Analysis: Christie Campaign Pledge to Slow Medicaid Spending Would Hurt NJ

Andrew Kitchenman | July 31, 2015 | Health Care
Think-tank report predicts state might be forced to reduce healthcare services for seniors, disabled

If Gov. Chris Christie’s national plan to slow the rate of Medicaid spending increases ever became law, New Jersey residents – especially seniors and the disabled – would feel it in their pocketbooks, according to a new analysis.

The state would receive $15.1 billion less over eight years if Christie’s plan were to be enacted, according to a report by New Jersey Policy Perspective, a self-described progressive research organization.

Christie, as he campaigns for the Republican nomination for president, has proposed linking growth in Medicaid spending to inflation. However, since healthcare costs, including Medicaid, have been growing faster than inflation for decades, report author Raymond J. Castro foresees dramatic spending cuts.

The report also found that the plan would have a profound effect on the state’s economy, likely leading to the loss of tens of thousands of healthcare jobs. These cuts would be in addition to other changes proposed by Christie, including increasing the eligibility age for both Social Security and Medicare.

A Christie campaign spokeswoman criticized the report’s findings, arguing that NJPP is biased against Christie, that Medicaid is badly in need of reform, and that Christie’s plan would prevent massive cuts in benefits due if the program went bankrupt.

Castro noted that the financial burden would inevitably fall on those with disabilities and low-income seniors, who rely on Medicaid long-term services.

The largest group to benefit from Medicaid is people with disabilities, who received 44 percent of Medicaid funds, followed by seniors, who receive 30 percent; children, who account for 18 percent; and adults younger than 65, who receive 8 percent of the funds.

“It’s going to be up to the state to decide where to absorb the loss, so they can do it in a whole bunch of ways, but that’s where you’re going to get most of the savings: to reduce services to the elderly and the disabled,” Castro said, adding that New Jersey spends more for those populations that most other states.

The state has been working to reconfigure long-term healthcare services by shifting funding from nursing homes and other institutions toward community-based group homes.

Another reason that the state would be hit hard by Christie’s plan is a program supported by Christie himself – the expansion of Medicaid eligibility under the Affordable Care Act, which has led to the addition of 462,000 New Jersey residents to the program.

Castro noted that healthcare spending has been a crucial driver of the state’s economy, with some healthcare jobs actually increasing in number even during the recession.

“How healthcare funds are spent and whether the state receives them are very important,” Castro said.

[related]Castro acknowledged that it’s important for the government to reduce the growth in healthcare costs. But he suggested that a better way to do that than a hard cap on spending would be to pursue policies nationally that the state is currently implementing, such as the introduction of Medicaid accountable care organizations – which are focused on sharing data to improve the coordination of care and target healthcare to the patients who need it – and the transition to community-based long-term services.

“We should use a scalpel rather than a meat-ax approach toward these programs,” Castro said. Changing how these services are provided should be pursued “rather than establishing cutbacks that are so large that it’s going to force states to reduce benefits and reduce eligibility. That’s the wrong way to go.”

At the same time, Castro said the government should be taking steps to encourage more doctors to treat Medicaid patients by improving reimbursements. Christie’s state budget included $45 million in additional funding for NJ FamilyCare – the state’s primary Medicaid support healthcare coverage program.

Castro noted that the additional state money drew a federal match, which wouldn’t be possible if they were a limit to federal Medicaid money tied to inflation.

“We still have a major problem in our state in terms of reimbursement and we need to work on that,” Castro said.

Castro added that Christie’s plan would add uncertainty into what Medicaid services would be available, since the system would shift from one in which spending depends on the need for services to one in which services would have to fit within the spending cap.

“They’re going to have to play a guessing game as to what costs are going to be in the future,” Castro said of state Medicaid officials. “We’re going to see a big shift in the states … In the next decade, they’re going to look at ways to cut services and even eligibility if they’re not going to have a guarantee for the funding” based on the demand for services.

Christie campaign spokeswoman Sam Smith questioned several of Castro’s assumptions, saying in a written statement that the governor’s proposal would allow for spending growth – since it would increase along with the growth in the Medicaid population, as well as with the growth for inflation.

“Moreover, as NJPP’s friends on the Left have been pointing out for years, growth in per capita Medicaid spending has been shrinking not rising,” Smith wrote. “So the entire premise of the NJPP story, which is that Medicaid spending will tremendously outstrip both inflation and economic growth, is not necessarily true.”

Smith also noted that there’s a bipartisan consensus in favor of having some type of entitlement reform.

“Only NJPP, which appears to be far to the Left of even Congressional Democrats and President Obama, seems to feel that no reform of Medicaid, or of entitlements generally, is either possible or necessary,” Smith said.

“Gov. Christie believes we should reform entitlements to slow their growth, thereby preventing an explosion of our national debt, massive benefit cuts due to the bankruptcy of these programs in the future, and massive tax increases on the American people — and thereby making possible increased investment in national future-oriented priorities like R&D and national defense.”