Health & Human Services Policy & Budget

Many of the Senate DFL majority’s priorities to protect Minnesotans from the devastating impact of the Republican federal budget bill (HR 1) did not pass the House. However, Republicans in the House could no longer deny that the largest cuts to Medicaid and SNAP in the nation’s history will dismantle Minnesota’s precarious health care system and food security for our neighbors.

Critical Senate DFL provisions to sustain rural hospitals and Hennepin Healthcare (HCMC) crossed the finish line and made it to the Governor’s desk. Senate DFLers also advanced investments in IT system upgrades to prevent property tax increases. Funding to partially cover county SNAP expenditures was also included in the final HHS budget bill.   

Despite having to dedicate significant time, money, and resources to responding to HR 1, the Senate DFL majority successfully advocated for progress in Minnesota’s child care and child welfare systems. Professional health care licensing and scope provisions were also passed to address medical workforce constraints and improve safety for Minnesotans.

Many of the budget cuts from HR 1 will not begin until 2027 and 2028, delaying the full impact until the next budget cycle. Minnesota will have a better foundation to withstand the impending budget cuts to Medicaid and SNAP because of the work of the Senate DFL majority. 

Key HHS Budget Provisions:   

• Responding to the Republican federal budget bill (HR 1)   

• Hennepin Healthcare (HCMC) Stabilization Funding  

• $205 million in immediate assistance  

• $500 million reserve account  

• Governance requirements and advisory task force   

• Statewide Hospital Stabilization Program   

• County IT modernization  

• Federal SNAP mandates   

• Combating food security  

• Access to mental health services  

• Child care licensing modernization  

• MN African American Family Preservation and Child Welfare Disproportionality Act   

• Education Group Insurance Program Report (EGIP)  

• Health Professional Licensure & Scope of Practice

Responding to the Republican Federal Budget Bill – HR 1 (SF 4612 Wiklund)  

Legislators had to enact several policy changes required by the passage of HR 1, which established new federal Medical Assistance (Medicaid) mandates. Senate DFLers took every opportunity to protect Minnesotans’ access to health care. The three key areas Senate DFLers advocated for include:  

• Preserving 3-month retroactive coverage for Medical Assistance enrollees  

• Ensuring flexibility in defining medical frailty that complies with federal law  

• Protecting Medical Assistance enrollees from cost-sharing requirements   

Senate Democrats successfully secured three months of retroactive Medical Assistance coverage for all enrollees, but only for one additional year. This protects Minnesotans facing unexpected medical costs and helps reduce the burden of uncompensated care on hospitals. Without future legislative action, federal changes will eventually reduce retroactive coverage eligibility to two months for families and children and one month for adults without dependent children.

The final HHS bill also includes Senate-backed language that gives the Minnesota Department of Human Services greater flexibility to interpret federal work-requirement rules in ways that help prevent Minnesotans from losing coverage unnecessarily.

Unfortunately, House Republicans blocked efforts to delay implementation of new cost-sharing requirements for certain Medical Assistance enrollees. Extensive research shows that higher enrollee costs deter health service and medication use, including for people in Medicaid.1 A relatively small cost-sharing burden on the state would have had significant benefits for the state’s health care industry.

$205 Million in Immediate Assistance for HCMC (SF 5270 Wiklund)  

The final bill includes $205 million in immediate assistance for Hennepin Healthcare (HCMC). The HCMC stabilization funding includes accountability and reporting requirements to ensure the investment supports long-term financial sustainability and protects access to critical services. The funding is broken down as follows:  

• $105 million in direct grants will be distributed to HCMC. About half of which will be distributed in FY 26, with the remainder distributed to HCMC in FY 27.   

• $100 million from the general fund will be used in FY 27 to pay the state’s share of HCMC’s Directed Payment Program (DPP).

In addition to historical cuts to Medicaid, the Republican budget bill limited how states can reimburse doctors and hospitals for providing care to Medicaid enrollees. For hospitals, this is called a Directed Payment Program (DPP). Not only did HR 1 disrupt Minnesota from enacting 2025’s bipartisan law that provided $1 billion to hospitals through a statewide DPP program, but it also severely limited HCMC’s ability to sustain care for Medicaid patients.

In 2022, the legislature passed a law that authorized HCMC to have its own DPP process. Starting in FY 28, HCMC will lose about 10% of revenue from this unique DPP process, totaling $1 billion in declining DPP revenue over 10 years, with an additional $600 million in DPP revenue loss due to Medicaid disenrollment. This anticipated loss of DPP revenue resulting from HR 1 is directly contributing toHCMC’s future financial instability.

To help HCMC, the legislature will cover one year of upfront costs HCMC regularly pays through an intergovernmental transfer to receive enhanced federal funding for the DPP process. This amounts to $100 million of general fund money in FY 27 instead of HCMC paying, but it does not cover the future 10% reductions in HCMC’s DPP process.

$500 Million Transferred to Budget Reserve Account for HCMC  

A new provision establishes a $500 million budget reserve for long-term stability that HCMC can draw on. To access the reserve funds, HCMC must submit a payment request and must ultimately be certified by MDH as eligible for the payment. MMB, in consultation with MDH and after review by the Legislative Advisory Commission, may make payments from the reserve account.

HCMC Governance Structure Requirements & Advisory Task Force (SF 5199 Dibble) 

HCMC is a unique publicly owned hospital with governance structure guidelines codified in state law. The HHS budget bill requires that at least 75% of the board’s non-county commissioner members have expertise in hospital administration, business management, and related areas. Further statutory modifications outline how the hospital’s corporate board oversees HCMC’s finances. The new law also establishes criteria for how the county board exercises its right to dissolve and reorganize the corporate board.

The Senate DFL’s priority to establish an Advisory Task Force on Governance and Finance of Hennepin Healthcare System, Inc. (HCMC) also made it in the final HHS budget bill. The task force will develop recommendations on ownership and financing of HCMC. Membership requirements include appointing individuals with relevant experience by August 1, 2026. Examples of the task force’s duties include evaluating labor and workforce needs and engaging with subject-matter experts, such as ambulance service providers or EMS. By January 15, 2028, the task force must submit final findings to the legislature.  

Statewide Hospital Stabilization Program (SF 5270 Wiklund)  

The total funding for the statewide hospital stabilization program is $30 million, significantly less than the Senate DFL’s original $115 million. From that $30 million, $50,000 will go directly to each critical access hospital and rural emergency hospital in the state. Other qualifying hospitals may apply to cover expenses resulting from uncompensated care. The uncompensated care pool is intended to help about 100 hospitals across the state that are expected to be among the most adversely affected by federal Medicaid reductions. Separately, $15 million is also dedicated to a rate increase for Critical Access Hospitals across the state.

County IT Modernization Funding (SF 334 Wiklund)  

$90 million is dedicated to upgrading Minnesota’s human services IT system. With Minnesota’s unique state-directed and county-operated disability and social services system, federal cuts and unfunded mandates affect not only the state’s budget but also 87 counties.   

County workers are on the front lines of helping Minnesotans access disability services, enroll in Medical Assistance, and determine eligibility for financial and food assistance. To carry out the unfunded mandates from HR 1 and improve fraud prevention measures, Minnesota’s social services IT system is overdue for an upgrade. The funding is outlined as follows:  

• $10 million to fund county IT priorities  

• $15 million to MNIT for fraud prevention and detection  

• $15 million to address county income verification systems and eliminate ancient green screens.  

• $50 million to address other issues, such as creating a secure applicant portal, funding the legislative commission and advisory council, minimizing county worker manual workarounds, and other IT system improvements.

However, along with dedicated IT modernization funding, the new law gives counties greater influence and decision-making over IT infrastructure developments and investments in Minnesota. It accomplishes this through:

• Establishing a new state fund to modernize the information technology (IT) systems.  

• Requiring state agencies to consult with the newly established advisory council before spending money from the fund, initiating procurement, or making major changes to social services IT systems.   

• The advisory council membership is favored toward counties and consists of representatives of DHS, DCYF, MNIT, AMC, the Minnesota Association of County Social Service Administrators, and federally recognized Indian Tribes.

Legislative Commission on Human Services Systems:   

This is an eight-member bicameral, bipartisan legislative commission to oversee, monitor, and provide recommendations on the modernization of human services systems. The Commission will also evaluate the current IT social services systems and review how other states implement IT improvements. The first report to the legislature is due February 15, 2028.

Multiyear Modernization Plan:   

MNIT must maintain a multiyear modernization plan and develop a preliminary plan by March 1, 2027. The law outlines the plan’s requirements, such as a statewide inventory of major human services systems, cost allocation plans, and cybersecurity. 

Addressing Federal SNAP Mandates (SF 4359 Boldon)

The Republican federal budget bill (HR 1) implemented the following budget cuts to states regarding SNAP:  

• Required states to pay a portion of SNAP benefit costs. Before HR 1, SNAP benefits were fully federally funded. Now the state share is determined by error rates, except that states with high error rates are temporarily excluded. Error rates are administrative issues, not fraud related. Minnesota has an average error rate.

• Increased the state share for administrative costs. States used to receive a 50% federal reimbursement for administrative costs. HR 1 reduced the federal share from 50% to 25%, requiring states to pay 75% of SNAP administrative costs beginning in FY 2027. This is automatic and not connected to any performance measures.

Because Minnesota has a county-operated human services system, counties will be expected to cover the additional costs resulting from the Republican budget bill. Senate DFLers strongly advocated for the state to offset the federal SNAP cuts for counties. However, House Republicans refused to cover any additional SNAP benefit costs and significantly reduced covering SNAP administrative costs for counties. The final agreement included $10 million to DCYF to allocate to counties based on each county’s proportional share of SNAP administrative costs.

Combating Food Insecurity  

The final HHS budget bill includes $10 million in support for food banks (SF 3770 Boldon) and food shelves (SF 3904 Mann) to address rising food insecurity, as well as major federal reductions to the Supplemental Nutrition Assistance Program (SNAP).

Access to Mental Health Care Services  

The final HHS budget includes investments in mental health services to improve access to care for children and families and strengthen community-based mental health crisis response systems. These include:   

• $12.5 million for School-linked Behavioral Health grants  

• $3.8 million for Mobile crisis grants

Child Care Licensing Modernization (SF 4324 Wiklund)  

The Senate DFL advanced a major child care licensing modernization effort despite the Governor and the House failing to advocate for this popular initiative this session. The legislation moves family child care and center-based child care regulations from outdated administrative rules into statute, creating a more transparent and responsive regulatory framework while maintaining strong safety protections.   

The implementation process will take more than a year, with funding provided to the Department of Children, Youth, and Families to work collaboratively with providers on rollout and training. Examples of new licensing standards include the following:   

• Requiring a notice of the presence of animals, and notification of injury, and adding a requirement for policies on social media and image sharing.   

• Establishing stronger language on child behavior guidance and revising language around support for children with special needs.   

• For child care centers, reducing and simplifying qualifications and reducing hours of annual in-service training.   

• For family child care providers, streamlining the number of license classes and expanding the capacity of several licensing classes.

MN African American Family Preservation & Child Welfare Disproportionality Act  (SF 4355 Champion)  

The main provision of the MN African American Family Preservation and Child Welfare Disproportionality Act (the Act) requires responsible social service agencies to provide active efforts to prevent out-of-home placement and reunify families for all children to whom the Act applies. The responsibility for implementing the Act falls solely on counties, with DCYF providing guidelines and oversight.  

The 2026 HHS budget bill appropriates $15 million in one-time funding to each county board for the initial implementation of the Act. The updated law outlines the demographics and criteria that DCYF must use to distribute the grants. The law states that no county shall be awarded less than $100,000.  

The statewide implementation of the Act is still effective January 1, 2027. However, the case review requirements for counties have been delayed by six months and are now scheduled to begin on July 1, 2027. This will provide the legislature with another opportunity to address policy and funding concerns.  

Other policy modifications to the Act include changing critical definitions in statute and significantly altering the processes of determining which children are subject to the Act. 

Education Group Insurance Program Report (EGIP) (SF 2909 Kunesh – modified)   

This HHS budget bill includes a provision requiring all E-12 schools to participate in a survey detailing their health insurance costs. This lays the groundwork for a full Educator Group Insurance Program proposal similar to what is available for local government workers. 

By July 15, 2026, and July 1 each year thereafter, the Legislative Budget Office (LBO) must send an annual survey regarding health insurance costs to all school districts and charter schools in the state. Examples of information that must be reported to the LBO include the total dollar amount the school paid in health insurance premiums on behalf of all employees, an accounting of all forms of compensation (such as fees paid to a broker or agent), the actuarial value of the health plans offered, and employees’ out-of-pocket costs.

The annual survey must be completed by the school district or charter school by September 1 each year. The Legislative Budget Office must compile information from the surveys and provide a report by December 1 each year to the chairs and ranking minority members of the legislative committees with jurisdiction over education and health insurance.

Licensure and Scope (HF 3825 Wiklund)  

The following provisions are included in the 2026 licensure and scope omnibus:  

Increase Workforce:  

• Mortuary Science-Reciprocity (SF 2154 Utke)  

• Mortuary Science-Internships (SF 2155 Utke)  

• Licensure by Reciprocity for Marriage & Family Therapists (SF 4746 Koran)  

• APRN Training Flexibility (SF 1794 Kupec)  

Modernize Professional Standards and Update Scope of Practice Laws:  

• Acupuncture and Herbal Therapy Language Updates (SF 1746 Hoffman)  

• Athletic Trainers’ Scope of Practice Clarification (SF 962 Hoffman)  

• Pharmacy Practice Authorization for Opioid Use Disorder (SF 4486 Hoffman)  

• Clarify that natural persons can only practice medicine for medical professions regulated by the Board of Medical Practice, as well as optometrists and psychologists (Maye Quade)  

• Dentistry Professional Licensure Modifications (SF 3559 Boldon)  

• Physical Therapy Practice Provisions Modifications (SF 3049 Boldon)
  
  Increase Access to Care & Establish Safety Standards:  

• Music Therapy Licensure Creation (SF 2975 Port)  

• Massage Therapy Voluntary Certification Creation (SF 1131 Hoffman)   

• Social Work Title Protections (SF 3682 Mohamed)