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Minnesota state Sen. Tony Lourey of Kerrick listens to experts on federal health-care proposals say that state officials will need to deal with the plan, and probably ask taxpayers to pay more. Don Davis/Minn. State Capitol Bureau

Federal health changes will cost state

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ST. PAUL - Minnesota leaders are bracing for a fiscal fallout as federal policymakers debate health-care reform proposals costing $1 trillion.

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Most state governments, including Minnesota, faced huge deficits as they wrote new budgets this year. If major new federal health-care programs are implemented, it appears the states will be responsible for paying for a wide range of items, such as unemployment insurance for workers laid off due to higher employer health costs and running new health programs.

"It is probably the worst time to implement," the University of Minnesota's Lynn Blewett told a state Senate health committee Tuesday, adding that the state role in a new health care system "could be substantial."

Added Sen. Julie Rosen, R-Fairmount: "I'm very nervous about what it is going to do to Minnesota."

Blewett said that despite extensive debate in Washington and, during the August congressional recess, heated town hall meetings back home on the subject, no one knows how much it will cost the state to implement federal health-care reform. And, she said, there "does not appear to be a lot of state input" being sought by Congress or the Obama administration.

Minnesota officials worry that health-care reforms they have implemented over the years could end up hurting the state under Washington's plans.

"Minnesota tends to be a very efficient state," Jean Marie Abraham of the University of Minnesota said. "We already are pretty lean."

Given that, the question is whether cuts a federal program would force on hospitals, doctors and other health-care providers will hit Minnesota too hard. The concern is that Minnesota already has cut the fat out of health care, so across-the-board cuts like proposed in most of the Democrat-written proposals would eat away at the state health programs' substance.

Blewett said such questions cannot be answered yet. "There is a lot of 'the devil is in the details' and there are not a lot of details in the bill."

President Barack Obama originally wanted a health-care reform bill passed before the August recess. Then he wanted it in September. Now, it appears he is willing to wait until later in the year.

One of the biggest controversies has been over whether a bill should include a federally funded health care plan, meant to compete with private insurance companies. In recent days, it appears even Obama is willing to accept something less, perhaps a cooperative-type organization such as those governing ethanol, dairy and electric organizations in Minnesota.

A cooperative would receive federal grants and loans to get it up and running, said Abraham, who just returned from Washington where she worked on the Obama health-care plan. But details of how an insurance co-op would operate remain sketchy.

One concern Abraham said has arisen is that some employers may opt to lay off workers, especially at low-wage jobs, because of the additional cost needed to comply with a new health-care policy. While she called it a "modest" reduction, Abraham said it could increase state costs for unemployment insurance and other state programs for the jobless.

She also warned that income tax collections could fall if workers were laid off, giving the state less money to pay for health programs that Washington may mandate.

While Washington could send some federal aid to help states fund new health plans, no one at Tuesday's hearing indicated that would come near covering state costs.

One problem Blewett warned about is that some proposals could cut Medicare spending by nearly $800 million in the next 10 years, an effort to find funding for the new programs. That would come from prescription drug, doctor and hospital payments the elderly now receive.

Sen. Paul Koering, R-Fort Ripley, said the major bills, based on a plan by Obama, would turn over health care to the federal government and the state Senate health committee's job should be over. But the committee's chairwoman said that is not the case.

"If this passes, our role is just beginning," Sen. Linda Berglin, DFL-Minneapolis, said.

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Don Davis
Don Davis has been the Forum Communications Minnesota Capitol Bureau chief since 2001, covering state government and politics for two dozen newspapers in the state. Don also blogs at Capital Chatter on Areavoices.
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