Physician Medicaid payments cut by 7% in Minnesota

Minnesota Gov. Tim Pawlenty and state lawmakers ended their 2010 legislative session by reducing public health program pay and cutting back a state health care program for low-income residents.

Minnesota cut health care and human services spending by $292 million, according to the Minnesota Medical Assn. This included a 7% cut to all Medicaid physician pay except rates for primary care services, a move that will save the state $6 million in fiscal 2011, said Dave Renner, MMA director of state and federal legislation.

The state also reduced rates for Medicaid managed care and MinnesotaCare, a state health insurance program for low-income residents. Some of those cuts probably will be passed down to doctors, Renner said.

Minnesota Medicaid pays physicians about 60% of Medicare rates for primary care, Renner said. Most physicians continue to see Medicaid patients, in part because state law requires physicians and hospitals to maintain a caseload of public health program enrollees to be paid to care for state and other government employees.

But the budget woes are not over, Renner said. Although the state technically balanced its $34 billion 2010-11 budget, it did so by delaying about $1.2 billion in education payments until the next two-year budget. That budget is expected to run a deficit of at least $5 billion, he said.

Coverage in limbo

Minnesota lawmakers were unable to resolve the fate of tens of thousands of low-income adults enrolled in a state health care program. While the state's largest physician and hospital associations hoped to enroll these residents into Medicaid, Pawlenty and fellow Republicans in the Legislature resisted, because they were concerned that long-term state spending would increase.

The program, General Assistance Medical Care, or GAMC, had covered about 35,000 childless adults at any one time, or about 75,000 people in a year, said Lawrence Massa, president and CEO of the Minnesota Hospital Assn. Eligibility in the four-decade-old program is limited to people earning up to 75% of the federal poverty level, now $8,123 for an individual.

But in May 2009, Pawlenty vetoed the line item containing the GAMC funding, saying the state no longer could afford the program, which cost $288 million in fiscal year 2009, according to the Minnesota Dept. of Human Services.

Instead, the Legislature adopted a scaled-back version of GAMC in March that will take effect on June 1. The revised program will give hospitals an incentive to provide more coordinated and preventive care mainly by limiting GAMC funding to about $164 million over two-years.

The state offered 17 hospitals the chance for contracts to provide care for GAMC enrollees, but only four have agreed so far. All are in the Minneapolis/St. Paul area, where at least 60% of GAMC enrollees live, said Rep. Matt Dean, the leading Republican on the House's health care finance committee. "It is our hope that program could grow and cover the entirety of the state," he added.

Massa said those four hospitals will share $71 million of the $164 million GAMC budget. The rest of will pay for enrollee drug coverage and care from other sources. Dean said the program is getting "significantly less money, and hospitals will argue that it's underfunded. And it may very well be."

But Dean also said the old GAMC "did not get at the root cause of their admissions. It just treated their conditions." Now hospitals are on the hook for actually coordinating care with clinics, he said.

Massa said the move will lead to more uncompensated care for doctors and hospitals. He said he doesn't understand how the state can justify underfunding GAMC and other health care programs. "To us, it amounts to the Legislature not wanting to pay its bills," Massa added.

Medicaid option remains

The Minnesota Medical Society, Minnesota Hospital Assn. and many Democrats preferred the option of moving GAMC enrollees into Medicaid rather than just scaling back the program. The federal government would have paid for half of the cost of Medicaid coverage under provisions that were adopted in the national health reform law.

Pawlenty, however, said the state could not afford the $188 million in additional state costs for expanding Medicaid to include the low-income enrollees. Pawlenty or the next governor will still have the option of moving GAMC enrollees into Medicaid through an executive order. That option expires on Jan. 15, 2011.

Renner said two leading Democratic gubernatorial candidates would approve the Medicaid expansion. GAMC enrollees also can opt for MinnesotaCare, but that program has premiums that many poor people can't afford, said Ed Eide, executive director of the Mental Health Assn. of Minnesota.

Dean warned that expanding Medicaid in Minnesota would be like taking home a 3-week-old grizzly bear cub. "You can have it now, but it's going to eat you later," he said.

But Massa said Pawlenty's point of view "is that we can't afford publicly subsidized health care. That kind of goes opposite of where we're headed as a nation."