Governor Tim Walz’s supplemental budget proposal, released in March, shows us the administration’s starting approach for dealing with the harmful effects of federal cuts and policy changes in H.R. 1. Walz’s budget begins to address the practical problems of implementing the new law, and starts to tackle enduring issues in SNAP and Medicaid program administration like outdated technology.
Last July, President Donald Trump signed into law H.R. 1, also known as the budget reconciliation bill, which cut hundreds of billions of dollars from Medicaid and SNAP, our country’s core basic needs programs. These cuts were the largest in the history of both programs and pay primarily for two things: 1) a tax package that gives the biggest tax cuts to the nation’s wealthiest, and 2) an extreme spending increase on immigration enforcement.
Providing affordable health care through Medicaid and basic food support through SNAP have long been a shared responsibility between the federal government and the states, and in Minnesota, counties and Tribal nations play important roles in providing these services as well. H.R. 1 gives states new responsibilities and requirements, while cutting their federal funding.
H.R. 1 is designed to make it harder to access food assistance and health insurance. Without state action to mitigate the harm, H.R. 1 could lead to a loss of health care for up to 140,000 Minnesotans, and put hospitals and other health care providers in precarious financial situations. In SNAP, benefits for recipients have been permanently lowered, and about 9,000 immigrants with humanitarian statuses and approximately 6,000 Minnesotans, primarily older adults and parents of teenagers, will lose federal SNAP benefits altogether. The state is required to implement cumbersome new requirements and Minnesotans will have to jump through more hoops to access these services. The deadlines to meet these federal guidelines are tight.
But the scale of the consequences of these federal decisions are not inevitable. Minnesota policymakers can choose to reduce the harms of these historic threats to Minnesotans’ health and well-being.
In this analysis, we take a look at how the governor’s supplemental budget proposal would meet the new federal requirements for Medicaid and SNAP and to what extent it does or does not take steps to protect the well-being of the more than one million Minnesotans who get health care, food, and other supports through them.
Walz’s budget grapples with harmful Medicaid changes
In Minnesota, roughly one million people get health care through Medicaid, also known as Medical Assistance (MA). This includes low-income seniors, children and families, people living with disabilities, and individuals working in jobs that don’t offer affordable health insurance.
H.R. 1 requires states to implement Medicaid changes that include: new work reporting requirements for some groups of participants, requiring more frequent eligibility determinations for some, eliminating coverage for some groups of people, and increasing out-of-pocket costs.
The governor’s budget splits proposals related to H.R. 1 implementation for Medicaid into two main buckets: Medical Assistance Eligibility Changes Due to H.R 1, and H.R. 1 Financing Related Response. Medicaid eligibility changes would cost $124,000 in FY 2027 and reduce state spending by about $36 million in FY 2028-29. While H.R. 1 compliance requires spending more to administer Medicaid, this portion of the budget proposal projects reduced state spending in FY 2028-29 because of cuts like fewer months of retroactive coverage. Another likely factor for reduced state spending is that an estimated 20 percent of people subject to the new work reporting requirements will lose their Medicaid coverage.
For the first time in its 60-year history, some people getting care through Medicaid will have to meet work reporting requirements (also referred to as community engagement requirements); H.R. 1 requires them to be implemented by January 1, 2027. To keep their health care, certain Minnesotans will be required to prove that they are working or participating in another qualified activity for 80 hours per month. These new requirements apply to folks sometimes referred to as the “expansion population” – low-income adults ages 21 to 64 who are not caring for dependent children under 13 in their home, and not enrolled in Medicaid through disability pathways, with some exceptions.
Work reporting requirements have proven to be ineffective and burdensome policy. In Minnesota, 70 percent of adults who get health coverage through Medicaid are already employed. Work reporting requirements have been attempted in several states, where they have led to high costs for states and a substantial loss of health care coverage. Those losing health care coverage because of work requirements include both people who do not meet the required number of hours of qualifying activities, and people who do meet the requirements but are unable to successfully navigate complicated reporting timelines and arduous paperwork.
In order to minimize the harm from work requirements, the state could implement them in people-centered ways so that eligible Minnesotans are more likely to get and keep their health care, and lessen the administrative burden on counties.
Walz’s budget includes the H.R. 1 requirement that eligibility for Medicaid for adults without children be verified every six months, rather than every 12 months currently. More frequent redeterminations for folks in the expansion population will begin January 1, 2027. This new requirement will likely significantly increase the burden on both Medicaid participants and county workers. The budget documents note that this policy could contribute to more “churn,” which is when folks lose and then regain coverage during a short period of time, creating gaps in coverage can limit access to needed health care and increase administrative costs.
The budget proposal includes an end to Medicaid eligibility for certain lawfully present immigrants, beginning October 1, 2026. Federal law requires that refugees, humanitarian parolees, asylum grantees, certain victims of trafficking and domestic abuse, and other noncitizens can no longer be eligible to receive Medicaid.
H.R. 1 limits federal funding for retroactive coverage. Although not required by H.R. 1, the governor’s budget would cut the number of months of Medicaid retroactive coverage down to one month for the expansion population and two months for other groups. Currently in Minnesota, once a person is determined to be eligible for Medicaid, Medicaid covers health care costs from the previous three months before the month they applied. Minnesota can and should continue to provide three months of retroactive coverage through state funds. The governor’s budget notes that his proposed change would increase health care costs for patients and providers. Reducing months of coverage will likely result in more medical debt for Minnesotans struggling to afford their health care, and shift costs to hospitals through the burden of uncompensated care.
The second area in the governor’s supplemental budget addressing H.R. 1 changes to Medicaid is described as “Financing Related.” Combined, these financing proposals would increase state spending by $1 million in FY 2027 and $2 million in FY 2028-29. Two notable items in this area are added out-of-pocket costs for some Medicaid participants and investments to strengthen Medicaid eligibility determination.
The governor’s proposal meets the H.R. 1 requirement for states to add out-of-pocket costs for the Medicaid expansion population starting October 1, 2026. Minnesota eliminated out-of-pocket costs for all Medicaid enrollees during the 2023 Legislative Session because they created barriers to health care. The governor’s proposal imposes more costs on Medicaid participants than is required for federal compliance.
The governor also directs additional resources for strengthening the state’s Medicaid eligibility determination so that counties and Tribes have more resources to accurately report eligibility of Medicaid participants.
IT systems used by counties to administer critical public services such as Medicaid and SNAP are long past due for an upgrade. Their antiquity adds to the difficulty of actually administering the required program changes from H.R. 1. These systems are often referred to as “legacy systems,” and Walz’s supplemental proposal includes $25 million in FY 2027 and $5 million in FY 2028-29 for upgrading legacy IT systems to support county workers processing applications.
Walz’s proposal fills some gaps in SNAP from H.R. 1 and invests in new IT
Currently, more than 440,000 adults, children, seniors, veterans, folks with disabilities, and others in Minnesota receive some additional resources through SNAP so they can afford a basic diet. More than 63 percent of Minnesota SNAP participants are in families with children, and nearly two-thirds of participants have incomes below the federal poverty level. For a family of four in 2025, that’s a yearly income just above $32,000. SNAP benefits in Minnesota in February 2026 averaged around $6 per day for each household member.
Minnesota policymakers do not have much flexibility regarding implementing some of H.R. 1’s SNAP changes, including:
- H.R. 1 ended federal SNAP benefits for lawfully present immigrants with humanitarian statuses, including refugees, asylees, victims of trafficking and domestic abuse, and more.
- Federal policymakers changed how SNAP benefits are calculated, reducing the amount of future SNAP benefits for all participants.
- H.R. 1 completely eliminated SNAP-Ed, a program supported through about $9.5 million in annual federal funding that provided meaningful opportunities for community members around healthy eating, cooking, gardening, food budgeting, and more.
However, state policymakers still have choices around 1) how the additional financial responsibilities shifted to Minnesota will be shared between the state and counties, and 2) protecting so-called “time-limited recipients” (TLRs) who are newly subject to work reporting requirements. Those newly subject to these requirements include people ages 55 to 64 who are not caring for children, and parents and caregivers of teenagers (children aged 14 and up), veterans, people experiencing homelessness, and youth aging out of foster care. However, policymakers also can and should act to expand and invest in other services so that Minnesotans cut off from SNAP can still put food on the table.
The governor’s supplemental budget proposal addresses H.R. 1’s threats to SNAP in three areas: SNAP costs shifted to the states, IT system updates, and administrative investments.
Addressing the new benefits costs shifted to Minnesota
The governor would ensure continued SNAP food assistance to Minnesotans by budgeting for the state to cover the never-before-seen benefits “cost sharing” requirement. Prior to H.R. 1, the federal government took full responsibility for funding the SNAP benefits that struggling Americans receive, but H.R. 1 now requires states to fund some of the costs of benefits. How much of the benefits states are required to fund (the “cost share” states have to cover) is based on a single measurement: the SNAP Payment Error Rate (or PER). States with payment error rates 6 percent or above must pay some of the cost of SNAP benefits.
The payment error rate is not a measure of fraud. Instead, the PER is mostly a measure of honest mistakes, like data entry errors in the outdated systems states and counties use to administer SNAP. Minnesota’s PER in FFY 2024 was about 9 percent requiring the state to pay 10 percent state benefits cost share which could cost the state around $97 million every year. This requirement impacts the state budget in October 2027, partway through the state’s 2028 fiscal year.
H.R. 1 also included a dramatic reduction in federal funding for the administrative costs of SNAP, for things like updating technology, paying staff who manage participants’ cases, and contracting with services that support eligibility assessments and payment distribution. The new law changed the financial balance between the federal government and state and local program administrators from 50-50 to a more burdensome 25-75 percent split. In other words, the share of SNAP administrative costs that must be funded locally has increased 50 percent.
The Minnesota Department of Children, Youth and Families (DCYF) estimates that the fiscal impact of the shift in administrative costs in Minnesota is around $37 million annually.
Upgrading legacy IT systems
The governor’s supplemental budget includes several provisions related to IT needs. It proposes around $3.8 million in FY 2027 and $10 million over the next biennium (FY 2028-29) explicitly to cover reduced federal reimbursement for state IT systems.
Walz’s supplemental budget also includes investments to upgrade legacy computer systems and to continue to staff and work through modernization efforts. SNAP is administered through the legacy IT system MAXIS, which was originally launched in Minnesota in 1989. During a system walkthrough in the House of Representatives Ways and Means Committee, a county worker demonstrated why upgrades are needed. For example, local financial workers entering data into MAXIS can’t use their mouse and instead have to use the keyboard to navigate between places where they must enter applicant data. Workers are regularly forced to manually override system rules and hand type applicant information, often keying in the same data in multiple places.
Another challenge is that MAXIS cannot communicate with external computer systems. Even online applications must be manually entered into the system. The governor’s budget recommends IT funding to create an “integration layer” that would allow connections between MAXIS and more modern applications like MNbenefits, the state’s online application portal for food support, cash assistance, and other economic supports, as well as create a web-enabled user interface for financial and eligibility workers.
Investing in additional training, oversight, and administration capacity
While the governor proposes to pay for the new benefits cost-sharing requirement, he also invests in training to reduce the state’s Payment Error Rate (PER) – reducing this rate sufficiently would eliminate the cost-sharing requirement. The governor’s budget devotes $1.8 million in FY 2027 to standing up a new quality assurance case review team to catch payment errors. It also dedicates around $1 million in FY 2027 and $2.4 million in FY 2028-29 to training county and Tribal staff on ways to bring down the PER. And lastly, it includes plans to spend around $600,000 on a subscription AI chatbot tool to help workers apply SNAP eligibility rules more effectively.
To be clear, the payment error rate in SNAP is not a measure of fraud. Instead, the PER is mostly a measure of honest mistakes, like data entry errors in MAXIS. These errors vary from people forgetting to share their new address and housing costs after a potentially stressful move, to eligibility workers accidentally overlooking a document in a family’s file. Some of the errors result in Minnesotans receiving less SNAP benefits than they qualify for. Many errors could be resolved with more people-centered technology and simpler processes that reduce paperwork burdens on everyone.
Policymakers should do more to protect Minnesotans from the harm from H.R. 1
In H.R. 1, the federal government has moved further away from the promise of providing a lifeline to individuals and families at risk of going hungry at a time when more of our neighbors are struggling to make ends meet. Paradoxically, H.R. 1 creates extreme pressure on state and local agencies to spend a significant amount of additional funding on administrative changes that make SNAP less effective at reducing hunger.
Similarly in Medicaid, state and local governments will be spending more to add burdensome processes and red tape, creating new barriers to accessing vital health care, raising costs for Minnesotans, and increasing the amount of uncompensated care that hospitals and other health care providers must absorb.
While Walz’s budget proposal includes resources to meet new Medicaid and SNAP requirements mandated in the federal H.R. 1 law and long-needed investments in IT systems, it falls short of what is fully needed to meet the needs of Minnesotans struggling to eat, keep their health care, and otherwise afford their lives.
Additional steps Minnesota policymakers should take include:
- Prevent Minnesotans from going hungry by conducting effective outreach and education to SNAP participants impacted by H.R. 1 changes, and increase funding for other anti-hunger services;
- Protect Minnesotans’ access to health care by not implementing more stringent rules than required by federal law, and make other policy changes to expand access to MinnesotaCare and other affordable health care options; and
- Make people-centered choices in implementing these systems, including making the compliance process easy for people to navigate. The compliance process should implement core tenets of good design including: translating notices and forms into multiple languages, ensuring simple and accessible documents submission, and using plain language. Using existing data sources to verify compliance would avoid wasteful duplication and lessen the burden for applicants, participants, and county workers.
Technical note: Estimated changes in spending presented above are compared to the baseline budget as measured in the state’s February Budget and Economic Forecast. For forecasted programs where spending is determined by formula, changes from previous years might be different than those compared to baseline spending as set by the February forecast.
By Jessie Luévano and Carly Eckstrom