Myth vs. Reality — Governor Pawlenty’s Proposed Budget and its Impact on Minnesota’s Hospitals
Myth:
The federal stimulus package that Minnesota received helped the state’s health and human services budget.
Reality
NO. Despite receiving $1.8 billion in federal stimulus money for health care in Minnesota, the
Governor wants to use these dollars for other purposes in his revised proposed budget. By playing
shell games with federal matching money for health care, the governor recommends neglecting the
health care needs of Minnesota’s citizens while funding other government programs on the backs of
hospitals.
Myth:
The governor’s revised budget saves eligibility cuts for citizens receiving MinnesotaCare benefits.
Reality:
NO. The governor intends to completely eliminate all adults from the MinnesotaCare program by
Jan. 1, 2011. These individuals will still need care and will end up in our hospital emergency room.
Because of this, we predict that hospitals will bear the burden of $409.5 million in additional
uncompensated care costs if the governor’s budget is approved. Austin Medical Center provided
over $3 million in MinnesotaCare for 2008. Eliminating this benefit will directly impact Austin
Medical Center’s Charity Care and bad debt negatively.
Myth:
Hospitals have plenty of money and they can handle the proposed budget cuts.
Reality:
NO. Net income for Minnesota’s hospitals fell from a positive $41 million in fourth quarter 2007 to a
net loss of $226 million in fourth quarter 2008. Yet, even as hospital finances deteriorate, hospitals
have an obligation to continue to provide care regardless of the ability of a person to pay. The total
estimated impact of the Governor’s budget proposal would be loss of $758.7 to $862 million, with
federal matching dollars included. If the Governor’s budget proposal were to pass, things would get
much worse and hospitals would be forced to reduce or eliminate services and lay off skilled
workers. The estimated impact on Austin Medical Center is $4.5 million over the next two years.
Myth:
Spending on hospital services within the state’s Medicaid budget is enormous.
Reality:
NO. Total spending on hospital services in the Medicaid program (fee-for-service inpatient, fee-forservice
outpatient, Prepaid Medical Assistance Program) represents only 15 percent of the Medicaid
budget. To put this into perspective, long-term care, long-term care waiver and home care represent
44 percent of the state’s Medicaid budget. Also, hospitals are not being paid more. In fact,
hospitals are paid at their 2002 costs, minus 14 percent.
Myth:
The tax on health care providers needs to go into the general fund to be used to balance the budget.
Reality:
NO. A 2 percent provider tax was enacted in 1992 to fund MinnesotaCare, an affordable and
subsidized health insurance product for Minnesota’s working poor. The provider tax is currently
dedicated to the Health Care Access Fund. On several occasions the Health Care Access Fund has
been raided to balance the state’s overall budget. From Fiscal Year 2005 to 2009, $345 million has
been taken from the Health Care Access Fund and transferred to the General Fund. This time, the
Governor’s budget proposal intends to eliminate the Health Care Access Fund by 2011, while
keeping the provider tax in place. This amounts to a tax on nonprofit hospitals that will be used to
finance the general functions of state government. Money meant to keep Minnesotans healthy and
insured should be used for that purpose, as was originally intended. Physicians are the only service
profession that has this special tax, which Austin Medical Center believes is unfair.
Myth:
The Medicaid program is costing the state too much and rates must be cut to bring this program under control.
Reality:
NO. The Medicaid program, which provides health care coverage for low-income citizens, has a
dollar-for-dollar federal match. The federal government sends Minnesota one dollar for every dollar
the state spends on Medicaid. Minnesota needs to fully leverage federal support for its Medicaid
program to preserve health care services and avoid more layoffs at hospitals across the state. The
current budget proposal does not do this. Minnesota should take advantage of every dollar that the
federal government offers.
