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Medicaid Makeover Waits on Word from Washington

Hoping for $100 million from the federal government, NJ instead gets 200 questions about its Medicaid Reform Proposal.

New Jersey wants to remake its Medicaid program to improve healthcare and save money, goals applauded by many in the medical community. But the state was counting on a $107 million refund from the federal government to help its efforts, money it looks unlikely to get -- at least not in time for this fiscal year's budget.

That doesn't mean Medicaid reform is in jeopardy, but the state has more work to do if it's going to meet its targets, which call for a Medicaid makeover by next July.

The clock is ticking. Meanwhile New Jersey is still waiting for the federal government to give its approval to a 160-page Medicaid Reform Proposal known as the Comprehensive Waiver. Submitted in September by the state Department of Human Services (DHS) to the federal Centers for Medicare and Medicaid Services (CMS), the waiver was meant to save $300 million this fiscal year, through major changes to the $11 billion Medicaid program. Those revisions included contracting with managed care providers to oversee adult behavioral health and long-term care.

But a third of that $300 million was slated to come from a $107 million Medicare refund that the state is seeking from the federal government. Now it appears that New Jersey can't count on that money, at least not anytime soon.

"The $107 million would have been welcomed, and we were pushing very hard to get it. It would have been a quick source of funds and revenue for us," said Valerie Harr, who oversees Medicaid as director of the Division of Medical Assistance and Health Services in the state Department of Human Services.

"It is disappointing news," Harr continued. "But we are constantly updating our forecasting, and there are a lot of factors that go into projecting the Medicaid [budget] and this will be one component."

This isn't the first time this year that New Jersey has been frustrated in its attempts to save money on Medicare. The state originally proposed saving $32.5 million by imposing income restrictions on new enrollees in New Jersey FamilyCare, the state-funded expansion of Medicaid. But it backed off in the face of vocal protests from legislators and stakeholders. The rules didn't change: parents earning 133 percent of the poverty level can continue to sign up for the program.

The state had also floated a plan requiring Medicaid members to pay a $25 co-pay for emergency room visits, but backed off on that as well, in face of opposition.

But how does a Medicare matter affect New Jersey's Medicaid budget?

Harr explained that New Jersey is among several states seeking a total of $4.2 billion in Medicare refunds. For years, care that should have been billed to Medicare by the Social Security Administration's disability program was erroneously billed to Medicaid, a joint state and federal program. New Jersey's portion of that refund would be $107 million.

Sean Hopkins, senior vice president of the New Jersey Hospital Association, has closely monitored the state's efforts to get the Medicare refund. "For a couple of decades the Medicaid program was covering services to people who were eligible for Medicare," he said. When the snafu came to light, he said at one point the federal government suggested that the states should get their money back from the healthcare providers, then ask them to rebill Medicare. "That will not happen. The claims would not be timely. They are very old claims. And to have the providers have to go back and bill Medicare would be a tremendous burden," Hopkins said.

Several years ago the states seeking the refund formed a coalition and hired a Washington law firm to help them resolve the issue.

"Initially, the states were trying to get a legislative fix, and there were various efforts to have it fixed at the legislative level" by Congress, Harr said. "Ultimately there was a proposal to try to have an administrative solution, and conversations with HHS were positive," she added. It appeared that the federal government "was willing to work with the states around this issue."

But Harr said the tide of the negotiations turned in late October, when the general counsel of HHS "reported back [to the coalition] that the secretary of HHS does not have the authority to provide the administrative remedy that the states were hopeful" of receiving.

Since an administrative fix by HHS is off the table, Harr commented, "We probably are not going to be able to count on receiving that $107 million, at least in the short term." She noted that she has not yet had "conversations with the governor's office or even with our chief financial officer [in DHS], so I don't know in terms of budgeting what the decision will be."

The rest of the $300 million savings reflect changes the state is seeking in the Medicaid program that are detailed in the Comprehensive Waiver. Harr said the CMS came back with about 200 questions, and when the issues are resolved the agency will decide whether to approve all or part of the waiver.

"We need to look at our latest spending projections" which she said will be affected by the timing of the CMS ruling on the waiver, and then the timing of the changes spelled out in the waiver. "Then we will have to make the decision about how much of that $107 million we need to account for."

Suzanne Ianni is chief executive officer of the Hospital Alliance of New Jersey, whose members are "safety net" hospitals that provide care to the inner city poor and typically have the largest Medicaid and uncompensated care caseloads. Ianni said she supports the waiver and appreciates the fact that the it does not propose cutting Medicaid reimbursements to her member hospitals.

According to Ianni, the waiver "is truly a reform document aimed at innovative strategies to both streamline Medicaid's administration and improve the health of Medicaid patients through programs such as medical homes and Accountable Care Organizations. We sincerely appreciate that the Christie administration refrained from provider cuts as New Jersey's Medicaid rates are already some of the lowest in the nation."

It's too early to predict the impact of the state's not getting the $107 million to plug into the current budget. "As the year rolls on, there are a lot of moving parts in the budget," Hopkins said. "The budget is a blueprint for what you expect to happen, and then real experience replaces it."

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