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How Controversial Federal Healthcare Law Will Affect Garden State

New Jersey will see immediate gains from healthcare reform, but it's a bumpy road.

New Jersey will reap immediate benefits from federal healthcare reform this year, but implementing the law promises to be a complex and frustrating challenge.

One of the state’s burdens will be to maximize the effectiveness of the landmark legislation for its citizens, according to healthcare advocates. They met with community-group leaders and legislative and regulatory officials on Tuesday to discuss The Patient Protection and Affordable Care Act, which mandates all Americans get health insurance.

Implementation of the controversial federal law has its challenges and at least one downside in New Jersey. The state is home to a large immigrant population, which remains exempt from coverage. And since the basis of the reform is the expansion of Medicaid to cover the previously uninsured, if cash-strapped New Jersey cuts its funding to that program, the very basis of the federal reform could be hamstrung.

"The current fiscal climate makes Medicaid a very big target for cuts," said Katherine Howitt, a policy analyst for Community Catalyst, one of the co-sponsors of the event.

"Medicaid is supposed to serve as the foundation for many of the coverage expansions in this new law. And so protecting the existing state coverage networks is really an essential component in being able to implement this law in 2014."

Rolling Out in Stages

To complicate matters, while implementation of the federal law starts this year, it rolls out in stages with several deadlines. The main deadline is 2014, but some of the provisions won't be fully in place until several years later.

There are many unanswered questions that need to be hashed out about the complex, 900-page healthcare law and how it will impact New Jersey.

Looking for answers, some 175 interested parties met at Rutgers University in New Brunswick for the conference, "What Next? Making It Work for New Jersey."

Up to the States

Several speakers noted that the federal government left it up to the states to put healthcare reform into action, and that New Jersey needs to find ways to effectively implement the law to best serve its citizens.

"We embark on a new, exciting, likely complex—no doubt frustrating at times—and admittedly unknown journey together to implement the historic patient protection and affordable care act," said Evelyn Lieberman, director of organizing and advocacy for New Jersey Citizen Action Education Fund, a co-sponsor of the conference. "We know this new law won't solve all of our problems. It's hard to overstate, though, the likely impact of this legislation, particularly for consumers, and the importance of our early understanding and active participation in its implementation."

There are a variety of ways that New Jersey specifically will benefit from the law, Howitt explained. For example, an estimated 144,000 small businesses will be eligible for a business tax credit that will make it easier for them to provide health insurance for their employees.

Closing the 'Donut Hole'

The federal law will also close the so-called Medicare Part D "donut hole," which is the gap that about 109,000 New Jersey Medicare beneficiaries have in their in their drug coverage. That “hole” forces senior citizens to foot the bill for some prescriptions. But New Jersey residents who hit that gap will be getting a $250 rebate check.

Speaker Jaime Torres, regional director for the U.S. Department of Health and Human Services, said those checks will be mailed in the next two days.

Starting in September, the new federal healthcare law will also allow children to remain on their parents' health insurance policy until they are 26 years old. That will affect an estimated 27,800 individuals.

Howitt also went through the many consumer-protection aspects of the federal healthcare reform in New Jersey. For example, insurance companies will no longer be able to place lifetime caps on their coverage, which impacts 5.3 million Garden State residents who have private insurance coverage.

The federal government has allocated $5 billion to pay for healthcare for the uninsured who have pre-existing medical conditions, through the creation of high-risk insurance pools, which 35 states already have.

Pre-existing Conditions

New Jersey, which has been allocated $141 million of the $5 billion, already protects those with pre-existing conditions by barring insurers from denying them coverage, according to Howitt.

"In New Jersey, that basic protection pretty much already exists," she said. "You’re one of the very few states. Only five states currently offer that protection, which prohibits insurers from denying coverage to individuals with preexisting conditions."

Since New Jersey doesn’t need to create a high-risk pool, it expects to use its $141 million to otherwise subsidize coverage for individuals with pre-existing medical conditions, according to Howitt. She said that no one know exactly how that will work yet.

Under healthcare reform, Medicaid will cover 476,300 newly eligible New Jersey residents, according to Howitt.

Expanding Medicaid Eligibility

And the new law expands Medicaid eligibility to cover 25 percent of the Garden State’s uninsured.

"Obviously, all of these expansions in eligibility are going to be very costly," Howitt said. "The important thing to know is New Jersey actually won’t face most of those costs. The federal government will actually pay the cost of this vast expansion."

But New Jersey won’t see as big an increase in Medicaid recipients that other states will, according to Howitt. That’s because it already offered expansive coverage, because it set a higher income threshold for eligibility than other states. Healthcare reform lifts the income eligibility to a level near the one New Jersey already had in place.

Under the new federal law, by 2014 all states must expand Medicaid income eligibility to 133 percent of the federal poverty level, which is $30,000 for a family of four.

“New Jersey typically has been covering up to 200 percent of the federal poverty level,” Howitt said.

Large Immigrant Population

New Jersey has at least one disadvantage under healthcare reform: It has a large immigrant population that isn’t eligible for coverage, which means those individuals will remain uninsured even with the new federal law.

Ray Castro, a senior policy analyst for New Jersey Policy Perspective, brought up another complication that could affect health reform implementation, one recently covered by The New York Times.

At least 30 states, including New Jersey, assumed they were going to be the beneficiaries of a six-month extension of increased federal Medicaid spending—and they budgeted assuming they would get that funding.

If Congress doesn’t pass the extension, New Jersey will wind up with a $500 million budget shortfall. Gov. Christie could try to make up the deficit by cutting state funding to hospitals, for example, or other health-related programs.

“If we do not get that funding, that will have to be replaced,” Castro said.

Linda Moss is a veteran business reporter and freelance journalist who has worked for Crain's New York Business and Multichannel News, a cable trade publication.

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