Providers warn committee changes to ICF rate language could freeze reimbursements; DHS cites implementation assumptions, pending litigation
March 23, 2026 | 2026 Legislature MN, Minnesota
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Provider representatives and DHS sparred in committee testimony about how 2023 statutory language on ICF (Intermediate Care Facility) reimbursement rates has been implemented.
Sarah Grafstrom, representing ARM and home- and community-based waiver providers, asked the committee to remove language in section 17 that she said would apply annual adjustments only to ICFs at the legislatively established rate floor. "This language in SECTION 17 would apply the annual adjustment to only ICF rates that are at the rate floor," Grafstrom testified, saying that the change belongs with budget language rather than policy language and could prevent some providers from receiving legislated adjustments.
Tom Gillespie, president and CEO of a nonprofit disability-services provider, told the committee that creating a predictable rate system in 2023 was intended to provide stability. Gillespie warned that providers have not yet received the assumed 2025 and 2026 increases and that partial implementation has left providers facing higher operating costs without matching revenue.
DHS staff and counsel explained there are two pieces at issue: establishing rate floors and an annual cost-of-living adjustment for providers above those floors. According to DHS, the state implemented the rate-floor portion but did not apply the annual inflation adjustments to rates above the floor as written, creating the current dispute. DHS said the problem stems from implementation choices and funding assumptions tied to federal approval and that litigation has been filed challenging the department’s approach; a judge has up to 90 days to issue a ruling.
Committee members said they want clarity about the department’s authority, the difference between payment holds and program termination, and whether statutory language matches legislative intent. Several members asked DHS to follow up with written clarifications; providers urged the committee not to insert budget decisions into policy text and to consider legislative fixes if needed.
The hearing included public testimony urging that rate changes reflect provider costs and avoid destabilizing care for Minnesotans with high-support needs.
Sarah Grafstrom, representing ARM and home- and community-based waiver providers, asked the committee to remove language in section 17 that she said would apply annual adjustments only to ICFs at the legislatively established rate floor. "This language in SECTION 17 would apply the annual adjustment to only ICF rates that are at the rate floor," Grafstrom testified, saying that the change belongs with budget language rather than policy language and could prevent some providers from receiving legislated adjustments.
Tom Gillespie, president and CEO of a nonprofit disability-services provider, told the committee that creating a predictable rate system in 2023 was intended to provide stability. Gillespie warned that providers have not yet received the assumed 2025 and 2026 increases and that partial implementation has left providers facing higher operating costs without matching revenue.
DHS staff and counsel explained there are two pieces at issue: establishing rate floors and an annual cost-of-living adjustment for providers above those floors. According to DHS, the state implemented the rate-floor portion but did not apply the annual inflation adjustments to rates above the floor as written, creating the current dispute. DHS said the problem stems from implementation choices and funding assumptions tied to federal approval and that litigation has been filed challenging the department’s approach; a judge has up to 90 days to issue a ruling.
Committee members said they want clarity about the department’s authority, the difference between payment holds and program termination, and whether statutory language matches legislative intent. Several members asked DHS to follow up with written clarifications; providers urged the committee not to insert budget decisions into policy text and to consider legislative fixes if needed.
The hearing included public testimony urging that rate changes reflect provider costs and avoid destabilizing care for Minnesotans with high-support needs.
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