The High Cost of Public Healthcare in New Jersey

Beth Fitzgerald | December 8, 2011 | Health Care
What can be done to bring down what a new report reveals as some of the highest Medicare/Medicaid spending in the country?

New Jersey public healthcare spending was among the highest in the nation in 2009 — $11,903 per capita for Medicare and $10,825 for Medicaid. That’s 15 percent higher than the Medicare national average, and 60 percent higher than Medicaid’s $6,826. And while New Jersey’s total healthcare spending was not as high — $7,583 per person, compared with a national average of $6,815 — it was still in the top 20 percent in the nation.

Those figures are from a national report released by the federal Centers for Medicare and Medicaid Services in Washington, D.C., which said the costs reflect the state’s older population, higher per capita income, and higher cost of living — all of which drive up the cost of everything, including healthcare.

Joel Cantor, director of the Rutgers Center for State Health Policy elaborated on this point. “Our spending per enrollee is very high,” Cantor said, because “our program covers very sick people, more so than the national average. It is not because we pay providers more than average. We don’t.” Compared to the rest of the country, Medicaid in New Jersey has “a bigger share of spending for the elderly and people with disabilities. They are very high consumers of healthcare because they are very ill and they use long-term services and a lot of acute medical services as well.”

The highest-spending state at $9,278 per capita was Massachusetts, which requires its residents to get coverage and provides a state-sponsored system of health plans. Massachusetts’ program is very similar to the national health care exchanges where all Americans will be able to shop for coverage in 2014 under the Affordable Care Act.

Nicole Brossoie, spokesperson for the state Department of Human Services (DHS), which runs the Medicaid program, said the CMS report “supports the efforts New Jersey is pursuing to preserve the Medicaid program through reform measures.” The state is seeking a federal Medicaid waiver that will extend managed care to nursing home patients, and encourage them to get care at home rather than at a medical facility.

It is not unusual for New Jerseyans who need nursing home care to spend down their assets to qualify for Medicaid, which then covers their care. Among the goals of the state’s Medicaid waiver is to shift more resources into home health care and reduce the number of elderly in long-term nursing facilities.

In the current fiscal year, managed care enrollment became mandatory for nearly all Medicaid enrollees. In 2009, the year covered by the CMS study, only 75 percent of New Jersey’s Medicaid customers were in managed care; this past October 1 that rose to 92 percent. DHS estimated that managed care will save $36.4 million this year. “More importantly, managed care has been shown to effectively and positively impact patients’ health-related decisions, eliminate duplicative services, and improve health outcomes,” Brossoie said.

DHS is looking for more changes to Medicaid, a 50/50 state and federal program that spends about $11 billion a year. DHS is awaiting CMS review of its Medicaid waiver, which proposes moving nursing home and other long-term care patients into managed care, integrating behavioral health with physical healthcare, and pioneering Medicaid Accountable Care Organizations in cities like Camden, Newark, and Trenton in an effort to improve the health of low-income residents while also reducing their reliance on hospital emergency rooms.

Cantor noted that U.S. healthcare spending is the highest in the world, and New Jersey was above the U.S. average in 2009. In addition, the healthcare costs paid by employers rank New Jersey in the top five nationally. “We are high spenders in the highest-spending country in the world.”

Cantor said the state’s Medicaid waiver “seeks to address this directly by moving more of these high-cost folks into managed care, and if done well it has the potential to reduce the spending while not reducing services.”

Paul R. Langevin Jr. is president of the Health Care Association of New Jersey, whose members include nursing homes and other long term facilities. He said the state reduced Medicaid reimbursements to nursing homes by 3 percent in the current fiscal year, or a total of $60 million, reducing the per diem rate to about $200.He said before the cut “we were not being fully reimbursed for the cost of taking care of people, and we haven’t been for many years.”

Langevin questions whether the state can control Medicaid spending by encouraging home care as opposed to institutional care. “I don’t know if it’s going to be cheaper to take care of people at home. It may be preferred, but I don’t know that it’s going to be cheaper.” He said there are about 29,000 people in long-term care and 3,000 in assisted living facilities. Spending may in fact rise because “the population as a whole is getting older” and will need more medical care.

Langevin also raises the issue of efficiency, questioning whether, “we have an infrastructure that is ready to take a significant number of nursing home residents out of nursing homes and care for them elsewhere. Because from a purely efficiency standpoint, the nursing home is a much more efficient way of taking care of people. You have 120 patients in a building, and doctors and nurses taking care of people in a facility designed for this.”

Doug Johnston, government affairs manager for AARP in New Jersey, also raised the matter of efficiency, though in a different context. He said there are more than 100,000 “dual eligibles,” in New Jersey — seniors who are covered by Medicare but also have Medicaid coverage for expenses not paid by Medicare.

Johnston said AARP believes that better care coordination is the key to controlling spiraling healthcare spending. “We can significantly reduce healthcare costs and do it by improving care coordination, providing a higher quality of care and getting better healthcare results.”

Dr. Donald Berwick, whose tenure as administrator of CMS ended last Thursday, told “The New York Times” in an interview published December 3 that between 20 percent to 30 percent of healthcare spending in the U.S. is “wasted.” He blamed failure to coordinate care, overtreatment of patients, the complexity of the healthcare system, burdensome rules, and fraud.

Cantor agreed that much has to change
“It would be hard to conceive of a system that would be less efficient,” Cantor said. “When you look at our numbers compared to other developed countries around the world, we spend at least 20 percent more per person, sometimes twice as much per person, without outcomes that are any better and in some cases worse. So clearly we are spending more than we need to achieve the level of health we are getting. There is a lot of work to be done to improve care and that is true across the country and it is especially true in New Jersey.”

We’re in this together
For a better-informed future. Support our nonprofit newsroom.
Donate to NJ Spotlight