Minnesota's next governor faces a state health care fiscal cliff

The winner of the Minnesota governor's race in November doesn't have a choice when it comes to a top agenda item.

The state faces a steep, self-created health care funding cliff that could undermine coverage for more than a million Minnesotans. Lawmakers have known about the problem for seven years and have done nothing. Kicking the can down the road again is not an option.

Voters — especially those from rural areas, who are more likely to rely on MinnesotaCare, medical assistance and the private individual market — ought to demand that the two gubernatorial contenders explain their action plans. There is a stark difference between Republican Jeff Johnson's approach and that of DFLer Tim Walz.

The issue is whether or not to maintain the state's expiring 2 percent tax on the gross revenue of medical providers, hospitals and wholesale drug distributors. The tax raised $635 million in 2017. It was passed in 1992 under Republican Gov. Arne Carlson to increase struggling Minnesotans' access to care and improve health care services.

This pot of money is known as the Health Care Access Fund, which also includes revenue from a 1 percent insurance premium tax. For years, the fund has paid for MinnesotaCare, the state's popular insurance program for working families. But with the federal government providing more aid for MinnesotaCare in recent years, the fund has been tapped heavily to pay for another health care need — the state's Medical Assistance program for the poor. The fund is slated to provide $824 million for this program during the current biennium.

Legislators in 2017 also authorized the use of $401 million from the fund to pay for a two-year "reinsurance program,'' which brought down private insurance premiums for those who buy coverage on their own.

Those are large sums for ongoing needs, with the expiring reinsurance program likely requiring a temporary extension to help consumers. Yet the provider tax revenue stream dries up after Dec. 31, 2019, because of an ill-advised legislative deal cut in 2011 to sunset the tax. Since then, legislators have recklessly ignored the fiscal cliff they created.

Minnesota's next governor will play a lead role in deciding whether to take this last opportunity to maintain the provider tax or, if not, where to find the dollars or otherwise deal with the massive health care funding shortfall. That is why this issue warrants a spotlight as the race ramps up.

Walz told an editorial writer that he supports maintaining funding for the Health Care Access Fund. "Ensuring the proper funding includes, in part, continuing the provider tax," he said. Johnson said he supports the "scheduled sunset of the provider tax." He said Minnesota will need to return to funding Medical Assistance through the general fund.

The Star Tribune Editorial Board's view is that it's prudent to preserve the provider tax's dedicated health care funding. Even in the best of years, there are many claims on general-fund dollars, but that is particularly true right now given the backlog of infrastructure and transit needs and pressure to pass a federal tax conformity bill, which will affect revenue. The state's aging population also will place heavy demands on human services, which will require investment, not cuts.

The logic behind the 2011 deal to sunset the tax was never clear. While lawmakers got a pass on justifying it at the time, the looming loss of dollars requires detailed explanations from 2018 candidates. Did the provider tax serve Minnesota well? Who benefits if it expires or if it is maintained? The answers should factor significantly into voters' decisions this November.