New Jersey Policy Perspective

Impact Of Cuts Proposed For Medicaid In N.J. Is Unclear

New Jersey Policy Perspective — Monday, February 28, 2011

TRENTON — Few cuts proposed by Gov. Chris Christie for the upcoming state budget are as important, or as uncertain, as his plan to slash projected spending on Medicaid health care services for poor people by as much as $550 million.

When federal stimulus spending expires, extra Medicaid assistance to states goes with it, pushing those costs back to state capitals. And with Medicaid expenses rising, in part due to high unemployment, it's not a tab states are well positioned to afford.

"We must reform Medicaid, a federal program simply running out of control," Christie said last week in his budget address to the Legislature.

The Rev. Bruce Davidson of the Anti-Poverty Network said the Christie administration is "really trying to do this right so there isn't a significant heavy impact on people," but that changes come with risk for a population ill-equipped to cope with it. Details, he said, also are scarce.

The real-life impact on New Jersey's residents remains unclear, administration officials admit.

The state plans to:

In addition to the $300 million from the so-called "global waiver," the Christie administration intends to save $250 million through other moves. More than half of those savings haven't been identified publicly.

"The thing that troubles me the most personally is that we can look at the rising costs attached to Medicare and Medicaid and say we have to control these costs," Davidson said. "But I think we also have to look at what those numbers tell us. The growth in demand for these benefits is due to the fact more and more people are slipping into poverty, and they need the benefits.

"Until you start to attack some of the things that are causing people to find themselves with an inadequate income to provide for their basic health care needs, we're going to see those numbers go up," Davidson said. "Beginning to address the whole question of sustainable wages and jobs is really crucial. For a lot of this population, they wouldn't need the benefits if they had employment opportunities that they don't have right now."

Top officials from the Christie administration said last week it's too soon to know the impact of the cuts being assembled. Budget documents, however, said the loss of extra federal aid "provides New Jersey with the opportunity to restructure how and to whom benefits are provided."

"The waiver application will be developed over the next weeks and months, so it's premature to say exactly what the impact would be on any particular class of individuals," Treasurer Andrew Sidomon-Eristoff said.

Christie's chief of staff, Richard Bagger, said the waivers "tend to relate to how benefits are delivered, in what setting they're delivered, through what intermediaries like managed care, and what services are covered, as opposed to who is covered."

Advocacy groups with an interest in the program said much money can't be saved without reducing services.

"If cuts like that are made, people will feel it," said Crystal Snedden, a health care campaign coordinator for New Jersey Citizen Action. Christie should have looked to increase income taxes on wealthy residents before reducing health care for poor people already suffering from the economy, she said.

"We don't know exactly what is being cut where. We can't say how it's directly going to impact people," Snedden said. "But I would just be angry, especially during these tough economic times, that he's looking at cutting vital health care programs like Medicaid when there are other options."

Raymond Castro, an analyst at the liberal New Jersey Policy Perspective, also has concerns.

"It's more than 10 percent of the entire program. That's just a huge, huge cut," Castro said. "The question is: What does that mean? ... It's a large program, but I question their ability to generate that much in the way of savings without cutting direct services or even eligibility."

The biggest questions surround the $300 million Christie says would be saved if the federal government grants New Jersey a waiver to revamp how the state manages the program. In Rhode Island's case, Castro said, such a waiver meant the state agreed to turn the program into a block grant in which the federal government agreed to provide the state a specified fixed amount of money, rather than a dollar-for-dollar, open-ended entitlement in which the sides agreed to split all costs.

Castro said it's impossible to know at this time whether New Jersey intends to negotiate an agreement similar to Rhode Island's approach, but he worries the state could open itself to a financial risk if it trades flexibility for guaranteed federal matching funds.

"If you got a five-year waiver, which is pretty much standard length, the state would have to predict how much they're going to spend in five years. That's really, really difficult to do," Castro said. "And if you're off by a few percent, the state could be in for hundreds of millions of dollars. So it's a very high-stakes game that could potentially place great risk at the state level."

A managed-care approach could address one problem sometimes faced by people enrolled in Medicaid -- finding doctors or dentists, who sometimes won't take fee-for-service patients because the reimbursement rates paid in New Jersey are so low. Medical day care and personal care services are among the types of care the Christie administration says it intends to shift into HMOs.

"The governor has made it clear he doesn't want to cut optional services. He made that clear in his budget address," said Lowell Arye, executive director for the Alliance for the Betterment of Citizens with Disabilities.

"To me that's important, because optional services are essential services for my population. Optional services include prescription drugs, dental, durable medical equipment. To somebody with a complex physical and/or neurological developmental disabilities, those are not optional services," Arye said. "So if they're looking at how they contain costs and those sorts of things, absolutely we want to continue to talk with them about this."

Even with the cuts, New Jersey's spending on Medicaid will reach a record level.

Christie's proposed budget calls for spending a bit over $3.8 billion of state money on Medicaid, about $79 million higher than the previous high-water mark from fiscal 2008 -- before three fiscal years in which federal stimulus funds absorbed what would have been roughly $2.5 billion in state costs. Compared with current spending, the state's share would rise by more than $490 million.

Christie's budget plan pays for Medicaid by using about $118 million from casino taxes and almost $3.7 billion from the general fund. It amounts to more than 20 percent of the state's general fund and 13 percent of the overall $29.4 billion budget, which adds in the income tax and casino tax budgets.

"They're still trying to figure out what it's going to look like when all the dust settles on this. And they're also dealing with the reality that the hole that's left right now in Medicaid is way beyond the state's ability to fill," Davidson said.

"What I appreciate about the administration, at least in terms of what I've heard so far, is that they're sort of creeping forward on this," he said. "They're not making dramatic, irreversible changes that are immediately going to put people in jeopardy. That's good news. They're trying, at least, to be thoughtful."
At a glance

What Gov. Chris Christie's proposed Medicaid changes mean:

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