Opinion: Medicaid, An Indispensable Program For The Poor Of Our State

Healthcare Basics: A series that details the fundamentals of Medicare and Medicaid, two costly programs that play a critical role in keeping millions of Americans healthy

Credit: Amanda Brown
Richard F. Keevey
Fifty-four years after Medicare and Medicaid were established, our nation is rapidly approaching a crossroads in how we provide and pay for these critical government programs. This is the second in a four-part series by Richard F. Keevey, the former budget director and comptroller for New Jersey, breaking down the complicated issues, explaining what the programs are and whom they serve, how they came to this juncture and where they are headed. Keevey will also suggest steps that could be taken now to forestall a crisis. Today’s focus: Medicaid. Follow this link to read Part One.


Medicaid represents 17 percent of the money spent on healthcare in the United States — $1 out of every $6. It is the major source of health financing affecting the budgets of the states, including New Jersey.

It provides for the health and long-term care needs of 75 million low-income residents in the country. Total expenditures are approximately $625 billion and it is the fourth largest expenditure in the federal budget behind Social Security, Medicare and defense.

In this fiscal year, New Jersey will expend $16 billion for Medicaid, including the sizeable reimbursement it gets from Washington. It’s the largest program in the state budget — just ahead of K-12 education, which comes in at $15.5 billion in the budget for FY2020.

New Jersey’s Medicaid program, including the Children’s Health Insurance Program (CHIP) — sometimes referred to as NJ FAMILY CARE — provides healthcare to 1.7 million lower-income adults and children. Taking turnover among clients into account, almost 2.3 million receive benefits at some point in a given year, state officials estimate.

Nearly all New Jersey beneficiaries are enrolled in managed-care plans offered by five private companies, which receive per-member, per-month payments under contracts with the state — a very effective way to manage such a large health program.

Medicaid is open to anyone who meets eligibility rules. They are complex, but in brief, one must have an income below certain limits and fall into a “covered group’”:

  • Aged, blind or disabled, and receiving payments under the Supplemental Security Income program administered by Social Security;
  • Pregnant women who fall below 200 percent of the poverty level;
  • Children through age 18 in families that fall below 350 percent of the poverty level;
  • Other adults up to 138 percent of the poverty level.
  • The passage of the Affordable Care Act (ACA) had a very positive impact on the healthcare of many folks in New Jersey. It expanded Medicaid eligibility to include many lower-income working people who otherwise would not be eligible. Approximately 490,000 residents have been added to the Medicaid rolls — people who were for the most part uninsured before ACA.

    Financial issues

    The Medicaid program is administered by states, under federal guidelines, and is financed jointly by the states and the federal government. The program has a guarantee of matching dollars with no pre-set limit. Federal reimbursement rates range from 50 percent to 77 percent depending on the wealth of the state.

    New Jersey, being a relatively high-income state, receives 50 percent of Medicaid costs from Washington. Reimbursements for clients eligible under the ACA are at a much higher level — it was 100 percent in the first year and has now been phased down permanently to 90 percent. It’s still a great deal for New Jersey residents and the New Jersey budget, which otherwise had to subsidize hospitals for “charity care” of otherwise uninsured patients. The CHIP program, focused on the young, is 65 percent supported by the feds.

    Medicaid spending is driven by multiple factors, including the number and mix of enrollees, medical-costs inflation, utilization, state policy choices about benefits, provider payment rates and other program factors. During economic downturns, enrollment grows as does spending — usually at the same time state revenues are slumping.

    New Jersey has one of the nation’s most generous programs in terms of services offered and eligibility. In addition to mandated services that every state must provide, New Jersey also offers an extensive range of optional services (including optometry, dental, and pharmaceuticals).

    Perhaps as a result, cost per enrollee is among the highest in the nation — approximately $9,560 per person per year, almost 25 times the national average. At the same time, though, the program is not generous in payments to acute-care providers, reimbursing much less than Medicare and well below rates offered by private insurance.

    “Our spending per enrolled is very high because our program covers very sick people, more so than the national average,” said Dr. Joel Cantor, director of the Rutgers Center for Health Policy. “It is not because we pay more to providers — we do not. Compared to the nation, New Jersey has a bigger share of spending for the elderly and people with disabilities. They are very high consumers of healthcare as they are very ill and use long-term care services and acute medical services as well.”

    Specifically, New Jersey costs for long-term care for the elderly ($19,505 annually per enrolled) and for people with disabilities ($24,995 per enrolled) is significantly above the national average — $15,503 and $18,100, respectively.

    New Jersey also spends much more than the national average on Medicaid for nursing-home care, including for people who, at the end of their lives have spent all their money on care and now are poor.

    In an essay in the book, Medicare and Medicaid at Age 50, Dr. Jill Quadagno posits that “Medicaid has become the de facto nursing home benefit for seniors.”

    The Medicaid program also provides “disproportionate share hospital” (DSH) payments to facilities that serve a large number of poor and uninsured patients. New Jersey hospitals benefit from this provision.

    Two significant but little-known facts: Almost 67 percent of all Medicaid spending in the United States is attributable to the elderly and persons with disabilities, even though they represent less than 25 percent of all enrollees. Furthermore, Medicaid spending per enrollee grew at a slower rate than Medicare, private health insurance, and all national health expenditures over the last 10 years.

    Some observations

    Medicaid is indispensable for the healthcare of lower-income Americans — almost 30 percent of the nation’s population. Without Medicaid and the ACA, more than 75 million Americans, including 1.7 million New Jerseyans, would lack health coverage.

    Medicaid is also an essential source of financial support, particularly for safety-net hospitals, health centers and much of the nursing-home sector. These institutions are major sources of jobs in New Jersey and throughout the country, paying decent wages in under-resourced communities. A significant retrenchment in federal Medicaid funding would burden states and localities — as well as families.

    Some members of Congress wish to repeal ACA and cap funding for Medicaid via a block grant or similar mechanism. Either or both actions would adversely impact the lives of many Americans.

    Unfortunately, Medicaid and certainly the ACA have a much weaker political base than does Medicare and are in a much more precarious situation.

    Although technically an “entitlement” like Medicare and Social Security — all who meet the set criteria are eligible — Medicaid is funded exclusively by government budgets and not by contributions made by workers via payroll taxes over their lifetimes. It therefore suffers from a misguided “welfare” stigma.

    Carried to extreme policy choices, both Medicaid and ACA are potentially reversible. The actions of a growing force in Congress could reverse the significant strides made in healthcare in the United States.

    Growing deficits and debt might allow for the retrenchment of these programs by very conservative forces — as if healthcare for low- and moderate-income folks was the singular reason for the national debt.

    It is certainly reasonable to take steps to stem the flow of red ink, and some actions certainly beg for policies to reduce healthcare costs. (Reducing the extreme and uncontrolled growth of prescription drugs and drug prices and increasing certain taxes, to name a few.) But abandoning Medicaid and the ACA is the wrong path.

    We’re in this together
    For a better-informed future. Support our nonprofit newsroom.
    Donate to NJ Spotlight