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Murphy Administration Hopes to Save on Cost of Public-Worker Benefits

Renewed focus in Trenton on price tag of health insurance, as troubled pension system also expected to come in for more scrutiny

Acting state Treasurer Elizabeth Maher Muoio
State Treasurer Elizabeth Maher Muoio

On the heels of a new state budget that increased both taxes and spending, Gov. Phil Murphy’s administration is moving forward with a plan to trim millions of dollars from the state’s worker-benefits tab.

A cost-savings initiative detailed yesterday by state Treasurer Elizabeth Maher Muoio includes a new audit of Medicare claims and a closer review of third-party companies that contract with the state to provide employees with health insurance.

The efforts could save more than $200 million — no small sum for a state that has had its share of trouble keeping the books balanced in recent years. The cost-saving measures echo similar proposals discussed recently by lawmakers. Now that the fiscal year 2019 budget is in place, they’re the first step in what is expected to be a renewed focus in Trenton on state spending and the cost of employee-benefits.

A bipartisan legislative group of fiscal-policy experts organized by Senate President Steve Sweeney (D-Gloucester) is expected to soon release new proposals to lawmakers in Trenton. Murphy, a first-term Democrat, has empaneled his own group of stakeholders to conduct a study of the health-benefits plans that are provided to government employees in New Jersey.

Meanwhile, still lingering in the background is the question of what to do about the public-worker pension system, which remains grossly underfunded despite a record, $3.2 billion state contribution that was booked in the new budget Murphy signed into law earlier this month.

Checking Medicare eligibility

According to the savings initiative that Muoio outlined yesterday, the state Division of Pension and Benefits is auditing Medicare claims to ensure all of those who are submitting claims are eligible for coverage. It’s been nearly a decade since the state has performed such an audit of Medicare enrollees; the review is expected to save nearly $80 million.

Also up for evaluation are the state’s agreements with third-party vendors who provide services to workers, with all payments and invoices set to be scrutinized for savings opportunities, which could total as much as $25 million. The state is expecting to save another $81 million under new out-of-network rules that were enacted by Murphy and the Legislature earlier this year.

Plan-design committees that draw up health-coverage options for workers at all levels of government in New Jersey are also being encouraged to adopt changes related to generic drugs and copayments for some services. Those reforms also have the potential to save millions of dollars.

“As part of the governor’s goal to change the way we do business, we put together an internal working group at the start of this administration that was tasked with finding more immediate health benefit cost savings,” Muoio said yesterday. “These initial measures are designed to exact savings through efficiencies in order to keep premiums in check while maintaining the same quality level of service for members,” she said.

Some of the same initiatives being pursued by the Murphy administration were also being pushed by lawmakers earlier this year, and many similar proposals made it into the budget legislation that lawmakers sent to Murphy last month.

Eliminate wasteful spending

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Senate Budget and Appropriations Committee Chairman Paul Sarlo (D-Bergen)

“These are the types of responsible actions that need to be taken to eliminate wasteful spending and find efficiencies in government,” said Senate Budget and Appropriations Committee Chair Paul Sarlo, who was a leading proponent of taking a closer look at the state’s third-party vendors.

“This has to be an ongoing practice that looks to identify both immediate and long-range savings,” said Sarlo (D-Bergen).

Along with Sen. Steve Oroho (R-Sussex), Sarlo has been leading the panel of experts that Sweeney put together in February to review the state’s tax and fiscal policies. Word has already leaked out that the group’s recommendations, expected to be released shortly, will encompass the issue of public-worker benefits, with less generous healthcare coverage and changes to pension benefits among the options expected to be put on the table for discussion.

Sweeney focused heavily on the employee-benefits issue in the run up to the adoption of the fiscal year 2019 budget as Murphy was pressing lawmakers to pass tax increases to help support increased spending on things like the education, mass transit, and the pension system. (The fiscal 2019 budget, which totals $37.4 billion, devotes more than $6 billion to cover the costs related to employee and retiree health and pension benefits.)

Republicans perk up

“All we have done this year is talk about spending,” Sweeney complained during a news conference in late June, indicating costs also need to be considered.

Meanwhile, Muoio said yesterday the group of 16 stakeholders representing state government, labor groups and their employers that Murphy assembled in late May would be continuing to work on longer-term healthcare savings proposals, as well as ways to improve services for government workers.

The new talk of reducing spending has also perked up Republican lawmakers, although they’d like to see more action from the Democrats, as a majority party that for years sat on recommendations put forward by a panel of benefits experts convened by former GOP Gov. Chris Christie.

“While I’m happy to see some action, these reforms are not nearly enough,” said Senate Minority Leader Tom Kean Jr. (R-Union). “We need comprehensive public-employee benefit reform in order to deliver real relief to property taxpayers across New Jersey.”

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