More People Covered by Obamacare Means Less Money for Charity Care

Christie cuts budget for second straight year; urban hospitals call for better targeting of funds

Sen. Joe Vitale (D-Middlesex), chair of the Senate Health Committee and the primary architect of Family Care
While on the presidential campaign trail, Gov. Chris Christie was among the Republican candidates calling for “repealing and replacing” Obamacare.

But his proposal for next year’s state budget suggests the federal health insurance program is actually working in New Jersey to reduce the number of residents without medical coverage.

In his budget address Tuesday, Christie called for trimming the state’s Charity Care program by nearly $150 million from the current year; this would leave $352 million for the state’s fund to help offset the costs hospitals incur treating uninsured patients and poor patients.

Half the funding for Charity Care is from state coffers, the rest from the federal government.

State officials said more than 700,000 Garden State residents have obtained health insurance through state or federal programs since the Affordable Care Act mandated coverage in 2014 and, as a result, hospitals have fewer uncompensated care claims.

Data from the Department of Health suggests that such claims, which are used to calculate Charity Care reimbursements, dropped 44 percent between 2013 and 2014 alone.

When asked, acting state Treasurer Ford M. Scudder declined to give full credit to the Affordable Care Act.

“I would say this is really about changing healthcare markets,” he said Tuesday, shortly before the governor’s budget message. “But certainly it’s partly because of the federal exchange,” he added, referring to the ACA’s insurance marketplace for lower-income residents.

While the ACA outlined options for expanding healthcare coverage, states had some leeway in how they responded.

New Jersey chose to expand its successful NJ Family Care program for working-class residents and also created its version of the federal exchange for those with lower income levels to obtain new, federally subsidized Medicaid plans. Scudder said that since 2014, some 434,000 people have joined Family Care and another 285,000 people secured coverage through the exchange.

“Documented Charity Care has gone down. That was everyone’s prediction: that as more people became insured, Charity Care would go down,” noted Sen. Joe Vitale (D-Middlesex), chair of the Senate Health Committee and the primary architect of Family Care.

Assembly Speaker Vincent Prieto (D-Hudson) said the governor’s reduction in Charity Care will be thoroughly vetted during the budget hearings this spring, which will include testimony from hospital leaders. After the Legislature reviews Christie’s proposal, a final budget must be adopted and signed by the governor before July.

In other healthcare line items, the 2017 budget – for the fiscal year starting in July – calls for an extra $60 million for the state’s teaching hospitals, comprised of $20 million in state money and a $40 million federal match (a 2-to-1 ratio, as opposed to the 1-to-1 match New Jersey gets on Charity Care spending.) Total proposed funding for Graduate Medical Education is $188 million.
Oher levels of hospital aid remain the same as the current year. Christie also added funding for mental-health and substance-abuse programs, including $127 million to fund higher Medicaid reimbursement rates for counseling

While the update on insurance coverage appears to be good news for patients, officials of hospitals that depend on Charity Care dollars raised concerns about the sharp decline – especially since it comes on the heels of a $148 million cut in the current year’s funding. The state provided $750 million in FY15 and $502 million in the current year.

“For the healthcare community, there are things to like in this budget proposal, as well as areas of concern,” said Betsy Ryan, president and CEO of the New Jersey Hospital Association, which represents 4,000 hospitals, nursing homes and other facilities.

Ryan praised the funding for graduate medical education and additional dollar commitments to mental health, but said she was concerned about the reduction to Charity Care.

“We await details of the Charity Care distribution formula; we need to ensure that the reduction doesn’t unduly impact our hospitals, which continue to provide care to all regardless of their ability to pay.”

Currently, all 72 of the state’s acute-care hospitals receive some Charity Care funds, based in part on what they spend to treat uninsured patients and those on Medicaid, which pays providers at roughly 70 percent of their full cost. Charity Care reimbursement levels range from 2 percent of these claims to nearly 76 percent, or, in dollar figures, from roughly $18,000 (Memorial Hospital in Salem County) to more than $63 million (St. Joseph’s Medical Center in Paterson) for this year.

Suzanne Ianni, president and CEO of the Hospital Alliance of New Jersey, which represents 17 “safety net” facilities in primarily urban areas, also welcomed the extra dollars for medical education. But she said the state must do a better job of directing the shrinking pool of Charity Care funding to the hospitals that need it most.

“Charity Care funds must be targeted to safety net hospitals – not only to protect healthcare access and jobs for low-income populations in our cities – but also to literally preserve federal healthcare funding for our state,” Ianni said.

Ianni pointed to a recent report to Congress from a nonpartisan commission on Medicaid that suggests states could be penalized in the future for spreading too thin the federal Disproportionate Share funding that New Jersey uses for Charity Care.

She urged state officials to also consider the full cost of treating poor patients – including expenses for transportation, housing assistance, even food – when allocating Charity Care.

“While the number of uninsured has decreased in New Jersey, it does not mean the need for Charity Care funding goes away,” she added. In fact, with more people on Medicaid – for which hospitals can’t recover 30 percent of their costs – “safety-net” facilities will see even greater financial strain.

[related]Linda Schwimmer, president of the New Jersey Healthcare Quality Institute, agreed that the decline in Charity Care claims is not a surprise, given the success of the ACA. But she warned that there will always be patients – especially undocumented residents – without insurance and, as Charity Care reimbursements decline, the state must ensure they reach the hospitals most in need.

“There is an ongoing issue of sustainability,” she said. “We can no longer afford to be a mile wide and an inch deep – we need to do a better job of targeting this funding.”

The governor also used the FY2017 budget presentation to follow through on pledges made in his State of the State address last month to expand efforts to address what has become an epidemic of opioid addiction. The new budget includes $1.7 million to expand a pilot program that pairs former addicts who at least four years clean with drug users who are admitted to the emergency room following an overdose. Already underway in Monmouth and Ocean counties, the Recovery Coaches program has been highly successful at convincing users to enter treatment programs.

The more than $127 million – a mix of state and federal dollars – added to mental-health and substance-abuse programs will enable the state to increase reimbursement rates for substance-abuse counselors and some mental-health providers.

State officials are meeting with these providers to discuss plans for the change – the first significant funding boost in more than a decade – which they hope will attract more professionals to the field and expand New Jersey’s capacity to tackle the wave of addiction.

“Last month I called on this Legislature to join me in doubling down on our state’s fight against drug addiction,” Christie said. “We have a chance to help people beat this disease.”

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