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From Medicaid to Managed Care: The Christie Administration's Plan to Slash NJ Healthcare Costs

The administration suggests ripping up the rulebook for NJ FamilyCare and Medicaid, but details are sketchy.

Theodora, a 20-year-old Summit resident, is unable to walk, talk or eat on her own. With a tracheotomy that requires careful cleaning and constant monitoring, she even needs help to breathe.

Diagnosed as a child with an extremely rare bone disorder that involves a form of dwarfism, developmental delays and skin disease, the young woman needs 24-7 care from trained nurses. Today, 16 of those hours are covered by a team of dedicated caregivers who are paid through Medicaid. Her mother, Vanessa, who is also raising three teenagers, handles the overnight shift.

But in just 38 days Theodora’s carefully constructed system of homecare could be torn apart. As one element of a massive effort to save more than half a billion dollars in healthcare costs, New Jersey plans to move hundreds of thousands of Medicaid patients into managed care -- many by July 1. And while some healthcare advocates agree that the reform plan is well-intentioned in its efforts to promote integrated and preventative care in a community setting, patients, providers and advocates all worry that it is happening far too quickly, without an adequate safety net in place.

"This is very, very reckless. I don’t know how they could do this," Vanessa said last week, describing the ordinary, bulk-rate letter she received from state officials on May 12, informing her of the pending change. She is still awaiting a packet of information the state promised to send about the HMO plans that will be available to her daughter.

Since the nursing agency that provides Theodora’s caregivers is not part of an HMO, Vanessa is fighting to find a way to coordinate her daughter’s care. But she also worries about other parents with severely ill children -- parents who might not speak English, or who are also struggling with housing or their food budget.

"There’s just a whole bunch of issues here," Vanessa said. "They just can’t do that to these kids."

State officials say they are working hard to allay concerns about this changeover, participating in workgroup meetings with the managed-care companies, healthcare providers and patient advocates. They note that they have properly laid the groundwork for the move. But Democrats in the legislature are concerned about the lack of detail about the reform plans and the impact the cuts would have on poor New Jerseyans. (One proposal would severely limit access to the state’s Medicaid program, so that a woman with two children who made less than $100 a week would be earning too much to qualify for subsidized health insurance.) To get answers, the Assembly Budget Committee will hold a special hearing today to press administration officials for more details.

“The administration’s continued theme of only looking out for those most fortunate is long past tiresome. It needs to dump this plan and come up with a more humane approach,” said Assembly Speaker Sheila Oliver, (D-Essex), in a statement announcing the hearing. She noted that she "cannot envision" the plan being approved by the Democratic-controlled legislature.

Targeting Medicare

Gov. Chris Christie made clear in February when he presented his $29.4 billion budget for fiscal year 2012 that Medicaid would be among the programs targeted for a serious overhaul and funding cuts of about 6 percent -- part of more than half a billion dollars in healthcare spending reductions. Paid by a roughly 50/50 mix of state and federal funding, New Jersey’s $10 billion Medicaid program provides healthcare benefits to nearly 1.3 million poor and disabled adults, children and senior citizens. Last year the program received an additional $1 billion in federal stimulus money, which will not be available in 2012.

"Here, as elsewhere, we propose real reform to put us on a sounder footing for the future, and we have worked to preserve priorities and provide a safety net for those most challenged by the economy," Christie said in his February 22 budget speech.

These budget cuts range from small program changes -- the addition of a $3 co-pay for medical daycare -- to enormous systemic reforms, which could force hundreds of thousands of the sickest, most vulnerable people to find new doctors, nurses and clinics in just weeks.

The reforms could also mean that access to New Jersey’s nationally recognized FamilyCare program, which uses state and federal money to expand Medicaid to cover scores of working-poor residents, will be drastically slashed to save money. FamilyCare allowed the state to build on the Medicaid program, which traditionally covers the poorest residents, to include more working-class families.

If approved, the governor’s proposal to reduce adult eligibility to FamilyCare from 133 percent of the federal poverty line to around 25 percent -- or $4,633 a year for a family of three, which is less than $90 a week -- would leave New Jersey with one of the of the nation’s most restrictive programs. (At one point, the program covered parents up to 200 percent of the poverty limit, or more than $37,000 for three; children in families earning up to 300 percent are still covered.) State officials have promised that the program will remain open to children and no current participants will be kicked out.

"The working poor are being the scapegoat,” said Raymond Castro, a healthcare analyst at the liberal think tank New Jersey Policy Perspective, who has written about what the FamilyCare changes could mean to state residents on his blog.

Castro and other advocates believe that, given the state’s current economic climate, it is entirely the wrong time to trim safety net programs like Medicaid.

"Other states get it -- even when there’s this terrible economic bind -- that these programs need to be protected," Castro said, noting that only two states, New Jersey and Arizona, actually cut funding last year.

All together, the governor called for a $540 million reduction in state healthcare spending next year, including $240 million in cuts outlined in the budget and another $300 million for which there has been almost no detail provided -- until late last week, barely six weeks before the legislature must approve the 2012 budget.

Reading the Waiver

The $300 million would come through a variety of program changes that are spelled out in a Comprehensive Waiver request to the federal office that runs the Medicaid program. Like a growing number of other states, New Jersey is asking the Obama administration to allow it to overhaul its administration of the Medicaid program and make substantial changes in eligibility and coverage to find financial savings. In return for permission, the state promises "budget neutrality," an assurance that the program will be run for five or more years with a set level of federal funding, leaving the state to cover most cost increases, if they occur. While states require federal waivers to make almost any change to their Medicaid programs, these comprehensive, or "global" waivers, are fairly new. So far Vermont, Tennessee and Rhode Island have had comprehensive waivers approved.

"New Jersey is a national leader in its coverage of children, with one of the most generous [publicly subsidized] programs in the country," noted Human Services Commissioner Jennifer Velez late Friday when her department released what it called a “concept paper" about the comprehensive waiver. The 18-page paper was also submitted to federal officials, but it will be followed by a more detailed proposal -- with dollar figures itemized -- at the end of June.

"To support these efforts, and to ensure continuity in our healthcare programs and services, we must control Medicaid’s skyrocketing costs while improving healthcare delivery," Velez said. "This concept paper provides a roadmap to reasonable program reform for New Jersey. The initiatives, collectively, present an opportunity for the state to sustain the safety net by preserving and improving the delivery of services for the most at-risk populations."

Administration officials have long voiced frustration over the Medicaid program’s current setup, which involves a half-dozen divisions spread across three state departments: Health and Senior Services, Human Services, and Children and Families. The proposal calls for consolidating the program’s administration in one spot and streamlining communication with the federal government to create a more efficient program that can get patients enrolled and in proper treatment more quickly.

Prescreening Patients

The proposal also aims to ensure that patients are carefully screened for conditions that attract more federal funding and includes savings from programs created through federal reform, which will be fully implemented in 2014. In addition, it suggests that the state take a $107 million "offset” in 2012 to account for a complex accounting error that federal officials conceded to making years ago. Although other states have also asked for this relief, it was not clear if Washington has ever granted permission.

But the proposal would also give state officials far more latitude in determining who is eligible for the subsidized insurance programs and exactly what services will be covered, and for how long. For example, it calls for including child support, life insurance payments and other benefits as earned income, which will further limit the number of adults who can qualify for FamilyCare.

While it calls for practically doubling the low reimbursement rates to doctors who treat Medicaid patients, the proposal would pay for this hike through what it calls a "rebalancing" of the program to limit eligibility and benefits. This could mean co-pays, like a $25 fee for inappropriate emergency room visits, or even premium contributions.

The administration’s proposal also calls for HMOs to create incentive plans to encourage patients to help themselves. Patients could get pharmacy discounts or other rewards if they get proper screenings and immunizations, quit smoking, lose weight and show up on time for the classes and appointments scheduled by their doctors. The outline notes federal grants of $5 million to $10 million are available to help pay for similar incentive programs for patients who are not in managed care.

Healthcare providers are particularly worried about the massive transition to HMO care, which would be the most dramatic change to Medicaid since it was created in 1965. Although the concept paper lacks details as to the specific patient numbers and parameters, it says that between July and September primary and acute care for most Medicaid participants -- including elderly, disabled patients and several hundred of the sickest residents of the state, like Theodora -- will be shifted into one of four pre-approved HMOs.

Come January, behavioral health services for adults with less severe needs would be coordinated through managed care. By July 2012 these HMOs would also handle nursing home and long-term care for Medicaid patients. Although state officials have said that no one will be moved without a proper evaluation first, it is not clear if patients will be able to keep their current doctors or if the HMOs even have enough doctors to handle the new patient load.

"They’re moving this way too fast. Recipients cannot make a reasonable choice without more information,” lamented Jean Alan Bestafka, CEO of the Home Health Services and Staffing Association, which represents home health aides.

Negotiating Nursing Contracts

Currently, Medicaid pays these home health aides and nurses directly. But the changes require hundreds of nursing agencies that employ tens of thousands of nurses to negotiate contracts with the HMOs, learn new coding and billing practices, and set up new administrative systems -- all in the next month, Bestafka explained. "It’s going to be a disaster, a real disaster," she said.

Ward Sanders, president of the New Jersey Association of Health Plans, which represents the HMOs involved and other insurance providers, said his members have participated in the workgroup meetings and are setting up contracts with nursing agencies and other providers. The move should improve access and quality of care, especially for those seeking behavioral health services.

Healthcare advocates believe that funding decisions in recent years also leave low-income residents with fewer options when it comes to healthcare. Changes to the income limit and eligibility requirements for FamilyCare mean some 70,000 previously eligible adults will now be excluded; another 22,000 recent immigrants who were in the program have since been forced out, according to NJ Policy Perspective estimates. In addition, 1,400 adults, primarily parents with grown children who earn more than 25 percent of the poverty level, will also be removed in the coming year.

The administration is "systematically dismantling access to affordable healthcare for tens of thousands of residents," said Sen. Joseph Vitale (D-Middlesex) who helped create FamilyCare in the late 1990's. And when parents are excluded from coverage, children are less likely to receive proper, preventative care, he said.

“It’s a steady march backward,” Vitale said, noting that when parents are excluded from health insurance coverage, children are also less likely to receive appropriate, preventative care.

In addition to the major changes proposed for Medicaid and FamilyCare, healthcare savings included in Christie’s 2012 budget contain proposals to charge elderly, disabled patients prescription co-pays and a $3.7 million cut in funding for AIDS drugs. The budget also contains a $31 million cut to nursing home payments, assumes $35 million in savings by rooting out more fraud and abuse -- a figure critics’ question -- and includes nearly $39 million more in federal hospital funds.

"We need to implement significant changes, but we are not being rash," Commissioner Velez told the Assembly Budget Committee last month, when discussing the Medicaid reforms. "These savings initiatives we have proposed are not so aggressive as to drive providers out of business or for clients to be denied care."

But patients and healthcare providers are not so sure. Bestafka said her phone is ringing off the hook with calls from agencies and aides desperate for answers. Crystal Snedden, the Health Care Campaign Coordinator at the activist group Citizen Action, said she is also getting calls from low-income parents, like Vanessa, who are "scrambling to figure out what this means for them and their doctors."

"When you apply for a waiver you tend to get less money and more flexibility," Snedden said. "But what good is flexibility going to do if you don’t have enough money to provide the care you need?"

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