Op-Ed: Reinvest Healthcare Savings to Meet New Jersey’s Growing Needs

Raymond Castro | April 15, 2015 | Opinion
Federal funds for human services are a big help for residents, but the state needs to be smarter about leveraging them

In a state budget message filled with gloomy overtones, the proposed spending plan for healthcare and other services that help New Jerseyans make ends meet is a rare bright spot. But don’t be fooled: The 11 percent increase in funding for the Department of Human Services is not so much the result of more state investment, but the increasing reliance on federal dollars to meet New Jersey’s needs.

In addition, those dollars aren’t going as far as they could because the state has used them to plug other spending gaps.

DHS budget (expand)
Since 2013, state funding for human services has increased by just 4 percent, or $240 million, while federal funding has jumped by 62 percent, or $4.2 billion. What is so shocking about this lack of state support is that it occurred at a time when the state had the biggest increase in poverty in the nation.

The federal dollars are a big help, but much more should be done to leverage even more and meet the needs of New Jersey residents. We should not miss out on a major opportunity to significantly expand vital human services like healthcare and economic supports for struggling low-income families.

We also know from extensive research in New Jersey and nationally that bringing in federal funds for services has an immediate multiplier effect on the economy that will create thousands of much-needed jobs. This strategy is so much more effective than the state’s practice of using solely state funds to provide tax credits to mostly big businesses in the hope of eventually creating growing the economy, even though there is no sound research to back up this approach.

While enhanced federal funds have been helpful in expanding certain services, they have also been used by this administration to replace state funds, which have greatly limited the state’s ability to address other pressing needs.

The main source of additional federal funds for the Department of Human Services is for medical assistance provided through the Medicaid expansion under the Affordable Care Act, an enormous success that has so far allowed 420,000 New Jerseyans to obtain health coverage.

The expansion also allowed the state to receive a higher matching rate for families who participated in NJ FamilyCare prior to the expansion, which generated about $400 million in state savings this year — a number that will continue to grow. These freed-up dollars, unfortunately, haven’t been used to assist New Jerseyans, but were instead used to balance the budget. Even worse is that if these dollars had been used to meet New Jerseyans’ needs, they would have brought in even more federal dollars, which could have made vital services even better.

Fortunately, the state has another opportunity in next year’s budget to generate even more savings from the Medicaid expansion. According to the governor’s budget, New Jersey is also saving $74 million on charity care to hospitals, since more residents have insurance and don’t have to rely on care they can’t pay for.

To the governor’s credit, his spending plan reinvests $15 million of that by increasing the payments doctors get for treating Medicaid patients. This, in turns, generates $30 million in federal dollars. This is how the state should be leveraging budget savings, but even it does not go far enough. The rate increase will only restore about half the cut primary- and specialty-care providers saw when a temporary payment bump as part of the ACA expired — at a time when hundreds of thousands of New Jerseyans are newly obtaining health coverage.

Given that the state is receiving a windfall of about $500 million a year from reduced charity costs and the Medicaid expansion, it should reinvest more of those dollars to meet New Jerseyans’ growing needs (and generate even more federal money):

  • Double the funding going to increase Medicaid payments for primary- and specialty-care providers, from $15 million to $30 million with a requirement that they meet quality and value standards. This would bring a total of $60 million in federal matching funds to New Jersey.
  • Use $12 million to provide New Jerseyans with more information about the benefits of Medicaid expansion and the marketplace for private insurance. Currently, the state provides no funds for such outreach. Enrolling more New Jerseyans in these programs who would be completely funded by the federal government would result in a major increase in federal dollars spent in New Jersey.
  • Provide $15 million to eliminate the major backlog in Medicaid and nutrition assistance applications by temporarily increasing staffing at the county Boards of Social Services, which process the applications. The federal government would match this $15 million, and by reducing the backlog and enrolling more residents in both programs, more federal dollars would also end up flowing to New Jersey.
  • Allocate $45 million to completely restore the state’s cuts to assistance for poor families in WorkFirst NJ by beginning to reinstate eligibility levels that are less restrictive, reducing penalties for working so parents can escape welfare, and enabling families to keep more of their child support which will encourage absent parents to give more.
  • It’s foolish for New Jersey to leave so much money on the table. With a few common-sense steps it could bring in more and greatly improve the lives of New Jersey families.