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Healthcare Policy in NJ: The Biggest Issues to Watch in the Year Ahead

Medicaid changes, Supreme Court‘s ACA decision, state health costs are at top of agenda for 2015

joe vitale
Sen. Joe Vitale (D-Middlesex), chair of the Senate Health Committee and the primary architect of Family Care

There were massive structural changes in New Jersey healthcare in 2014, including the addition of more than 500,000 newly insured residents due to the Affordable Care Act and the launch of Medicaid managed long-term services.

But the coming year may prove to be a bigger test of how policies are implemented -- and whether the state can get a better handle on rising healthcare costs.

Policy experts cited five issues as ones that are likely to be particularly compelling in the coming year:

  • The introduction of Medicaid Accountable Care Organizations, which are designed to better coordinate healthcare delivery to low-income residents, as well as other changes to Medicaid;

  • The way the state responds to a U.S. Supreme Court decision due by June that could invalidate the tax-credit subsidies that allow many lower- to middle-income residents to purchase health insurance.

  • The possibility that the state will address its rising healthcare costs as it considers changes to the health benefits received by state employees and other government workers;

  • The decisions made by the Legislature as it weighs changes to how bills for healthcare providers that are outside of a patient’s insurance network will be handled;

  • The next steps taken by Gov. Chris Christie and legislators in the state’s effort to curb drug addiction and the rising number of deaths from the use of opioids.

Medicaid Accountable Care Organizations

The crucial safety-net insurance program for low-income residents (as well as most who receive long-term care) is in the midst of multiple changes. Topping the list in the coming year is the rollout of Medicaid Accountable Care Organizations (ACOs). Seven coalitions of healthcare providers in geographic areas that span the state have applied to be a part of the program, which allows doctors to manage the healthcare of Medicaid recipients by hiring nurses as care coordinators and to target care quickly to those patients with the greatest, most-complex needs.

It’s likely that the ACOs will start in the first half of the year, allowing for some early results from the project to begin to be assessed by the end of the year.

The application process itself has revealed one of the challenges for the state program. The ACOs must include 75 percent of the primary-care providers in their respective ZIP codes -- but provider listings on insurance websites are in many cases out of date.

Another Medicaid challenge could come in the form of fewer doctors. A two-year increase in Medicaid reimbursements that was part of the Affordable Care Act -- which allowed primary-care doctors to obtain the same reimbursements from Medicaid patients as they do with Medicare patients -- has expired. (Congress didn’t vote to extend it.) Thus, doctors that took on new Medicaid patients may be reluctant to do so in the future.

But Linda Schwimmer, vice president of the nonprofit New Jersey Health Care Quality Institute, predicts that the ACO program will be successful -- and provide critically needed data on what approaches work.

“Having these seven incubators going will really be a good spotlight on a lot of the Medicaid issues,” Schwimmer said.

Sen. Joseph F. Vitale (D-Middlesex) said it will be interesting to see whether patients enrolled in the ACOs receive more of their care in primary-care offices instead of hospitals, what are the health issues that cause them to seek care, and what effect the organizations will have on the amount of charity care provided by nearby hospitals.

And with 396,000 more recipients of NJ FamilyCare (the name of New Jersey’s Medicaid program) at the end of 2014 compared with the start of the year, the stakes for delivering effective, efficient Medicaid services have grown.

State reaction to U.S. Supreme Court decision

The U.S. Supreme Court is expected to issue a decision in June on King v. Burwell, a challenge to the subsidies that the federal government has been providing to residents of states like New Jersey that opted to have a federally operated individual insurance marketplace. If the court agrees that the Affordable Care Act doesn’t allow for these subsidies, then New Jersey officials will have to revisit their decision against having a state-run insurance exchange (there is no debate on whether the ACA allows subsidies for residents of states that have their own exchanges).

Roughly 200,000 New Jersey residents could be receiving subsidies through income-tax credits by the time the court issues the decision.

Schwimmer said a negative ruling could be the “death knell” for the individual mandate to buy insurance in New Jersey and other federal marketplace states, since many of the residents with subsidies couldn’t afford insurance without them.

New Jersey Policy Perspective senior policy analyst Raymond J. Castro noted that since four justices voted to hear the case, it’s likely that there are already four opposed to the subsidies, since justices who support the subsidies were unlikely to vote to hear the case. But he said that if the court rules against the subsidies, the details of the ruling would be crucial.

For example, the court could allow states to simply declare that the federal marketplace is a “state exchange” – requiring no additional funding from the state. But if the court says states must set up their own information-technology infrastructure to support the exchange, state officials may balk at the investment. Christie’s presidential ambitions could further complicate the issue, since Republican primary voters are hostile to the ACA.

“I think the best thing for the governor politically is that the Supreme Court reject the lawsuit, because he can’t win if the decision is that we have to have a state exchange,” Castro said.

He also noted that if the federal exchange subsidies are invalidated, some residents depending on the subsidies will be in the middle of treatments for cancer and have scheduled surgeries.

“Is he really going to terminate them?” Castro said. “I just think that is going to create a huge, huge dilemma for him … I hope that there’s some contingency planning going on in the governor’s office.”

Vitale predicted that if Christie were faced with such a decision, he would find a way to allow residents to keep their insurance.

“I don’t think he would leave hundreds of thousands of New Jerseyans without insurance,” he said.

How the state addresses its rising healthcare costs

Christie’s Pension and Health Benefits Study Commission is expected to release a report on how much public workers should contribute to their benefits, while public employee unions are fighting for the ability to negotiate those benefits.

But Schwimmer said the state has a significant opportunity to go beyond just discussing what share workers pay toward benefits and instead focus on taking steps to make its health spending more cost-effective.

“There’s a lot of innovative programs that are being done by other states and other large employers” that could lead to saving money overall rather than just arguments over shifting ever-expanding costs, Schwimmer said.

Potential models that the state could turn to include the health center that Unite Here Health opened for union workers in Atlantic City, which allows a more centralized, coordinated approach to healthcare costs, and the California Public Employees Retirement System’s use of reference pricing, in which employees were directed toward hospitals that provided services at lower costs or were required to pay more out of pocket.

The issue will grow in importance as the state faces additional costs from the Affordable Care Act, which is scheduled to impose a 40 percent excise tax starting in 2018 for plans that cost more than $10,200 for individual coverage and $27,500 for family coverage.

Vitale said any solution must be fair to the workers and honor the state’s obligation to retirees, while balancing the need to control costs and ensure the long-term sustainability of the system for future employees.

Vitale added that the result shouldn’t depend on increasing workers’ out-of-pocket expenses, which he said would defeat the entire purpose of insurance for those who face health crises.

Addressing out-of-network medical bills

The additional healthcare costs that arise when patients receive services from doctors and hospitals that are outside of their insurance networks will likely be the focus of legislation in the first half of the year -- but it will be a challenge for legislators to reconcile the stark differences over potential solutions. Some of the services patients receive at hospitals and other facilities may be out of network, and when patients get the bill, they can be in for a costly surprise.

Groups representing insurers, consumers, and employers have said that current out-of-network costs harm patients indirectly even when they don’t have to pay them directly. That’s because additional costs to private insurers leads to higher insurance premiums, while higher costs to public programs like Medicare and Medicaid lead to higher taxes.

But associations of doctors and hospitals argue that the onus should be on insurers to inform patients about potential out-of-network costs and argue that maintaining the ability to be out of network is important in negotiating with insurers.

Schwimmer expressed hope that Christie’s office will be involved with legislators in negotiating laws to address the issue, noting that out-of-network expenses affect the insurance costs for state workers and local public employees, putting pressure on the state budget and local property taxes.

Castro said that making out-of-network prices more transparent would be a good step, but that legislation should prevent providers from charging high out-of-network rates in the first place. He said New Jersey’s health outcomes don’t justify its high healthcare costs.

Potential solutions include measures that would require insurers and providers to enter into arbitration over out-of-network disputes -- although the details of this requirement will be essential to controlling costs. In addition, a bill sponsored by Assemblyman Gary Schaer that requires hospital bill price transparency could be revived.

Vitale said he’s met with Schaer, Assembly Financial Institutions and Insurance Committee Chairman Craig J. Coughlin (D-Middlesex), and Assemblyman Troy Singleton (D-Burlington) -- who supports mandatory arbitration -- and all four agree that whatever legislation is introduced must protect the interests of consumers “first and foremost,” while also considering the interests of providers and payers. He predicts that there will be a “reasonable solution” passed this year, but the details are “still a work in progress.”

Christie, Legislature consider further steps to stem overdoses

Much of the second half of 2014 in the world of New Jersey health policy was spent discussing potential ways to address the crisis of overdose deaths due to heroin and prescription opioids. With many bills focused on addiction prevention, education, treatment, and recovery already passed by the Legislature, Christie will have an opportunity to extend his approach to curbing drug addiction.

In addition to Christie’s role in determining which bills become law, the Legislature is still considering one of the more controversial proposals -- requiring doctors and advanced practice nurses who prescribe opioids to check the state’s Prescription Monitoring Program before writing prescriptions. The PMP, which tracks all opioid prescriptions, has been used by other states to reduce the number of illegal prescriptions that are being diverted toward those with addictions. But many doctors are staunchly opposed to the proposal, arguing that it would be time-consuming and ineffective.

Vitale said the state budget currently doesn’t provide all of the resources that are needed to address the problem, but the administration has been working with legislators to address funding.

“This isn’t something that’s a passing healthcare fad or a flu bug that comes and goes every year, this is an everyday crisis for thousands of New Jerseyans,” with significant human and financial costs that deserves a comprehensive response, Vitale said.

Vitale added that there is room for compromise on the PMP bill, perhaps by requiring that doctors check the registry the first time they prescribe controlled dangerous substances to a patient and again at a later date for patients with long-term pain, rather than checking it every time they issue a prescription. He noted that the number of doctors participating in the program has been steadily rising and expressed hope that further gains can be made with the cooperation of doctors.

Vitale said a long-term strategy to address addiction must recognize that it is similar to any other disease.

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