NJ Spotlight

Report Says Early Years Of Medicaid Expansion In NJ Won't Break The Bank

Advocates argue that expanded eligibility is a bargain and a 'no-brainer,' even when state is paying its full share

NJ Spotlight — Thursday, November 29, 2012

By Andrew Kitchenman

A report issued this week by the Kaiser Family Foundation sees little impact to New Jersey for expanding Medicaid eligibility — at least in the early years of enrollment. For instance, it will cost an additional $15 million in 2016, the third year of the expansion.

By 2022, the state will see an additional $273 million in costs, according to the state-by-state analysis by Urban Institute researchers. The expansion would add 291,000 state residents to Medicaid, at a cost of $938 per new enrollee.

The report "shows what we thought all along: it's a cost-effective means [of extending coverage] for a lot of people who don't have it now," said Jeff Brown, coordinator of policy advocacy and communications for New Jersey Citizen Action, a nonprofit that advocates for healthcare access.

Brown said that even at the 2022 cost level, "if you look at what we get in return, which is insurance for roughly 300,000 people, it's a small price to pay."

Joel Cantor, director of Rutgers University's Center for State Health Policy, was struck by the relatively small fiscal impact on the overall state budget. In 2022, the additional spending would equal 0.6 percent of the state's budget, according to the report.

From 2013 — the year before an expansion would kick in — through 2022, the total additional cost to New Jersey would be $1.49 billion. But that total is reduced to $1.19 billion once $296 million in estimated charges for unreimbursed care to previously uninsured residents is factored in.

Cantor, however, believes that the $296 million in reduced state spending on unreimbursed or charity care is conservative.

The final decision whether or not to expand Medicaid rests with Gov. Chris Christie.

If he decides in favor, he is essentially opening the Medicaid rolls to residents whose incomes are above the maximum allowed for the state's General Assistance program, or $2,520 per year for single person who isn't disabled, but below 138 percent of the federal poverty line, currently $15,415.

The growth in costs over the 10-year period reflects the increasing share of state spending for the newly eligible population.

While the federal government is picking up all of these costs from 2014 through 2016, the state will also see some increase during that period.

"For example, parents gaining eligibility are more likely to seek coverage and are thus more likely to enroll their children, who would already be eligible," report coauthor Michael Buettgens explained in an email. He added that prior Medicaid expansions have resulted in similar increases.

Under the Affordable Care Act, the state share of Medicaid expenses for the newly eligible would increase to 5 percent in 2017, 6 percent in 2018, 7 percent in 2019 and 10 percent in 2020 and all future years.

The report's authors wrote that their estimates are conservative and that state costs could be lower — and savings higher — once the economic impact of additional federal Medicaid spending in the state is considered.

New Jersey Healthcare Quality Institute President and CEO David Knowlton calls the decision to expand Medicaid eligibility "a no-brainer."

But not everyone shares his enthusiasm. The proposed Medicaid expansion has received a skeptical reception from state business groups.

New Jersey Chamber of Commerce Senior Vice President Michael Egenton said business owners have concerns that the federal government will not uphold its commitment to fund 90 percent of the expansion in the long term.

"Somebody ultimately ends up paying for it," Egenton said, and business owners are concerned that it will be them.

Cantor said Egenton's concern about the federal commitment is legitimate, considering the fiscal challenges the federal government currently faces. But Cantor warned that the economic consequences of turning down the additional federal money could be dire.

"If we don't do expansion, we're putting a lot of hospitals at risk, even for closure," Cantor said, noting that federal support for unreimbursed or charity care is being scaled back.

The report estimates that the federal government would spend an additional $15.4 billion on Medicaid in the state from 2013 to 2022 if the states expands eligibility, a 16.7 percent increase.

Brown said the Medicaid expansion would increase the hiring in healthcare, which would spill over into the broader economy.

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