For 1.7 million New Jersey residents, the state’s Medicaid program is essential to their health and well-being. Early in 2020, policymakers expected the number of people who relied on Medicaid to remain stable, or even dip slightly, as unemployment declined and more people obtained health insurance through their employers.
That scenario now seems as unfathomable as a crowded movie theater.
The devastating economic impact of the COVID-19 pandemic has caused New Jersey’s unemployment rate to jump from 3.7% in March of this year to 15.2% in May. As more people lose their jobs, more people lose their health insurance.
As a result, more people will be eligible for Medicaid. An unprecedented enrollment of children and families in Medicaid over the second half of 2020 and into 2021 is now the expected scenario. This unprecedented growth in Medicaid enrollment would put extraordinary demands on our state’s budget, already hurting from reduced tax revenues. Our state will have tough decisions to make.
The reason Medicaid is not flooded with applications right now is the Pandemic Emergency Unemployment Compensation (PEUC), a federal program that supplements the weekly unemployment benefit. For example, the average weekly benefit without PEUC is $462 versus $1,062 with PEUC.
At the lower unemployment benefit level, many families would qualify for Medicaid immediately. The emergency federal unemployment program that boosts unemployment benefits ends July 31. The U.S. Congress is currently considering whether to extend PEUC.
The Quality Institute’s Medicaid Policy Center just released an issue brief projecting what Medicaid enrollment in New Jersey would look like based on three different scenarios, each depending on whether unemployment benefits are extended as well as the pandemic’s spread and related public health orders:
- Scenario One — PEUC is not extended. New Jersey Medicaid enrollment will increase by 40% from 1.7 million in March 2020 to its peak of nearly 2.4 million by December 2020. As the employment picture improves, enrollment will decline to pre-COVID-19 levels by the end of 2021. Using per capita cost estimates from Gov. Phil Murphy’s FY2021 Recommended Budget, we estimate an additional $2 billion in Medicaid costs in that fiscal year.
- Scenario Two — Congress extends the unemployment benefit or modifies the benefit to incentivize a return to work. This would increase Medicaid enrollment by 20% with the peak in April 2021. New Jersey would see a smaller growth in Medicaid enrollment over a longer period of time. Barring a second stay-at-home order, this is the most likely outcome. Under this scenario, we estimate an additional $1.2 billion in new Medicaid costs in FY2021.
- Scenario Three — Unemployment benefits are not extended and the economic recovery lags due to a strong second COVID-19 wave. In this worst-case scenario, double-digit unemployment will persist through 2020 and the first quarter of 2021. We project this will result in a 60% increase in Medicaid enrollment that will not peak until August 2021. New costs in FY2021 under this scenario are estimated to be $3.2 billion.
Congress must consider the implications for state Medicaid programs when making the decision whether to extend PEUC. With the additional income, people who have lost their jobs can purchase coverage through the Affordable Care Act individual market or COBRA instead of Medicaid.
The problem is not just in New Jersey. Colorado anticipates a 40% increase through 2020, while Florida and Ohio estimate 15% and 10% increases respectively between April and June 2020, with additional growth throughout the year.
States such as New Jersey that expanded Medicaid and allowed people with higher incomes to enroll are expected to experience greater increases in enrollment.
The Families First Coronavirus Response Act increased federal matching funds for Medicaid. But it also says states cannot limit or reduce Medicaid enrollment, including normal case terminations.
We need Congress to support states struggling to protect their residents in a pandemic and balance their budgets. Extending unemployment benefits through December 2020 would limit increases in Medicaid enrollment at least through the end of 2020. That would give the economy a chance to reopen and for employment levels to recover. Extending this program helps Americans hurt by the pandemic — and also helps states preserve their Medicaid programs.