Explainer: Medicaid Insures Poor, Provides Services for Seniors, Disabled

Federal-state program has taken on increasingly large role since 1965 launch

When the expansion of Medicaid eligibility allowed 420,000 more New Jerseyans to receive health coverage, it became the latest in a long line of additions to the primary program for insuring low-income residents and providing long-term care for seniors and people with disabilities.

In fact, there’s such a broad range of services offered through Medicaid that it’s one of the primary drivers of New Jersey’s state budget, making up most of the $6.74 billion that the state Department of Human Services plans to spend in the next fiscal year, as well as most of the $10.86 billion that the federal government gives the department.

What it is: Medicaid was launched under the Social Security Amendments of 1965, which also created the Medicare healthcare program for seniors. It was initially designed to provide healthcare to low-income children deprived of parental support and their caretaker relatives, as well as for the elderly, blind, and people with disabilities. Over time, it increased the range of services provided and the number of Americans eligible for the program.

As of the 2012-2013 fiscal year, $10.61 billion in New Jersey Medicaid spending was divided three ways, with 53.3 percent of that paying for acute care, like visits to hospitals and doctor’s offices; 34.5 percent going to long-term supports and services; and 12.2 percent paid to hospitals that serve a disproportionate share of low-income patients, according to Kaiser Family Foundation data.

A partnership: Unlike Medicare, which is funded and operated by the federal government, Medicaid relies on a mix of state and federal funding and control. The federal government must approve regulations regarding how the state spends the money, but over time, state officials have been given more flexibility to meet federal goals for Medicaid.

The federal and state governments pay for half of most Medicaid services, although the federal government currently pays all of the healthcare costs for the patients who qualified for Medicaid through the ACA. This federal share will decline to 95 percent in 2017, 94 percent in 2018, 93 percent in 2019, and 90 percent in 2020 and coming years, with the state picking up 10 percent of the cost.
As a program that states could join voluntarily, Medicaid originally was snubbed by many states, much as some states have chosen not to participate in the ACA’s Medicaid eligibility expansion. The last state to join Medicaid was Arizona in 1983.

Long-term care: The aforementioned flexibility has enabled the state to move from a fee-for-service program toward managed care, in which the state contracts with insurers, paying them a fixed amount per resident.

The state began the shift to managed care in 1995 for acute care, but is in the middle of a five-year program — the comprehensive Medicaid waiver — to shift more long-term supports and services toward managed care.

Medicaid is the primary program for these long-term services, with eligibility determined by residents’ income and assets. The test for determining income eligibility adjusts residents’ income to account for medical bills and health insurance premiums. The maximum assets that recipients can hold is limited to $4,000 for single people and $6,000 for couples. If they have more than these amounts, they must spend down to that amount before becoming eligible.

Closely entwined with CHIP: When state officials talk about the Medicaid services provided to residents without disabilities who are younger than 65, they usually use the term “NJ FamilyCare.” While FamilyCare is primarily funded through Medicaid, is also includes many children funded through a separate federal-state program: the Children’s Health Insurance Program, or CHIP. Of the 1.7 million New Jerseyans enrolled in FamilyCare, about 200,000 are in CHIP and 1.5 million receive Medicaid benefits.

Expanded eligibility and the application woes: Medicaid eligibility was expanded in January 2014, primarily benefiting adults without children with incomes below 138 percent of the federal poverty line, currently $16,243 for a single person. But it’s also drawn a large number of people who were previously eligible but chose not to apply, perhaps due to the bad publicity surrounding the ACA rollout.

This problem is rooted in a botched contract that failed to deliver the long-promised Consolidated Assistance Support System (CASS) computer system. While the state canceled its contract with Hewlett-Packard after five years, it’s handed over many applications — including county backlogs — to another contractor, Xerox. It’s also hired auditing firm KPMG to examine what can be salvaged from CASS, which lost the state $15 million. State officials are aiming to have the backlogs eliminated by the end of May.

Reimbursement questions: Many New Jersey doctors choose to not accept Medicaid recipients as patients, citing the low reimbursement rates offered under the program. This has led to a large share of these patients receiving care through federally qualified health centers (FQHCs), which are community clinics that offer an increasingly wide range of services. But this still leaves a gap in specialists, forcing patients to travel longer distances to receive services.

Future of Medicaid: Since Medicaid makes up such a large share of the budget, the state is constantly looking for ways to spend the money more efficiently while still meeting residents’ needs. Healthcare advocates point to improved coordination between hospitals and other providers, as well as coordination of both physical and behavioral healthcare. Since many Medicaid recipients with chronic physical conditions like congestive heart failure and diabetes also have behavioral conditions like depression and substance use disorder, treating these conditions in a coordinated way is a potential avenue for savings.

One way this could happen is through Medicaid accountable care organizations, which are scheduled to launch this year in up to eight regions. These organizations require hospitals and doctors to share information, allowing patients with chronic conditions to receive quick followup care after they visit emergency rooms, with a goal of preventing future ER visits.