Medicaid Spending Would Climb While Other Health-Related Programs Get Less

Christie focuses on healthcare costs in proposed 2015 budget, boosting total expenditures to over $4 billion

Rutgers President Robert Barchi, a medical doctor, said he would work with state officials to help develop a program to reform Medicaid.
State spending on Medicaid would grow by $214.3 million in the budget proposed by Gov. Chris Christie yesterday, while other health-related spending would decline.

Christie, in his budget address, focused on changes in how the state delivers healthcare to low-income residents through Medicaid.

The increase in Medicaid spending, from $3.95 billion in the current fiscal year to $4.16 billion under the spending plan, is the biggest reason for an overall increase in Department of Human Services spending, from $6.49 billion to $6.64 billion.

State Department of Health spending would from fall from $371.3 million to $339.3 million, with much of the drop due to a one-time payment for Cooper Health Care’s new cancer treatment center.

While details of the budgetary impact of Christie’s proposal were still emerging yesterday, state officials highlighted some of the changes in a budget summary. They include $1 million to support the integration of substance-abuse treatment with employment services, $4.5 million to expand drug court treatment services, and $21 million more for children in New Jersey FamilyCare.

New Jersey Hospital Association President and CEO Betsy Ryan said she was encouraged by Christie’s focus on healthcare delivery and took a largely positive view of early budget details.

The budget includes $985.1 million in state hospital funding, which is unchanged from the current fiscal year although it shifts $25 million from Charity Care to University Hospital. Ryan said she wanted to learn more about the effect of that change.

Christie highlighted the state’s Medicaid comprehensive waiver, which is allowing the state to shift the focus of long-term care from nursing homes and other institutions to home- and community-based services. The budget includes a $125 million increase to support this approach.

“My philosophy is to allow older New Jerseyans to maintain their independence and receive care in the community in their homes for as long as possible,” Christie said.
“This means better and more affordable care.”

Christie noted the high budgetary stakes of Medicaid, pointing out that the total state and federal cost for the program is $12 billion to serve 1.4 million New Jersey residents.

While Christie has been critical of President Obama and his signature law – the 2010 Affordable Care Act – the governor reiterated his support for expanding Medicaid eligibility in the state, a move made possible by the ACA.

“I’m proud to have made the decision to expand Medicaid and provide greater access to healthcare for New Jerseyans in need,” Christie said, adding that the expanded access necessitates broaders reform of the healthcare delivery systems.

Christie focused on Medicaid and New Jersey FamilyCare — the state’s Medicaid-funded state program – noting that a small number of Medicaid patients account for a large share of program spending.

“We need to take on the challenge of making the system more cost-effective so that we can protect Medicaid and FamilyCare for New Jerseyans who really rely on them,” said Christie, saying that 5 percent of the state’s Medicaid recipients – amounting to 70,000 residents – are responsible for 50 percent of the costs.

Christie called on Rutgers Biomedical and Health Sciences, which contains most of the former University of Medicine and Dentistry of New Jersey; University Hospital in Newark, and Rutgers-Camden to work with state officials to improve the efficiency of healthcare delivery in Medicaid and FamilyCare.

He cited two reform initiatives that are already moving forward in the state: a Medicaid Accountable Care Organization pilot program intended to improve healthcare coordination in areas with many low-income residents, and a federally funded Rutgers study on how to improve care for patients who frequently stay at hospitals.

Rutgers President Robert Barchi, a medical doctor, was on hand for the address and said he would work with state officials to help develop a program to reform Medicaid.

“One of the things that we can and should be doing as a healthcare entity and a great university is addressing the major problems of healthcare in this country,” including rising costs, Barchi said after Christie’s address.

He said the state must think about how “episodes of care” begin with early symptoms and continue through follow-up care, and not just focus on hospitalizations.

Barchi said the state must rely more on teams of healthcare providers rather than relying just on doctors, “using approaches that focus on wellness as well as acute episodes of care, and we must think about how we manage chronic disease.”

Barchi added that the university is “absolutely committed to working with the governor on addressing this problem, especially in the most vulnerable populations” such as those enrolled in Medicaid in and around Newark and other cities.

Rutgers Center of Health Policy Director Joel Cantor, whose expertise may also be called on to contribute to the effort, said he was pleased that Christie issued “a call to action” on Medicaid delivery system reform.

“Medicaid costs, like all healthcare costs, keep going up, and that’s a real challenge in the budget,” said Cantor, an NJ Spotlight columnist.

Medical Society of New Jersey CEO Lawrence Downs said it’s appropriate to undertake a “full reform” of Medicaid now that program eligibility has been expanded, “to make sure that patients can actually access physician care.”

But important questions remain about how Christie’s budget proposal will affect healthcare in the state.

New Jersey Policy Perspective senior analyst Raymond J. Castro said of Christie’s call for Medicaid reform that “on the face of it, it sounds like a laudable goal,” but that “the devil is in the details – hopefully this is not a way to cut services.”

Castro also expressed disappointment that the state hasn’t committed to returning the savings from the Medicaid expansion – which resulted from the federal government taking on a larger share of Medicaid expenses – into programs that would strengthen healthcare access.

Castro cited two potential big-ticket programs as worthy projects: the state taking on the role of equalizing doctors’ Medicaid reimbursements with those that they receive from Medicare and the introduction of state subsidies to supplement federal subsidies to help low-income residents buy insurance through the federal health insurance marketplace. Castro said the federal subsidies won’t go far enough in a high cost-of-living state like New Jersey to cover the costs that residents with low to moderate incomes must pay in insurance premiums and out-of-pocket healthcare expenses.
Sen. Joseph F. Vitale (D-Middlesex) agreed that the state should provide such subsidies once it has available funds, agreeing that marketplace insurance can still be expensive once out-of-pocket expenses like deductibles and coinsurance are taken into account.

But Vitale said he was encouraged by Christie’s overall healthcare emphasis.

“I think it’s good he’s thinking about more efficient ways to deliver care for all of New Jersey’s lower-income residents through Medicaid,” Vitale said, adding that the state effort should build oon Dr. Jeffrey Brenner’s work in Camden.

Dr. Poonam Alaigh, a former health commissioner in the Christie administration, said the governor’s focus on Medicaid was “very significant.” She noted that an expansion of Medicaid in Oregon resulted in an increase in emergency-department use, with many of those patients presenting a challenging combination of chronic health problems and behavioral health issues.

She predicted that the state’s Medicaid Accountable Care Organization pilot program — scheduled to launch this year — could be the key to aligning financial incentives to hospitals with positive health outcomes. She noted that Christie mentioned the program in his address.

“That’s going to be critical,” Alaigh said.