Medicaid Expansion Could Save State More Than $6 Billion Over Next Nine Years

Andrew Kitchenman | February 22, 2013 | Health Care
New report from New Jersey think tank fails to find downside to increasing Medicaid coverage

New Jersey would save more than $6 billion in healthcare spending over the next nine years, if Gov. Chris Christie opts to expand Medicaid eligibility, according to a report released by a think tank yesterday.

New Jersey Policy Perspective calculated that the state would accrue the savings because the federal government would be picking up the tab for both new and current participants in two Medicaid programs. The first, General Assistance, covers childless adults with less than $2,520 a year in income. The state pays 50 percent of the medical costs for 40,000 participants in this program.

The second, FamilyCare, is meant for poor adults and their dependent children. To qualify, a family of four must earn no more than $30,725 a year. The state currently pays 35 percent of FamilyCare costs for the 134,000 participants in the program. The federal government takes care of the other 65 percent.

But the federal government will stop kicking in its share for both programs on December 31, if New Jersey decides not to expand Medicaid eligibility.

“I would say that’s a no-brainer, that there’s no reason not to do this,” said David Rousseau, a former state treasurer under Gov. Jon S. Corzine and a budget analyst for NJPP. Rousseau said the federal government would kick in between $100 million and $200 million that the state is on track to spend on FamilyCare in the upcoming budget year. Again, those numbers only work if Christie chooses to expand Medicaid.

If the governor opts for expanded eligibility, the feds will cover 100 percent of the costs of both General Assistance and FamilyCare from 2014 to 2016, with the state share gradually rising to 10 percent by 2020.

It’s not clear whether Christie will address that matter in the budget proposal he releases on Tuesday. The issue has divided Republican governors nationally, with 13 opposing it, including Pennsylvania Gov. Tom Corbett. Seven support it, the most recent being Florida Gov. Rick Scott. State advocates for cutting federal spending are pushing for him to reject the expansion.

If Christie decides against the expansion, he could reduce spending on these current programs in another way: by eliminating them. The state could also try to negotiate continued federal funding for the two programs, but it’s not clear whether the federal government will be willing to aid a state that’s refused expansion.

“If we don’t do Medicaid expansion, FamilyCare is at tremendous risk,” Rousseau said.

Raymond J. Castro, the author of the NJPP report and a senior policy analyst for the organization, noted the savings would more than offset any cost to the state of the expansion.

Castro said he’s concerned that Christie would consider cutting the programs, but added that he would be surprised if the governor did that.

“He could continue to serve the people they serve now, plus get the savings,” Castro said. “It would just be draconian” to cut the programs.

The report’s conclusions were disputed by Dr. Alieta Eck, who practices internal medicine in Piscataway and operates a clinic for low-income patients in Zarephath.

Eck said the potential for reduced FamilyCare and General Assistance costs from Medicaid expansion aren’t true savings, since state taxpayers pay for federal funding through their income taxes.

“I think that the whole program is so broken and needs to be totally revamped,” Eck said. Last year, she served as president of the American Association of Physicians and Surgeons, a group founded to oppose government involvement in medicine.

Eck suggested that Congress might continue to fight the expansion by not appropriating the funds for the program, noting that Republicans who oppose the expansion control the House of Representatives.

Instead, she supports a state bill that would allow doctors to receive immunity from medical malpractice claims in return for volunteering four hours per week in clinics for low-income residents.

The NJPP report received support from legislators pushing for the expansion.

Sen. Nia H. Gill (D-Essex and Passaic) said the report adds to the “enormous” evidence in favor of expansion.

“The bottom line is the state cannot afford not to take advantage of the opportunity to expand Medicaid,” Gill said in a statement. “Leaving billions of dollars on the table in Washington while other states reap the benefits of our federal tax dollars is irresponsible.”

She urged Christie to follow Scott’s lead on the issue.