Here’s how the House plans to cut $300 million from the disability services agency

The Minnesota House passed a bill Monday with significant cuts to the Department of Human Services through 2027. 

DHS programs account for nearly one-third of state spending, and are expected to get more expensive in the coming years due to the aging population and increasing health care costs. Most of the spending is on Medical Assistance, Minnesota’s Medicaid program, which allocates more money per participant than nearly any other state. 

Because DHS is such a large portion of the budget — rivaled only by education — state leaders have targeted the agency for cuts in the coming years to avert a looming deficit. 

With the House tied 67-67, Republican and Democratic-Farmer-Labor leaders agreed to find $300 million in savings.

The cuts to Medical Assistance come ahead of proposed cuts at the federal level. Because the federal government pays for more than half of Medical Assistance, any federal spending reductions would likely force additional state cuts.

Republicans in the U.S. House are prepared to reduce Medicaid spending to pay for tax cuts; Senate Republicans are wary of the move. Party leaders are considering eliminating a tax loophole that allows states, including Minnesota, to get extra Medicaid money from the federal government.

The state Senate has not yet passed its DHS budget bill. Any discrepancies between the two budgets must be hashed out in a conference committee and re-passed by both chambers before the session ends on May 19; without a budget by June 30, the government will shut down. 

House budget cuts spending on services, pushes costs onto counties and federal government

The biggest piece of savings in the two year, $17.7 billion DHS budget bill (HF2434) comes from changes to “rate exceptions,” or higher-than-usual payments to providers who care for people with extraordinary needs. The bill requires extra documentation from providers, and limits what can be considered when determining if a patient and their provider qualify for the exception.

The bill also shifts part of the cost of rate exceptions to county governments, which could lead to higher taxes for property owners across the state. 

Together, the changes would save the state around $200 million in the next budget cycle.

The bill would also increase costs on county governments by increasing how much they pay for substance use disorder treatment, and for certain people detained at the Minnesota Sex Offender Program starting in 2027.

The budget would limit the inflation adjustments for some Medical Assistance reimbursements to 4% per year, saving $162 million over the next two years, and even more in future years. (Gov. Tim Walz proposed limiting that inflation adjustment to 2% per year.) 

The move is expected to squeeze providers, as their reimbursements may not keep up with the real cost of providing care. 

The bill contains a maneuver that would save the state money by pushing costs onto the federal government. It more than doubles the annual per-bed licensing fees for nursing facilities, from $2,815 to $5,900, and also more than doubles one component of the facilities’ reimbursement rates. In short: the state would collect licensing fees from the nursing homes, then return it using a mix of state and federal resources. This saves the state $73 million over two years.

The budget would also raise licensing fees for home and community-based service providers, substance use disorder treatment centers, and detox and withdrawal facilities. 

It would also eliminate payments made to providers to cover the cost of unplanned absences, saving around $67 million in the next budget. 

Medical Assistance currently pays providers the same amount for night supervision duties whether the worker is asleep or awake; the bill would create a new category for “asleep night supervision,” with lower payouts, saving $23 million over two years. 

It’s not all cuts

The House bill codifies raises for nursing home workers set by the Nursing Home Workforce Standards Board. The new minimum wage for all nursing home workers would be $19 per hour, which would increase to $20.50 per hour starting in 2027. Specialists like certified nurse assistants, trained medication aides and nurses all have higher minimum wages. 

It also codifies raises for disability services workers as part of a contract agreement with SEIU, the workers’ union. 

The Trump administration is cutting funding for HIV research and prevention efforts, and the House bill would allocate $6 million to community-based HIV/AIDS services providers to replace the lost federal funds. 

The bill would direct $5.5 million to preventing fraud by autism services providers.