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NJ Loses Nearly $8 Million in Standoff Over Affordable Care Act Funds

Deadline passes with no agreement on use of federal grant intended for creation of state-run insurance marketplace

Banking and Insurance Commissioner Kenneth Kobylowski
Credit: NJTV
Banking and Insurance Commissioner Kenneth Kobylowski.

New Jersey lost a $7.67 million federal Affordable Care Act grant yesterday as state and federal officials failed to reach agreement on how the money could be spent.

The crux of the dispute appeared to be over Medicaid costs. While the state largely wanted to use the money to support expansion of the state’s Medicaid program, federal officials maintained that the grant must be used more directly to support the ACA insurance marketplace.

The state received the grant in February 2012 for use in building a state insurance exchange. After Gov. Chris Christie announced a year later that the state would opt for a federal insurance marketplace, rather than a state-run one, state and federal officials began discussions about how the money could be spent.

Yesterday was the deadline for the state to come up with an acceptable plan for using the money.

The state wanted specifically to devote the bulk of the money to support a call center answering questions about New Jersey FamilyCare, the state’s largest Medicaid-funded program; advising residents with chronic infectious diseases about the best health coverage options available to them; and building the computer connections to exchange state data with the federal marketplace.

State Department of Banking and Insurance (DOBI) Commissioner Kenneth E. Kobylowski publicly revealed those details yesterday in a letter to U.S. Secretary of Health and Human Services Kathleen Sebelius.

In the letter, Kobylowski noted that the only requests that federal officials approved were for purposes that the state later found were unnecessary, such as a request for $600,000 to address a surge of inquiries to the state Office of Consumer Protection that never materialized.

“In short, we find ourselves with preliminary approval to use a small portion of this grant in ways that are unnecessary while we are unable to use the bulk of this funding to meet needs that are urgent and growing ever greater as we approach the end of the initial enrollment period,” Kobylowski wrote.

Federal officials would have approved a range of uses for the grant, including marketing the insurance marketplace to the public, a use supported by a coalition of advocates for expanding healthcare access, as well as by the state’s Democratic members of Congress and the Legislature.

Raymond J. Castro, senior policy analyst for New Jersey Policy Perspective, said DOBI officials failed to make significant changes in its plans for the grant months after they knew the federal government wouldn’t approve the plans.

Kobylowski said the state’s request to use part of the grant on information technology was based on a document attached to a December 2012 letter from Sebelius to Christie that said the grant could be used in this area.

However, federal officials said that an earlier federal regulatory guidance ruled out that use.

The state made three proposals to the federal government, according to the letter. In July 2013, DOBI asked to spend $4.86 million to increase the capacity of the call center for New Jersey FamilyCare, has been growing since Christie agreed to expand eligibility for Medicaid. In addition, the state sought $2.39 million for computer systems.

After the July plan was largely turned down, the state submitted a revised proposal in October, reducing the computer system portion of the spending to $1 million and adding a $780,000 request to help residents with chronic infectious diseases maintain coverage as their income fluctuates. This request was also largely turned down.

Kobylowski made a final appeal for the state plans in December.

HHS spokesman Fabien Levy said the federal government remained “committed to working with New Jersey to support their efforts to successfully implement their Marketplace.” His use of the phrase “their Marketplace” shows how far apart federal and state officials’ thinking on the ACA is, since state officials have emphasized that it’s a federal marketplace.

“We have reached out to the state numerous times over the last few months in order to avoid a last minute scramble, but unfortunately the state has yet to send us a request to re-scope their grant for any allowable activities,” Levy wrote in an emailed response to questions.

Despite rejecting the grant plans, the federal government would still cover much of the cost for New Jersey FamilyCare, as part of its commitment to fund Medicaid. The state would have to provide a matching amount – for some projects, the federal government would cover 90 percent of the cost and the state would cover 10 percent.

Kobylowski said the state FamilyCare program has hired 75 call center staffers through a combination of state and federal matching funds, but remains 25 staffers short of the level advised by the call center operator, which is straining to handle the large volume of calls while processing a significant influx of applications.

“Throughout the negotiations between our two departments, one recurring theme has emerged, in my view: New Jersey consistently has sought the flexibility to use this grant to meet the unique needs of our residents and we have been advised repeatedly that the permissible uses for this grant are limited – highlighting a fundamental flaw of the Affordable Care Act,” Kobylowski wrote in his letter. “Given the ease with which the federal government continues to grant itself flexibility in regard to myriad statutory and other provisions of the Affordable Care Act, it is my view that providing a modicum of flexibility to New Jersey should not be a burden.”

Castro sharply criticized Kobylowski’s stance, saying that if the state wanted flexibility, it should have opted for a state exchange. This would have led to up to $200 million in additional federal grants, Castro said.

He added that the state was already obligated as part of Medicaid to cover some expenses, such as updating its outdated computer system. And, Castro said, Kobylowski essentially admitted in the letter that the state isn’t upholding its responsibility.

“That’s really chutzpah, to even say that,” Castro said of the computer system plans. “It doesn’t make sense, because the state needed to do this anyway.”

Castro said the state’s requests were clearly inconsistent with federal guidelines for the grant, since the money was supposed to be spent directly on the marketplace. He recently wrote a report estimating that 95,000 additional uninsured New Jerseyans could gain insurance if the state spent the grant to increase public awareness of the ACA.

New Jersey Policy Perspective is a member of New Jersey for Health Care, a coalition of groups advocating for increased access to healthcare. Castro said the group was planning to announce enrollment goals in the coming weeks, but the failure of the state to spend the federal grant on advertising the marketplace will make this harder.

“We’re going to try to get the state to do more,” Castro said. “We know that we don’t have the resources, particularly in the area of media (advertising), which can be costly – this particular fight is over, but the bigger fight is not.”

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