Waiver Approval Clears Way for Massive Medicaid Reform in New Jersey

Lee Keough | October 5, 2012 | Health Care
Comprehensive Medicaid Waiver will help keep clients out of institutions, refocus treatment plans on managed care

Fate of Medicaid Waiver Faces Budget Review
The federal government has approvedNew Jersey’s request for a complete overhaul of its Medicaid program, a move that will give the state more flexibility in delivering Medicaid, as well as the opportunity to maintain or improve patient care at lower costs.

The changes to the program will have sweeping implications not just for poor families eligible for Medicaid, but also for seniors facing the prospect of nursing home; those that obtain behavioral health or addiction services from the state; and New Jersey residents with developmental disabilities.

It also changes the formula that Medicaid uses to compensate hospitals and other healthcare institutions.

Although there were few details regarding the approval of what is known as the Comprehensive Medicaid Waiver, the decision was widely hailed by both healthcare advocates and those in the delivery system as a positive step toward Medicaid reform. The negotiations have been going on for a year, and it is still unclear when the changes will take affect.

“The waiver is pretty cool,” said David Knowlton, president and CEO of the New Jersey Health Care Quality Institute, a healthcare consultancy. “It’s very smart of the [state] because it allows them to maximize federal dollars and give the best care for the cost.”

Gov. Chris Christie released a statement boasting that the decision demonstrates New Jersey as a model of reform, saying it will “not only strengthen the focus on treating and serving the individual first, but do so in a way that is cost effective and sustainable for our state over the long run.”

Most of those in the healthcare industry were still awaiting the actual written decision, which will detail how the reforms will affect every category of care. But they were hopeful that after more than year of study, along with expert advisory commissions investigating the specific implications and best practices from other states, New Jersey’s Division of Human Services will adopt many of the industry’s recommendations and be able to truly provide better care for a lower cost.

Keeping Clients at Home

The major impetus of the Medicaid restructuring is to allow more patients to stay out of institutions and remain in their homes, whether they are aging seniors, behavioral health patients, or those with developmental disabilities.

The federal government and state share the cost of Medicaid 50/50, and the waiver agreement will allow the state to take the total amount of Medicaid spending and deploy it in the way it thinks best. Patients will be moved to a managed care system and insurance companies will be compensated based on care outcomes and number of patients, rather than fee for service.

This model could save the state money while providing a better quality of life for patients over a longer period of time.

Current Medicaid guidelines, for example, are very strict when it comes to funding things such as home construction to accommodate wheelchairs or certain kinds of home nursing care. The waiver will allow managed care providers to determine when those accommodations make sense in order to keep someone in the community and out of a nursing home.

“Generally speaking, we are in favor of these developments,” said Jeff Abramo, executive director of the New Jersey AARP. “Done carefully, and phased in, in the proper way, this is a good step in the right direction.”

Nevertheless, Abramo expressed caution about possible oversight of the program, since it shifts dollars from healthcare providers to insurance companies. He also noted that the timing of implementation will be crucial. The Division of Human Services did not offer a deadline for implementation Thursday, and Abramo noted that the current deadline of January was too soon for an organized rollout of some provisions.

Moving to Managed Care

In addition to patients using Medicaid for long-term care, the new program will also move the approximately 60,000 adults and 40,000 children now receiving behavioral health benefits through Medicaid into a managed care system, rather than a traditional fee-for-service practice. For the first time, managed care coordinators will be able to look at the patient holistically, taking into account physical issues along with behavioral issues such as depression and addiction, and approve treatment plans accordingly.

The state is also proposing to spend more money on support of programs such as adult daycare for the disabled, as an alternative to living in one of the state’s seven developmental centers. While this would certainly save Medicaid dollars — on average it costs $260,000 a year to support an individual in a developmental center, compared with $170,000 in a community placement — it could also lead to a better quality of life for patients.

“The waiver allows us to pursue long-term sustainable reform and innovations that make sense,” said DHS Commissioner Jennifer Velez. “The common thread that runs through all of this is the prospect of care coordination and home-based living. But it is fair to say, if you are in nursing care today, the prospect of moving out of it is very slim. The idea is to give people an option of not having to move to a nursing home — it’s delaying admission so people can stay in their homes longer.”

Medicaid payments to hospitals will also be profoundly altered by the waiver; they will no longer get extra subsidies for Medicaid, although they will still be providing care. Velez said the waiver actually preserves $129 million that in the past was paid to New Jersey hospitals as subsidies for treating indigent patients.

Instead, that money, plus New Jersey’s match and $90 million for a graduate medical program will create a $260 million fund that will be used to incent New Jersey’s hospitals to improve patient care. According to Velez, each hospital will be able to develop its own plan for quality care improvement and — as long as the state approves – it will get financial incentives for meeting benchmarks.

“We’ve preserved that federal match and allowed it to be used for improvement in care,” she said.

Filling in the Details

Kerry McKean Kelly, a spokesman for the New Jersey Hospital Association, said her members are supportive, but they need to see the details. “We do support reform and understand that we need to make Medicaid sustainable in the future.” On the other hand, she said, the state does need to ensure “adequate payments to providers to maintain access for care to all patients.”

Paul Langevin, president of the Health Care Associates of New Jersey, the industry nursing home association said he was relieved to hear Velez’s statement that she did not expect to move large numbers of current nursing home residents out into the community. The waiver will have a major impact on his members, and he said the state has been taking an inventory of nursing home residents, with an eye to finding out how many might be able to move back into the community. Langevin estimates very few — about 100 — of the 29,000 Medicaid patients now residing in New Jersey nursing homes could qualify. “The facts are, most people have sold their houses. There are no homes to go back to.”

“We support people staying in their home and getting the right care,” said Langevin. “I do think it can also yield savings. Medicaid is a line item that’s been growing by leaps and bounds. And even though its growing at a faster rate than inflation, we are still underpaying nursing homes and doctors. Something’s got to give.”

The only question, he said, is “how do we get there?” The answer is in the details, which he has yet to see.

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