Conservative Estimates of Medicaid Enrollment Prove to be Boon to Budget

Increase in rolls of people eligible for Medicaid partially paid by state not as high as projected

The state budget is benefiting from a lower-than-expected number of residents enrolling in Medicaid for whom the state would have been required to pay part of their benefits.

State Human Services Commissioner Jennifer Velez cited the lower number of enrollees as a major reason why the state is expecting to spend $87.6 million less than it budgeted for Medicaid in the current fiscal year.

New Jersey FamilyCare, the state Medicaid program, actually was relatively successful in enrolling residents overall from January through March, the first three months of the expansion in eligibility for the program.

The vast majority of new enrollees have their Medicaid benefits covered entirely by the federal government.

The 2010 Affordable Care Act provides that the federal government will pay for 100 percent of the costs for newly eligible residents, as well as most adults who were previously eligible for FamilyCare, through 2016.

But under ACA guidelines, the state must pay a portion of the costs for children participating in FamilyCare, as well as for parents or legal guardians who are eligible for WorkFirst NJ, a state program that provides cash assistance to the very poor.

That’s because the federal government requires states to contribute to the largely federally funded Children’s Health Insurance Program (CHIP), which funds FamilyCare for children, and to Medicaid for parents or legal guardians eligible for Temporary Aid for Needy Families (TANF), the federal program that funds WorkFirst NJ, which resulted from the 1996 federal welfare-reform law.

Medicaid officials and media reports across the country have referred to people who were not directly affected by the Medicaid eligibility expansion but who choose to enroll as a result of publicity surrounding the ACA as “coming out of the woodwork,” and described their impact on budgets “the woodwork effect.”

Of the roughly 250,000 adults who enrolled in Medicaid since January, the state was required to cover part of the cost of benefits for only 10,152 people.

“We budgeted for a certain number of people to come onto the Medicaid rolls and when that take-up for the woodwork didn’t materialize,” it contributed to the budget savings, Velez said in an interview after testifying before the Senate Budget Committee earlier this month.

The issue reflects the complex ways that the ACA affects Medicaid.

Adult FamilyCare recipients can be broken into three groups: the first group includes those eligible for WorkFirst NJ; the second group is comprised of those who aren’t eligible for Workforce NJ but who were previously eligible for FamilyCare due to state law; and the third group encompasses those who are newly eligible for FamilyCare due to the ACA.

To be included in the first group, for a parent or legal guardian living in a two-person household, the household income must be less than $5,796. That income limit rises to $8,784 in a four-person household, according to the latest available guidelines.

The second group exists because, beginning in 2001, the state covered a wider range of parents and legal guardians when it expanded its CHIP program, NJ KidCare, to become NJ FamilyCare. While it originally covered these adults with household incomes up to 200 percent of the federal poverty line, Gov. Chris Christie’s budget in 2010 reduced eligibility for this group to 133 percent of the poverty level.

That means the second group covers people with household incomes equal to between $5,796 and $20,628 for a two-person household and between $8,784 and $31,321 for a four-person household. The ACA provides 100 percent federal funding for adults in this group.

The third group is largely comprised of childless adults, who previously weren’t eligible for NJ FamilyCare but were made eligible through the ACA’s expansion of Medicaid, which Christie agreed to. It also covers some parents, since the ACA encompasses a slightly larger income range: households with incomes up to 138 percent of the federal poverty line, or $21,204 for a two-person household and $32,499 for four-person household.

Even if the state missed its “woodwork effect” projections, that doesn’t mean that enrollment has been disappointing. Raymond J. Castro, senior policy analyst for the nonprofit New Jersey Policy Perspective, said there has been a significant increase in the number of parents with income above WorkFirst NJ eligibility levels who’ve enrolled in FamilyCare since January.

“I see this as rather positive,” Castro said.

From January through March, FamilyCare added 87,657 adults and 16,355 children. This increase is lower than the 250,000 newly enrolled, because more than 140,000 left FamilyCare during that time period.

Castro said the state likely missed its projections because officials wanted to be conservative and avoid a negative effect on the budget.

“I think they did it to be on the safe side and I think if I were over there I would have done the same,” said Castro, a former state Human Services official.

ACA opponents in other states cited the “woodwork effect” on state budgets as a problem with the federal healthcare law. But Castro said the number of TANF-eligible adults who weren’t already in Medicaid was such a small number that they were unlikely to have a big impact.

“It was really sort of a political thing and a scare tactic rather than anything real,” Castro said.

State officials also pointed out that the state has built a track record for successfully enrolling Medicaid patients.

“For five consecutive years, New Jersey has been awarded bonuses by the federal government for its enrollment strategies,” state spokeswoman Nicole Brossoie wrote in an emailed response to questions. She noted that the most recent award was for $22 million in July 2013.

The lower enrollment was only one reason for the lower state spending budgeted for Medicaid this year. Another reason is an increase in the amount of rebates it receives from pharmaceutical companies for the medications that FamilyCare recipients receive. This number fluctuates annually.