Minnesota committee hears DHS outpatient rate study; sponsors lay over bill to raise Medicaid behavioral‑health and physician rates

The House Human Services Finance and Policy Committee on March 3 heard a Department of Human Services presentation on an outpatient Medicaid rate study and took initial action on House File 1005, a bill that would phase in higher reimbursement for physician and community behavioral‑health services.

The study and the bill aim to address what DHS presenters called long‑standing, “static” reimbursement methodologies that have left many Medicaid providers paid well below Medicare levels and contributed to access problems for children and adults seeking outpatient mental‑health and substance‑use disorder care.

The DHS presentation: goals, methodology and headline findings

“One is to pay, or adopt the Medicare rates — 100% of what the Medicare rates are,” said Geogo Hace, division director with the Minnesota Department of Human Services, summarizing one of three core RBRVS recommendations in the department’s report. Hace told the committee the department contracted with a vendor and convened provider workgroups, surveys and more than 30 meetings to develop the recommendations.

The study examined two broad buckets of rates: those paid under a resource‑based relative value scale (RBRVS) used for about 8,000–9,000 procedure codes and a second set of roughly 130 non‑RBRVS Medicaid rates (mostly community behavioral‑health and substance‑use services) for which Medicare has no direct analog. DHS presenters said Minnesota’s RBRVS‑paid codes were, in the aggregate, paid at about 74% of Medicare in the 2023 data the study used. The department recommended (1) moving toward 100% of Medicare for codes with Medicare analogs, (2) continuing annual updates outside a budget‑neutral constraint, and (3) eliminating ad hoc add‑ons and reductions that make fee schedules opaque.

Christie Grama, a DHS presenter, described the market‑based approach used for non‑RBRVS behavioral‑health rates: surveys of provider wages and benefits, direct staff time and non‑billable time, program‑specific expenses, and administrative overhead. Grama said the vendor’s recommendations for those non‑RBRVS rates produced a large aggregate increase in recommended reimbursement and noted examples: behavioral health home monthly rates proposed to be consolidated and raised, and residential substance‑use disorder residential rates identified as “well below” recommended levels (DHS said low‑intensity residential rates were roughly 170% below their recommended level in the study and high‑intensity residential about 60% below recommended levels based on the analysis presented).

Provider testimony and committee discussion

Sponsor testimony and a panel of providers followed. Representative Biermann, sponsor of House File 1005, said the bill “implements the mental health and physician service components of DHS’s study” and phases the increases over three years (effective Jan. 1, 2026; 2027; 2028). Representative Baker, co‑sponsor, described the proposal as a phased approach intended to be fiscally manageable while addressing provider closures and long waiting lists.

Clinical and provider witnesses told the committee that inadequate Medicaid reimbursement was squeezing services and workforce capacity. Dr. Roliet Webetti, president of the Minnesota Academy of Family Physicians, testified that many clinics operate with high shares of Medical Assistance (Medicaid) patients and that current MA rates “do not cover the cost” of services she and colleagues provide. A manager of acute mental‑health services at Children’s Minnesota reported more than 1,200 child boarding incidents in 2024 and said roughly 70% of boarded patients rely on Medicaid.

Several committee members pressed DHS about technical choices and implementation: Representative Gander asked whether the non‑RBRVS methodology would recreate complexity the study seeks to remove; Grama replied that the approach uses similar components to RBRVS (professional time, practice expenses, malpractice) but builds them around behavioral‑health‑specific cost data where Medicare has no analog. Members also asked DHS for scaled fiscal scenarios (5%, 10%, 30% increases) and the department said it could provide technical assistance and fiscal estimates; DHS told the committee the full proposal would likely carry a price tag in the “hundreds of millions” of dollars, and that phase‑in choices could reduce initial year costs.

Actions taken in the hearing

The committee approved routine minutes from its Feb. 27, 2025 meeting on a motion by Representative Gilman (voice vote). During the HF1005 portion of the hearing, Representative Biermann moved and the committee adopted the DE1 amendment by voice vote. The committee chair then moved to lay House File 1005 over for possible inclusion in an omnibus bill; the motion was recorded as laid over for possible inclusion at a future omnibus.

Why it matters

Committee members, DHS and presenting providers linked inadequate outpatient reimbursement to widening access problems, long waits for community services (testimony referenced wait times of weeks to months for intensive outpatient children’s services), and pressure on emergency and inpatient services. Sponsors and DHS framed HF1005 as a three‑year, phased route to raise rates for physician services and community mental‑health services — including psychotherapy, CTSS (Children’s Therapeutic Services & Supports), behavioral health homes, peer services and other outpatient codes — and to end a legislative cutback that reduced master’s‑level clinician pay relative to other clinicians for identical codes.

Next steps and outstanding questions

DHS and bill sponsors committed to provide fiscal estimates and options for scaled implementation. Committee members requested additional data on how increases would flow through managed care organizations, how federal match would affect net state cost, and comparisons to private insurer reimbursement for specific codes. The bill was laid over for possible omnibus inclusion; no final vote on policy or appropriations took place in this hearing.

Ending note

Committee sponsors and DHS emphasized the phased approach reflects both the scale of needed increases and current budget constraints. Several members urged prompt action, citing provider closures and long wait lists as evidence of the urgency.