income in state and local taxes than other Minnesotans.

New Spending: Most of the Senate’s new spending is focused on education. Senate leadership proposes $350 million in additional funding for E-12 Education and $205 million for Higher Education. In comparison, the House targets are substantially smaller – $157 million in E-12 Education and $53 million for Higher Education.

Under the Senate proposal, Health and Human Services will also see a boost of $341 million. In this area, we see greatly different visions between the House and Senate. While the House has proposed a $1.1 billion cut to Health and Human Services compared to base funding and discussed substantial changes to health care, the Senate has emphasized that working Minnesotans should be able to keep their affordable health insurance through MinnesotaCare.

Budget Reserve: Both the House and Senate targets show a commitment to building our state’s resources for the next economic downturn. The Senate targets include a $250 million addition to the state’s budget reserve. This would bring the state’s “rainy day” funds to $1.6 billion of the suggested $2.2 billion target. The House proposal includes $100 million in additional funding for the reserve.

Now that the House and Senate have released the outlines of their budget proposals, we can expect to see finance bills shaping up. Senate Majority Leader Tom Bakk indicated that we will see the bills on the House and Senate floors in mid-April, which is earlier than the previously set “third committee deadline” of April 24.

-Clark Biegler

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Driver’s license bill would expand opportunity for Minnesotans

For a large number of Minnesotans, the daily activities we do to support our families, like getting to work safely, dropping children off at school, or buying groceries requires driving, but too many of our neighbors cannot apply for a driver’s license.

Bills are currently being considered in the House (House File 97) and Senate (Senate File 224) that will allow Minnesotans to apply for a driver’s license, regardless of immigration status. These bills would allow undocumented immigrants to use both their passport and birth certificate as acceptable identification to apply for a driver’s license.

Having a driver’s license can open a door to greater economic opportunity. Workers are able to get to their jobs safely and reliably, and have more flexibility for scheduling and broadened job opportunities. As these Minnesotans are able to increase their earnings, that also creates a boost in consumer spending that’s good for our state economy.

Allowing all Minnesotans to apply for a driver’s license would also keep our roads safer, by requiring everyone to take a driving test before they’re behind the wheel.

More Minnesotans driving with a license increases the number of insured drivers in our state. A larger insurance pool can help hold down premium costs for everyone.

Policymakers should expand opportunity for Minnesotans this session and allow all Minnesotans to apply for driver’s licenses.

-Clark Biegler

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House budget plan sets Minnesota on the wrong course

Minnesota has recently turned the corner after more than a decade of frequent budget deficits, and now has a $1.9 billion surplus. This creates an opportunity for additional progress towards a fairer tax system and broadly-shared economic prosperity.

But that’s not the path taken in the budget plan released today by the Minnesota House of Representatives. The plan includes a $2.3 billion tax target – that’s more than the available surplus. While the details of the budget plan are still to come, proposed severe cuts in services imply that fewer Minnesotans would have affordable health care, seniors and people with disabilities will go without services that enable them to live in the community, and we won’t invest in the workforce training that helps people get and keep good jobs.

Taxes: House leadership has proposed a $2.3 billion tax target, which they indicate would include about $2.0 billion for tax cuts and the impact of dedicating some existing tax revenues to transportation. This would come on top of significant tax cuts passed in 2014. That figure is simply unsustainable. Minnesota’s recent history demonstrates that when the state does too much tax cutting in good times, it makes the hard times worse when the next economic downturn comes along. This target not only makes it impossible to invest in Minnesota today, it also threatens the state’s ability to sustainably fund nursing homes, roads and bridges, and other critical services in the future.

Also concerning is that many of the tax cut proposals being discussed in the House would cut taxes only for the highest-income Minnesotans, reversing recent progress that has made Minnesota’s tax system more equitable.

Spending Cuts: The largest cuts are proposed for Health and Human Services – a net $1.1 billion. And in fact, cuts within this area will likely be even larger, as the House has promised to increase funding for nursing homes. With such a harsh target, it is unlikely that the House will provide funding for affordable child care or community services for Minnesotans with disabilities. Instead, we expect that this budget will mean working Minnesotans will lose affordable health care coverage. Cuts are also proposed in economic development and the environment.

New Spending and Budget Reserve: The targets include some modest higher general fund spending in some areas, primarily in E-12 Education and Transportation, which together total about $300 million. The targets also allocate an additional $100 million to the state’s budget reserve. This would bring the state’s “rainy day” funds to $1.4 billion of the suggested $2.2 billion target.

The House Ways and Means Committee held a hearing last week where many Minnesotans testified to the unmet needs still experienced in their communities. The economic recovery is beginning to take hold, but many of our neighbors are still struggling. Minnesota needs targeted investments and sustainable tax changes, but the targets released today indicate that the House holds a different vision for our state.

The Senate is expected to release their budget resolution and targets later this week.

-Clark Biegler

This post was updated to reflect information discussed in the March 24 House Ways and Means hearing. 

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Kids Can’t Wait Day of Action for affordable child care

All Minnesota families should be able to afford child care that meets their needs. Affordable child care allows parents to work, provides children with long-lasting benefits from consistent and dependable care, and ensures businesses can find and keep the employees they need.

But for too many, it remains out of reach. Annual child care rates in Minnesota for an infant in a center now average $13,993, eating up a significant amount of many families’ budgets.

KCW graphic final-01

The Minnesota Budget Project joined other members of the Kids Can’t Wait Coalition at a Day of Action at the Capitol to highlight policy proposals to make child care more affordable for Minnesota families. The improved state budget landscape offers an opportunity to move more families into greater economic security, and legislators from both parties are working to do so.

The Kids Can’t Wait Coalition supports several bipartisan provisions that would:

  • Increase funding for Basic Sliding Fee Child Care Assistance so that all eligible families, including the over 5,500 families on the waiting list, can afford the child care that meets their needs;
  • Increase the reimbursement rates for child care providers participating in the Child Care Assistance Program so that more families can find affordable care; and
  • Make targeted improvements to the state’s Child and Dependent Care Tax Credit to help more low- and moderate-income families afford the high cost of child care in Minnesota.

At a press conference and in a committee hearing, parents shared their stories about how affordable child care is difficult to find, making it hard for them to keep jobs and know their children are in safe, dependable care settings.

Elizabeth Mitchell is a single mother of a 4-year-old daughter and a 12-year-old son. She works full time and spends nearly half of her income on child care. She has had to quit jobs in the past that didn’t pay enough for her to afford child care. Elizabeth qualifies for Basic Sliding Fee assistance but is on the waiting list.

“If I had assistance with my child care expenses, I wouldn’t have to constantly worry about how to pay my bills,” she said. “My children are old enough to understand that money is tight. I do my best to reassure them that everything is going to be okay, but honestly, I am struggling every day to believe that.”

The authors of the Kids Can’t Wait Coalition’s legislation​ — Sens. Jeff Hayden and Chris Eaton, and Reps. Mary Franson and Jenifer Loon — all spoke about Minnesota families’ need for affordable, dependable child care.

If legislation is passed that makes safe, reliable child care more affordable, more Minnesota parents like Elizabeth will be able to believe that everything is going to be okay.

-Laura Mortenson

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