DHS presents $575 million savings package: telehealth extension, pharmacy carve‑out and HMO surcharge increase

Interim Commissioner Shereen Gandhi and DHS Budget Director Elise Bailey outlined the Department of Human Services’ budget proposals to the House Health and Finance Policy Committee on Feb. 10, describing roughly $575 million in projected savings over four years and multiple operational and program changes.

"At DHS, our mission is that in collaboration with community and partners, we support people to thrive in community and live their healthiest, fullest lives," Gandhi told the committee as she framed the department's role and the scale of programs under its jurisdiction.

DHS overview and scale

Elise Bailey told lawmakers DHS’s FY26 budget is about $24 billion in all funds, with roughly 54% from federal sources and about $9.4 billion from the state general fund. The department said it directly impacts more than a quarter of Minnesotans in its programs; in FY24 DHS served about 1.3 million Medicaid enrollees and 42% of Minnesota children receive health coverage through public programs.

Major proposals presented

- Pharmacy carve‑out: DHS proposes carving prescription drugs out of managed care for Medical Assistance (Medicaid), moving them to fee‑for‑service so the state can access Medicaid prescription-drug rebate revenue and realize savings…