The Governor's Budget Falls Short on Medicaid

There’s certainly some good news in the governor’s budget when it comes to Medicaid, but it unfortunately does not address a major problem that could be avoided.

The good news: The budget maintains most services and has no direct cuts. Given that this is another tight budget, this in itself is a significant accomplishment. There are also important funding increases in the budget, like $109 million to place individuals with developmental disabilities or mental health issues in the least restrictive community settings and $125 million more to allow seniors to remain in their own home to avoid nursing homes. It is also encouraging that the governor will contract with Rutgers University to evaluate how to provide better care to individuals who rely too heavily on emergency room visits.

This progress is tied to the state’s ability to tap into new opportunities to maximize federal funds, whether through the Affordable Care Act’s Medicaid expansion, other federal grants or successfully negotiating Medicaid waivers. For example, this proposed Medicaid budget is built on an increase of just $254 million in state dollars, compared to $1.6 billion in federal funds.

Now, the bad news.

For starters, the governor’s budget ignores a deadline that will likely produce major problems for Medicaid recipients and the doctors who care for them. New Jersey has one the lowest Medicaid reimbursement rates for physicians in the nation, in a state with some of the highest costs. Under the Affordable Care Act those rates were doubled for already-scarce primary care physicians in 2013 and 2014 (at all federal cost). Now it’s up to the state to maintain that higher reimbursement rate beginning in January 2015. If it doesn’t, reimbursement rates will be cut in half at the same time that thousands of new Medicaid recipients become eligible via the Medicaid expansion.

This is a perfect storm that could cut the number of doctors willing to take Medicaid patients just as the number of patients significantly expands. Concurrently, the state also needs to increase reimbursement rates for specialists to assure these providers are available when the demand for their services increases next year.

The governor’s budget also fails to help more New Jerseyans to afford the plans available in the Health Insurance Marketplace. The federal subsidies will probably be sufficient for most New Jerseyans, but given New Jersey’s high costs, some folks won’t be able to afford even these subsidized plans because of other major costs (like housing) that sharply reduce their disposable income. New Jersey might have followed the example of another high cost state, Massachusetts, which will supplement the federal subsidies with state funding to reach more residents.

These initiatives could be funded with the budget savings New Jersey will reap from the Medicaid expansion and little to no state spending. The governor’s budget includes $181 million in savings from the expansion. Rather than use this money to balance the budget or for other priorities, New Jersey should reinvest some, if not all, of it in health care by improving access and affordability.

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