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Opinion: Rediscovering NJ's Tradition of Healthcare Innovation

Are we witnessing the resurgence of the Garden State's venerable history of healthcare reform?

Observers of healthcare in New Jersey can be forgiven for being a bit cynical about its future. Cynics would point to New Jersey’s poor performance on myriad measures of health system performance. (See, for example, the Commonwealth Fund State Health System Scorecard, on which New Jersey ranks 30th.)

But the truth is that New Jersey has a venerable history of healthcare system innovation, and we may be seeing a resurgence of innovation today.

New Jersey was at the vanguard of healthcare financing innovation as early as the 1970s, when policymakers began experimenting with incentives for hospital efficiency and cost control.

In 1980 New Jersey led the way in innovative hospital financing with the first Diagnostic Related Group (DRG) payment system. Just a few years later DRGs were adopted as the apparatus of the Medicare hospital prospective payment system which notably (and to many, surprisingly) has been shown to hold down hospital spending without negative consequences for patients.

A decade later, the New Jersey Legislature enacted path-breaking reforms in the regulation of non-group and small-group health insurance. Those regulations served as models for the 2010 Affordable Care Act (ACA), which prohibits insurers from basing insurance eligibility or premiums on health status, among other things.

To be sure, the results of New Jersey’s policy experiments were not universally positive, but innovation always caries some risk. Even when things do not fully work out as hoped, lessons learned can inform future policy. For instance, U.S. Solicitor General Donald Verrilli in oral arguments in the Supreme Court Obamacare challenge cited the New Jersey insurance market regulatory experience in defending the individual mandate as a means of ensuring that guaranteed issue and community-rating reforms work effectively.

Today, the culture of healthcare innovation appears to be returning to New Jersey. Healthcare providers are taking advantage of opportunities for change under the ACA by forming Accountable Care Organizations. Insurers and medical practices are experimenting with enhanced models of primary care, giving patients with complex chronic illness more education and support to avoid expensive hospital episodes and improve their health and quality of life. Notably, New Jersey is just one of seven participants in the ACA’s Comprehensive Primary Care initiative.

The CPC is a collaboration (a word not often used when the federal government is involved) among some of the biggest insurers (including Medicare and Horizon Blue Cross Blue Shield) to coordinate incentives and supports for cost-saving patient-centered care in over 70 local primary-care practices. Enhancements to electronic health information technology are moving forward after a slow start in New Jersey as well.

Despite Gov. Chris Christie’s unmistakable animus toward Obamacare, New Jersey government is taking advantage of opportunities under the reform law to improve its health policy apparatus. For instance, New Jersey has accepted over $5 million to improve oversight and transparency of private health insurance premiums. Whether or not the administration elects to operate parts of the Health Insurance Exchange, the clearinghouse for coverage that will be launched later this year, its acceptance of nearly $9 million in grants for exchange planning and development will leave a legacy of better informed policy and government apparatus to facilitate coverage for New Jersey residents.

Perhaps more important than accepting funding under the ACA, the Christie administration has moved forward on bold state initiatives to improve care and tackle rising costs. The Medicaid Comprehensive Waiver, approved by the federal government in October last year, represents the biggest change to the state’s largest health care program in a generation.

The waiver involves innovative strategies to better manage care of some of the state’s sickest and highest-cost healthcare consumers. A year earlier, the Legislature enacted and the governor signed the Medicaid Accountable Care Organization Demonstration Act, a path-breaking strategy to advance community-based care coordination modeled on the work of the Camden Coalition of Healthcare Providers. While implementation of this law has been complex (Medicaid is nothing if not complex), it should get underway this year.

Health system costs and performance are huge challenges in New Jersey. But the New Year is a time for optimism, and there is good reason to be optimistic about New Jersey healthcare.

Joel C. Cantor is the director of the Center for State Health Policy and professor of public policy at Rutgers University. He has authored numerous studies of health insurance regulatory policy, healthcare delivery system performance, and access to care for low-income and minority populations. He serves frequently as an advisor on health policy matters to New Jersey state government. The views expressed in this essay are solely those of the author and are not endorsed by funders of the Center for State Health Policy.

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