Actions create the ‘perfect storm’

This “perfect storm” is a confluence of federal and state policy and rule changes that have the potential to devastate […]

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This “pRick Hammergrenerfect storm” is a confluence of federal and state policy and rule changes that have the potential to devastate funding streams vital to programs and services for people who have intellectual and developmental disabilities (IDD). The effects of the storm are already apparent, but the most damaging policy changes and rate cutting formulas are still on the horizon and will wallop service providers in the coming months. These policy changes affect a broad range of providers of Home and Community Based Services (HCBS) who rely heavily on several Medicaid waiver funding sources. For this story about the “storm,” I will focus on nonprofit day training and habilitation (DTH) service providers across the state.

About 100 DTH organizations provide employment and life enrichment day services for more than 25,000 Minnesotans who have IDD and employing about 19,000 staff. Many of these programs have been answering the need for these services in cities, small towns, and communities for more than 50 years. Here are the challenges currently affecting this vital social service sector:


  • Rates for HCBS Waiver providers have been severely lagging behind the inflation rate for more than a decade. Since 2006, the inflation rate went up 21 percent while provider rates only increased by 10.5 percent. During this time, the Department of Human Services (DHS) has implemented many rule and business practice changes that have caused provider expenses to go up, without any funding to cover these costs.


  • The Best Life Alliance, a coalition of HCBS providers has been campaigning for more than a year to secure an immediate rate increase of five percent. Legislators across the state have signed onto the coalition’s bill, with a majority of senators and representatives from both the Republican and Democrat caucuses coauthoring the bill and supporting the principles of the initiative. However, the governor has provided no funding in his 2016 budget, and the House and Senate have “zero targets” for new HCBS funding. While providers greatly appreciate the support for the alliance’s bill, it is only meaningful if followed by a fiscal appropriation and a commitment to secure a long-term funding mechanism to assure that provider rates, at a bare minimum, keep up with inflation.


  • In January of 2014 DHS implemented a new financing vehicle for HCBS services known as the Disability Waiver Rate System (DWRS). When this system becomes fully functional in January 2019, most DTH providers will have rate cuts averaging at least 6 percent with many providers facing 15-20 percent cuts and as much as 35 percent. These price cuts are being driven by seriously flawed rate formulas, buried in the detail of the DWRS. So far, efforts to fix this problem in negotiations with DHS have been unsuccessful.


  • A workforce crisis exists now for the IDD service sector with average employee turnover rates at 37 percent annually. Currently, there are an estimated 9,000 vacant positions for direct service staff. The system is straining to hire good employees and retain them in a revved up economy with the unemployment rate running below 4 percent for months.


  • The U.S. Department of Labor is promulgating a new regulation, which would change definitions of overtime and exempt salaried staff rules. Annualized implementation expense for DTH providers will average $153K per agency and over $16.8M annually for the sector. This federal rule change could be implemented as early as September this year, and presents yet another unfunded mandate that will further tax the capacity of the system as nonprofits struggle to survive.


  • DHS is also seeking to increase HCBS provider licensing fees. Introduced early in the 2016 legislative session, the proposed increase for some providers exceeded 500 percent. DHS has since revised the original proposal, and cut the growth by half for many providers; however an increase of only 250 percent is no more feasible for nonprofits who cannot afford yet another unfunded mandate.


This public policy trend and change in funding priorities has been emerging since the fall of 2013 and is entirely unprecedented in scope and potential harm that could befall on people who rely on human service providers. The outcome of the DWRS is very clear and will culminate with severe rate cuts for nonprofit DTH service providers when, under current law, full implementation of the DWRS rate formulas begins in January 2019.

Without exaggeration, most DTH programs across Minnesota will be struggling to stay in business – unless something changes! The perfect storm has been forecast and can be readily seen on the horizon – it is incumbent on Gov. Mark Dayton and Minnesota Legislature to act. If these priorities cannot be adequately addressed in the 2016 legislative session, they must be a priority next January in the shining, “buffed-up” capitol.


Rick Hammergren, Senior Public Policy Director at Opportunity Partners, has worked as a direct support professional and advocate on behalf of people with disabilities for more than 40 years.




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