NJPP Testimony: Benefits of Medicaid Expansion Won't Be Achieved Without Sufficient Resources

STATEMENT ON S2644 BY RAYMOND CASTRO, SENIOR POLICY ANALYST, BEFORE THE SENATE HEALTH, HUMAN SERVICES AND SENIOR CITIZENS COMMITTEE, TRENTON, NJ
MAY 9, 2013

New Jersey Policy Perspective strongly supports S2644, which would increase the Medicaid eligibility level to 133 percent of the federal poverty level for nonelderly adults consistent with the Affordable Care Act. I’m also representing the New Jersey for Health Care coalition today which consists of over 80 organizations and is the largest health consumer coalition in the state. The coalition has been working on this issue for several years and also strongly supports this legislation. Our concern is not with the policy but rather that insufficient resources have been allocated in the governor’s budget to fully implement it.

This bill addresses a major gap in Medicaid eligibility. New Jersey has made much progress in providing Medicaid and New Jersey FamilyCare to parents and children but that is not the case with childless adults. The only way that they can become eligible for Medicaid now is if they apply and are approved for General Assistance which has a monthly income eligibility limit of $140 for an employable individual as well as many other eligibility requirements that sharply limit participation in the program. Because of this major restriction, it is estimated that about 307,000 adults will be eligible for the Medicaid expansion.

The overwhelmingly positive benefits of Medicaid coverage have been well documented. In addition to the obvious health benefits to the individual obtaining Medicaid, research released within the last week has also shown that it will help reduce financial hardship. For example a study in Oregon found that one of the biggest benefits of providing Medicaid coverage to childless adults was an 80 percent reduction in the number of individuals with catastrophic health care costs compared to those individuals in the control group. This is welcome news in New Jersey and other states where these unexpected costs too often result in bankruptcy and foreclosures.

New Jersey Policy Perspective has also released a series of reports which have shown the positive impact of expanding Medicaid in New Jersey. These reports found that:

About half of all adults eligible for the Medicaid expansion work in low-wage jobs in New Jersey and that most occupations in our state include individuals who will be eligible for the expansion.

The expansion will stimulate New Jersey’s economy because it will result in New Jersey receiving about $1.6 billion annually on average over the next decade in federal Medicaid funds which will create thousands of jobs, and it will improve the health of New Jersey’s workforce making it more competitive.

It will result in at least $2.5 billion in state savings over the next decade because the matching rate for individuals currently eligible for Medicaid will be increased to 100 percent for the first three years then gradually reduced to 90 percent on a permanent basis.

These benefits, however, are only opportunities – they will not be achieved without sufficient resources. Our main concern is that no funds were allocated in the governor’s budget for outreach, marketing, and contracts with community-based organizations to reach the uninsured and help them fill out the application. This problem is compounded by the lack of sufficient staff in our County Welfare Agencies. The research shows that about 78 percent of all individuals who are eligible for assistance in the Affordable Care Act are not aware of this opportunity.

The individuals who will be eligible for this expansion have many barriers to enrollment including mental illness, substance abuse, physical disabilities, homelessness, and an inability to speak English. Many of them have never been on Medicaid before and do not know how to apply for it or they have had very bad experiences with health insurance which will make them reluctant to apply again for help.

The lack of state funding for outreach not only affects participation in the Medicaid expansion, it will also affect the number of individuals who will apply for premium subsidies in the federal exchange. NJPP estimates that without outreach New Jersey will lose $690 million in federal funds each year, and 186,000 fewer New Jerseyans will likely benefit from health care reform.

Unfortunately New Jersey is at a disadvantage because the state opted for a federally run exchange rather than a state based or federal-state partnership exchange. That means New Jersey will receive far less in federal funds for outreach than many other states. Currently only $1.5 million has been allocated to New Jersey by the federal government for the navigator program, which will award contracts to community-based and other organizations for outreach. States with a state based or federal-state partnership exchanges have been allocated far more than that in their exchange planning grant. For example Maryland, which will operate a state based exchange, plans on spending $16 million in federal funds and $8.8 million in state funds for outreach and related activities for a total of $24.8 million.

Recommendation

Based on what other model states with a state based exchange are planning to spend on outreach and they need in New Jersey, NJPP recommends that the legislature appropriate about $12 million in state funds for outreach, which would draw down an additional $6 million in federal Medicaid matching funds bringing the total funding for outreach to $18 million. The state funds should be evenly divided between the Department of Human Services and the Department of Banking and Insurance which will need to coordinate their efforts. About $1 million in outreach funding generates about $40 million in federal funding in New Jersey, so this is a worthwhile investment.

There is also no shortage of ways to pay for this initiative. As the governor made clear in his budget, the Medicaid expansion will result in $227 million in state savings in state fiscal year 2014. Those savings are only for 6 months since the expansion does not start until January 2014. Therefore in 2015 the savings will about double to nearly a half billion dollars which would increase in subsequent years. A small percentage of the savings would fully fund this initiative.

Expanding outreach will also mean a major reduction in the number of uninsured who go to the emergency room, which could generate savings in state charity care funds to hospitals – so in effect this initiative would pay for itself. Furthermore we know that state revenues will increase from taxes on health insurers as a result of more people becoming insured.

The federal government also awarded $7.6 million in federal exchange planning funds to the Department of Banking and Insurance for other purposes about a year ago but these funds were never spent. The federal government has determined that these funds could be used for outreach and marketing rather than have them lapse. This creates another excellent opportunity for New Jersey to expand outreach.