Statement of Senior Policy Analyst Raymond Castro on proposed Medicaid Comprehensive Waiver

Senate Health, Human Services and Senior Citizens Committee

Thank you for the opportunity to testify on the Department of Human Services’ proposed Medicaid Comprehensive Waiver. First I would like to focus on the results of new research we are releasing today on the impact of proposed NJ FamilyCare cuts in the waiver on both parents and children and then later discuss the need for more transparency and accountability in the overall waiver process.

Impact on Parents
The impact of closing enrollment of poor working parents in FamilyCare that has been proposed by the Christie administration in the waiver would have a major negative impact across the state. Our analysis of the county data has found that low-income parents will be denied FamilyCare in all counties, no matter how affluent or suburban, and that these cutbacks will be particularly severe because they will be in addition to the reduction in parent eligibility that was implemented last year in FamilyCare. The combined impact of these cutbacks represents an anti-family policy that will reverse the progress that has been made in FamilyCare.

The first chart I have provided you shows the number of parents that will be denied health coverage in FamilyCare in each county as a result of last year’s and the proposed cutbacks in eligibility. As might be expected, the counties with the largest number of working parents who would be denied FamilyCare – Essex and Hudson – are mostly urban. However there is also a major impact in some of the most suburban counties – like Ocean which ranked third highest in the state. Even some of the most affluent counties in New Jersey, such as Morris and Somerset, have large numbers of uninsured working parents who will be denied health care.

As you know, last year the eligibility level for new parents was reduced to 133 percent of the poverty level from 200 percent. According to the administration’s newest estimates, that resulted in about 43,000 parents being denied FamilyCare in FY 2011. In FY 2012 that number will increase to an estimated 70,000. As part of the waiver, the administration has also proposed closing enrollment to all new parents between about 25 percent (on average) and 133 percent of the poverty level. For example, eligibility for a parent in a three-person family would be reduced to $439 a month from about $2,000. This policy would result in another 23,000 parents being denied health coverage.

So the total number of uninsured parents who would be denied health care in FY 2012 is a staggering 93,000. Even that figure is conservative because it does take into account proposed increases in cost sharing for parents in the waiver that will discourage participation.

One of the reasons for the large impact is that while only new parents would be denied eligibility in FamilyCare, the current enrollment would also decrease due to attrition. Under the proposed new rules, once a parent left FamilyCare they could not come back if they are uninsured again unless they were impoverished and became eligible for welfare. As the second table shows, there has already been a 37% decrease in enrollment of parents between 133 and 200 percent of the poverty level since enrolment was closed to those new parents about a year ago. We expect the same attrition rate in enrollment for those parents affected by the proposed cutback in the waiver.

At that rate, in less than three years, there would not be any parents left in FamilyCare. Sadly that is the stated goal of the administration, to return Medicaid to the days when only children were served (as well as people with disabilities and seniors).

Impact on Children
Since it appears children are a priority of the administration, we also researched the impact of closing enrollment of parents on their children. As the third table shows, the first month that enrollment of parents was closed last year, child enrollment stopped increasing, and after a year there still has not been any increase. This has resulted in an estimated 18,000 fewer children who would otherwise have enrolled in Family Care in this income category in the first year. We expect that number to about double next year.

We also compared enrollment of these children with children whose parents could continue to enroll in FamilyCare. There was a ten percent increase in enrollment of children whose parents were allowed to enroll compared to a one percent decrease in children whose parents were denied FamilyCare during the period when parent enrollment was closed. Unfortunately it is those new parents whose children have been increasing in FamilyCare who are the next targets of the cutbacks proposed by the administration in the waiver. Thus, we can expect fewer children enrolled in that category in the future as well.

These findings are consistent with our study of the impact of closing enrollment of parents in 2002 on children in New Jersey as well as studies in other states.

Such a further reduction in the child enrollment rate will be devastating in a state that already has the 28th lowest child insurance rate in the nation (there were 228,100 uninsured children in New Jersey in 2008-2009).

The entire premise of this proposed cutback is wrong; we cannot be fully successful in helping kids without also helping their parents.

This proposal also cannot be justified on a financial basis. The Department of Human Services estimates that out of the $300 million that will be saved in the waiver, closing enrollment of parents will save only $9 million. Furthermore the state will lose about $17 million in federal matching funds so there will actually be a net loss of $8 million in revenues to the state. Such an action completely contradicts one of the goals of the waiver, to maximize federal funds.

Overall Waiver and Recommendations
With respect to the overall waiver, the $300 million in savings that is assumed in the budget, in addition to the $240 million in other Medicaid savings, is excessive and disproportionately cuts Medicaid to balance the state budget.

We also oppose all requests in the waiver to broaden state flexibility to expedite cuts in services and eligibility. The state should only apply for waivers that improve services or make them more costs-effective without compromising quality.

There is also a major lack of sufficient information on the changes that would be made as a result of the waiver. There appear to be some good ideas in the concept paper but they are impossible to evaluate without a detailed plan and a complete financial analysis of where the savings in the waiver will be generated. There also needs to sufficient time for the pubic to comment on the waiver and the plan.

The administration has indicated a willingness to work with the Legislature and the public on the waiver and therefore hopefully will act on these recommendations for greater transparency. If not, we urge state legislation, similar to which exists in many other states, which will limit the executive branch’s discretion to reduce eligibility in Medicaid and FamilyCare and authorize greater oversight of all Medicaid waivers by the Legislature.