Op-Ed: NJ Must Reduce Impact of Federal Cuts on Charity Care

Suzanne Ianni | February 14, 2019 | Opinion
Substantial reductions in funding, scheduled to take effect this October, could be devastating for the state’s safety-net hospitals. We need to protect them

Suzanne Ianni
Healthcare in America continues to be one of the most hotly debated issues of our generation. Rightly so, as our health is so vitally important and personal to each of us. There is general agreement on two basic healthcare propositions. First, the more people who have health insurance coverage, the better. And second, health insurance coverage is worthless without access to actual healthcare.

New Jersey’s safety-net hospitals provide access to care for all New Jersey residents, particularly a high percentage of the most vulnerable and uninsured residents. Safety-net hospitals also educate the next generation of physicians, provide around-the-clock expert medical care, and address the special needs of their communities by investing in family clinics and linking their patients to critical social services.

New Jersey’s Charity Care program receives funding from the federal government’s Medicaid Disproportionate Share (DSH) program, and is a critical support for safety-net hospitals and the communities they serve because they treat a large percentage of uninsured individuals across the state. Charity Care not only provides guaranteed access to care for the uninsured but helps support safety-net hospitals that treat a higher number (or disproportionate share) of Medicaid patients for which they are not adequately reimbursed. In fact, Medicaid pays only about 70 percent of the cost of providing care for its patients.

The good news is that more New Jersey residents are insured, and covered by Medicaid, than ever before. This fact also underscores how vitally important Charity Care and Medicaid DSH funding remains to support safety-net hospitals that provide essential healthcare to this increased patient population that now represents 28 percent of our state’s residents.

Reimbursements lower than cost of treatment

One assumption built into the Affordable Care Act is that DSH payments can be reduced because more people have insurance, particularly because 37 states expanded access to Medicaid. Consequently, the ACA includes annual reductions to DSH payments. Safety-net hospitals, however, depend upon these payments to make up for reimbursements they receive that are lower than the costs incurred for treating greater numbers of Medicaid patients.

The ACA reductions to DSH payments have been delayed but are scheduled to take effect this October. The reductions are substantial, with $4 billion being cut in Federal Fiscal Year 2020, and $8 billion to be cut each year from FFY 2021 through 2025. New Jersey is estimated to lose $1.1 billion in federal DSH payments from FFY 2020-2025. These cuts will have a devastating impact upon the state’s safety-net hospitals, which in the aggregate, currently operate with negative margins.

We know that the federal government plans to impose the largest DSH cuts, in part, on states that do not appropriately target DSH payments to safety-net hospitals. Therefore, we in New Jersey can reduce the impact of these cuts by ensuring that Charity Care is adequately funded, and its payments are targeted to the safety-net hospitals serving the most uninsured patients and vulnerable communities.

New Jersey’s healthcare policymakers have for many years demonstrated a clear understanding of the unique challenges faced by our state’s safety-net hospitals. Just last year, the County Option Hospital Fee Pilot Program was enacted, which will enable counties and hospitals to partner with the state to trigger significant federal matching funds to be reinvested into hospitals. This innovative program will support our healthcare system and help turn the tide on the amount of money our state sends to the federal government and what it receives in return.

The work of our state’s safety-net hospitals is critically important to the health of tens of thousands of New Jersey residents. To ensure safety-net hospitals’ continued viability, to protect our state’s healthcare system, and to reduce unnecessary DSH payment cuts, let us all work together to strengthen and ensure Charity Care supports safety-net hospitals as it was designed to do.