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When Will New Jersey Reap Financial Benefits of Federal Medicaid Waiver?

State allots additional $125 million as savings from switch to long-term managed care have yet to materialize

Jennifer Velez
Health and Human Services Commissioner Jennifer Velez (center of photo)

New Jersey was supposed to be saving money in making the transition to managed care for Medicaid long-term care, but instead expects to spend an additional $125 million on the transition in the coming year.

State Sen. Paul A. Sarlo (D-Bergen and Passaic) expressed frustration that Gov. Chris Christie’s proposed budget for the fiscal year starting July 1 includes that additional funding to implement the state’s comprehensive Medicaid waiver.

Sarlo noted that the administration had projected $300 million in savings during the first three years of the waiver -- which enters its third year in July.

The central feature of the waiver – and a big reason why savings were expected – is that the state is moving long-term Medicaid recipients to a managed care program. That aspect of the program does not begin until July 1 of this year.

The program is called a “waiver” because it requires the federal government to approve an alternate way of reimbursing the state and providers for Medicaid expenses.

The idea is to give more flexibility to both providers and recipients in how payments are made For instance, Medicaid may provide additional reimbursements for home-care aides or provide payments for building wheelchair ramps. Before the waiver was approved, Medicaid regulations could prevent those reimbursements.

Sarlo noted that the original projection was that the state would save $25 million in the 2014-2015 fiscal year. Instead, the state is now projecting it will spend the additional $125 million.

“We haven’t seen the savings – it’s costing us more money,” Sarlo said.

But state Health and Human Services Commissioner Jennifer Velez defended the transition, emphasizing that it will save money in the long term and that the one-year outlay is needed to help cover costs related to the transition.

Velez also said that state will be ready July 1 to move residents who are newly eligible for long-term care to a comprehensive set of managed-care benefits rather than traditional nursing care. The state is aiming to have more residents receive long-term care in their homes and in their communities rather than in nursing homes.

Sarlo conceded that the transition might save money in the future, adding that he has the “greatest confidence” in Velez’s handling of the transition.

But he said that absence of savings in the budget proposal is concerning. He linked it to the state’s other budgetary problems, as well as the recent bond rating downgrade by Standard & Poor’s.

“We show savings in our budget and we show really optimistic revenue projections and they don’t come to fruition, and then we get questions from outside financial institutions and credit rating agencies,” Sarlo said.

Velez said implementing the Medicaid waiver is a complex process, including combining services that have been provided through separate waivers from federal regulations.

“What we want to be able to do is make sure that people stay in the community as long as possible, with the appropriate services and supports around them, so that they don’t have to more readily go into a nursing home as a first option,” Velez said.

Current nursing-home residents will remain in nursing homes, but new long-term care recipients will be able to receive benefits while staying in their homes , until they have to move to a nursing home. Velez said that the $125 million will help pay for care managers who will ensure that people who are living in their homes are receiving the care they need.

Velez said the state decided against more aggressive cost-cutting moves, such as reducing payment rates to nursing homes.

Sen. Jennifer Beck (R-Monmouth) said linking the Medicaid waiver costs to the bond rating downgrade was a “little stretch,” adding that she had not been under the impression that the savings from the waiver would be instantaneous.

Beck added that the state’s decision to seek input from many different stakeholders and interest groups may have delayed the savings, a point that was supported by Velez.

“We did have a very inclusive process and I think that was the right way to go,” said Velez, adding that the importance of the transition made the state’s deliberative approach worthwhile..

She added that the state must be able to demonstrate over the course of the five-year waiver – which ends on June 30, 2017 – that the new managed-care, community-focused approach is no more costly than the traditional nursing-home centered approach.

Velez added that the state is receiving an additional financial benefit, since the federal government is providing matching funds for more state spending as part of the waiver.

Sen. Sandra B. Cunningham (D-Hudson) expressed concern about whether the state will be ready for the July 1 transition -- adding that any change that affects senior citizens runs the risk that people won’t receive the necessary information.

Velez said top state officials have spent “an inordinate amount of time” making sure that both the state and the insurance managed care organizations that will oversee the care of long-term Medicaid recipients will be ready.

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