The federal Republican healthcare proposal could add more than $1.4 billion to New Jersey’s tab within two years if the state chooses to continue the Medicaid expansion program — in addition to other new costs related to the reform — according to a national report released Tuesday.
The Center on Budget and Policy Priorities found that the Garden State would see a 346 percent increase in its share of cost for this portion of the Medicaid program, which now covers more than 500,000 residents. Delaying the implementation of these changes for two years – as some federal leaders have suggested – would do little to soften the blow, the group said.
A separate report by the center, also issued Tuesday, revealed that if these low-income individuals were forced off Medicaid into the commercial health insurance market, the high cost of these policies would put coverage out of reach for many — even with the subsidies outlined in the Republican plan. For example, a 60-year-old New Jersey resident earning roughly $13,000 a year would need to spend two-thirds of their annual income just to pay their insurance premium, the CBPP found.
The controversial proposal — the American Health Care Act — passed the U.S. House of Representatives in May and is now under review by a select group of Republicans in the Senate. While some Senators had pledged to take a fresh look at the plan, the CBPP cited recent reports in which members of the workgroup said much of the bill is likely to remain the same. Others have suggested delaying aspects of its implementation for several years as a form of compromise.
“Tinkering around the edges of a bad bill won’t solve its fundamental flaws,” said Ray Castro, director of health policy at New Jersey Policy Perspective, a liberal policy group that has tracked the proposal’s impact on New Jersey. “The bottom line is that the House bill would significantly harm New Jersey.”
U.S. Sen. Robert Menendez, a Democratic leader on the powerful Senate finance committee, has pledged to “work his heart out to do everything he can to stop” the House bill from becoming law. Menendez has been meeting with patients around New Jersey, gathering stories about the impact of the ACA, and has been battling on the Senate floor — and on social media — to push back against the controversial proposal.
An effort to replace aspects of the federal Affordable Care Act, or Obamacare, the GOP plan – sometimes called “Trumpcare” — would transform the way federal funding is used for traditional Medicaid, which covers 1.3 million people in New Jersey. It would also cut federal support for the Medicaid expansion population from 90 percent of the costs to 50 percent, for new enrollees.
The measure also permits states to allow insurance companies to reduce the scope of health benefits they provide and charge more for patients who have pre-existing conditions. It offers subsidies of up to $4,000 a year for middle-class individuals to help them purchase commercial insurance, but eliminates the Obamacare insurance mandate and various taxes on healthcare products and wealthy individuals, reducing federal spending by more than $800 billion over the next decade.
Absorbing the cost
But according to one of the CBPP’s reports, by Matt Broaddus and Edwin Park, this would in effect shift tens of billions of dollars to state budgets. “In practice, states very likely wouldn’t be able to absorb these additional costs,” they wrote.
“Delaying or phasing in the cost shift to the states under the AHCA would not stop the eventual end of the expansion and steep reductions in Medicaid enrollment,” the authors added. “The bill still would reverse the historic gains in health coverage and access to care that have been made under the [Obamacare Medicaid] expansion.”
If proposed changes to Medicaid expansion funding, scheduled for 2019 in the House bill, were instead delayed until 2021, New Jersey would be forced to spend nearly $1.17 billon on this portion of the program that first year — more than $800 million than it would cost under the current ACA formula. By 2023, these costs would grow to $1.84 billion, or $1.42 billion more than it would cost under Obamacare to insure this group.
These new costs would be in addition to the potentially billions needed to cover other costs for traditional Medicaid patients and would come as the state faces a growing budget crisis on other fronts. A report from Moody’s Investors Service in late May warned that, given New Jersey’s current economic growth, its rising public-employee pension contribution commitments, and its plans to implement tax cuts as part of the Transportation Trust Fund deal, the state could face a deficit as large as $3.6 billion by 2023.
“Clearly, as proposed, this would be devastating to New Jersey’s state budget in year one,” said Sen. Paul Sarlo (D-Bergen), the Senate budget chairman, who warned there was “no way” the state could absorb all these costs. “There’s no room to spare today,” he said, “and it’s highly unlikely there will be room to spare then.”
According to estimates by the nonpartisan Congressional Budget Office, if states don’t pick up these additional costs, the reforms to the Medicaid expansion would force two-thirds of the participants out of the program within three years. Two years later, only five percent of these individuals would still be covered through this program, the CBO predicted.
While some GOP members of Congress have suggested these individuals could find coverage in the commercial insurance market, a second Center on Budget and Policy Priorities report found this was unlikely. “In reality, low-income adults — especially older people — would face out-of-pocket premiums (after accounting for their tax credits [offered as part of the GOP plan]) too high for them to realistically afford coverage, and deductibles, and other cost-sharing too high for them to realistically obtain needed care,” author Tara Straw wrote.
The problem would be particularly acute for poor childless adults without a disability — a group that did not previously qualify before the ACA expanded Medicaid eligibility; this includes close to 40,000 people in the Garden State. According to the CBPP, a 60-year old New Jersey resident who earned around $13,000 a year, the current federal poverty line for individuals, would need to spend more than $8,600 annually on health insurance premiums by 2020. Under the ACA, that person now spends nothing on premiums.
A 45-year old at the federal poverty line would need to spend nearly a fifth of their income to buy coverage in the Garden State come 2020, the report found. A 30-year-old resident would need to shell out nearly 10 percent of what they take in, or more than $1,100 a year, to buy a policy. Many would also face deductibles that average $4,000, without the federal cost-sharing assistance that is part of Obamacare.
“If low-income New Jerseyans lose Medicaid coverage, the private market is not a viable option, even with the House-passed tax credits,” NJPP’s Castro said. “What’s more, New Jersey has one of the highest costs of living in the nation, so the poor have no disposable income available to pay for any health care,” he added. “In that sense, the study underestimates this problem in the Garden State.”