Recent Changes in Health Policy for Low-Income People in New Jersey
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Posted to Web: March 02, 2002
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About the Series
This state update is a product of Assessing the New Federalism, a multiyear project to monitor and assess the devolution of social programs from the federal to the state and local levels. Alan Weil is the project director. The project analyzes changes in income support, social services, and health programs. In collaboration with Child Trends, the project studies child and family well-being.
Recent Changes in Health Policy for Low-Income People received special funding from the Robert Wood Johnson Foundation as part of the Urban Institute's Assessing the New Federalism project. The project received additional financial support from The Annie E. Casey Foundation, the W. K. Kellogg Foundation, The Henry J. Kaiser Family Foundation, The Ford Foundation, The David and Lucile Packard Foundation, The John D. and Catherine T. MacArthur Foundation, the Charles Stewart Mott Foundation, the McKnight Foundation, The Commonwealth Fund, the Stuart Foundation, the Weingart Foundation, the Fund for New Jersey, The Lynde and Harry Bradley Foundation, the Joyce Foundation, and The Rockefeller Foundation.
This state update was prepared for the Assessing the New Federalism project. The views expressed are those of the authors and do not necessarily reflect those of the Urban Institute, its board, its sponsors, or other authors in the series.
Overview
In recent years, New Jersey has substantially expanded its role in health financing. Public coverage has increased, especially for low- and moderate-income children, and so has public oversight of private coverage. This is a marked shift from the prior era of active public retrenchment and downsizing. During the early to mid-1990s, the state had been implementing hospital deregulation, major reductions in support for hospital uncompensated care, cuts in hospital and nursing home rates, and mandatory Medicaid managed care for cash-assistance beneficiaries. Such downsizing had been prompted both by economic downturn and a shift in political philosophy as Republicans assumed control of the governorship and both houses of the legislature in the early 1990s.
Politically, the early priorities of new leadership were reducing taxes, controlling public spending, promoting economic development, restructuring public pensions, and reforming welfare. From the mid-1990s, the accelerating economy brought rapid growth in revenues even as tax cutting continued, and budgetary pressures eased. Given new federal support for children's health care coverage and also tobacco settlement funds, in the latter 1990s New Jersey became an enthusiastic promoter of expanded coverage. NJ KidCare came first, for children, then became NJ FamilyCare, which also covered parents and some childless adults. Earlier state-only expansions had either languished with low funding (adults' coverage) or were never enacted (children's coverage).
In the late 1990s, public coverage expanded incrementally to quite generous levels. By early 2001, New Jersey offered coverage to children with family incomes up to 350 percent of the poverty level, parents up to 200 percent, and childless adults up to 100 percent, funded by a mix of funding streams. Some state funding is contributed without any federal match. The state's income eligibility levels are among the highest in the nation. Medicaid, children's, and adult coverages now operate as varying benefit packages within a single program, dubbed NJ FamilyCare. At higher income levels, NJ FamilyCare benefits are scaled back from Medicaid levels to match a benchmark private managed care plan. Another expansion provides premium assistance to help qualified beneficiaries pay for private coverage. For higher income beneficiaries, the program is not an entitlement. Administrators may trim the program as necessary to stay within appropriated funds, which they have done.
Other expansions have also occurred: The hospital charity pool won permanent funding in 1997, then increases in support. Moreover, that support comes from general state sources, not from an off-budget industry assessment as elsewhere. Drug coverage for seniors has just been increased as well, along with support for community-based long-term care services and other initiatives. Tobacco settlement funds have been devoted mainly to health policy concerns, not used for general purposes as is typical in other states, though roughly one-third goes for education.
The state is an eager maximizer of federal support but more cautious with its own tax dollars, especially in creating open-ended entitlements. For example, the state limited its support for the most recent expansion to parents and childless adults not eligible for federal matching contributions. When new enrollment reached funded levels much faster than expected, the program cut back on outreach. Faced with revenue shortfalls, the state fiscal year (SFY) 2002 budget added only limited new funds, and non-parent adults' coverage was subsequently scaled far back.
Officials speak warmly of relations with the Health Care Financing Administration (HCFA, since July 2001 known as Centers for Medicare and Medicaid Services or CMS) over program issues, including waiver requests. This congeniality is seen as a change due more to federal than to state developments. Long-term care policy continues to emphasize deinstitutionalization, with more in-community support for disabled persons. The state is seeking cooperative implementation of the Supreme Court's 1999 Olmstead ruling on inappropriate institutionalization of disabled Americans. It is recognized that more home- and community-based support is needed, so state policymakers are meeting with various advocacy groups and other constituencies to help set policy and, unlike many other states, New Jersey does not expect litigation.
Control over Medicaid spending has consistently been a key priority and has met with considerable success. Starting from a high spending base, Medicaid grew only 3 percent a year in 1995–2000, compared with 5 percent nationally. Medicaid's share of state general-fund spending accordingly declined from 16 percent to 14 percent. The state has also been able to absorb sizeable declines in federal Medicaid support for hospitals disproportionately serving the needy, with little impact on program operations. New Jersey Medicaid does not seem to crowd out other state priorities, unlike the situation in some other states. Officials give much credit for spending restraint to managed care for the welfare-related population, begun in 1995, but fee-for-service price controls also contributed. Managed care is also praised for making qualitative improvements to care, which is the primary rationale for expanding it to the aged, blind, and disabled. That expansion has just begun, after a long planning process. Major consolidations have occurred among managed care plans, dropping participation from 13 to 5 plans, and officials would like to add another plan. Consolidation has also occurred for Medicare and private markets, however, and does not seem a major public concern as yet.
As of mid-2001, prominent health policy issues include coping with reaching the ceiling on coverage expansions for children and families, implementing Medicaid managed care for the disabled, closing institutions for people with mental illness and people with developmental disabilities, expanding long-term care alternatives, as well as implementing the recently strengthened state financial oversight of health plans and patient protections, including potential for-profit conversion of the state's large Blue Cross plan. Other 1990s initiatives that seem to be stable, and hence less salient, concerns include reorganization of the health department, administration of Medicaid managed care for poverty- related beneficiaries, expansion of state subsidies for prescription drugs for aged and disabled persons, redesign of the state's hospital uncompensated care pool, and most of the quality regulation of HMOs.
Two new developments create considerable uncertainty for continued expansion. The first is a slowdown in revenue growth. The SFY 2002 budget required $1 billion in adjustments between the governor's proposal of January 2001 and the enacted budget of June. The 2002 adjustments included revenue enhancements in the collection of business taxes, but major political resistance ruled out broad tax increases and recession has since worsened the picture, especially after the terrorist attacks of September 11. The state also incurred unexpected costs from September 11 and its aftermath, and from the anthrax emergency. The November election realigned political power, with Democrats reclaiming the governorship and the assembly and tying in the senate. Governor Jim McGreevey repeatedly attacked the record of the last eight years for overspending and has repeatedly promised not to raise taxes. Given the fiscal outlook, the future challenge may not be to craft further growth in public activities but rather just to maintain past expansions.
The foregoing are the main findings of this case study of recent health care policy affecting low-income people in New Jersey, which builds on a 1997 baseline study.1 This report and others like it examine representative states' responses to the new opportunities and challenges of the last half decade.2 This report is based on personal interviews in mid-March 2001, supplemented by telephone and written responses, as well as documents, newspapers, and Web sites. Interviewees were given the opportunity to comment on a draft. Fiscal developments, major budget changes, and Medicaid shifts were followed through November 2001.3 The following presentation tracks the five key issues studied: First, how have political and fiscal circumstances changed in New Jersey? Second, how has the state changed its public or private health insurance coverage? Third, how have Medicaid managed care and other acute care issues changed? Fourth, how did New Jersey policymakers respond to pressures to expand home- and community-based services for persons with disabilities? Fifth, what other issues were prominent?
Notes from this section of the report
1. The earlier study's site visit interviews occurred in February 1997, with follow up through the election that fall. It covered somewhat more topics and contained more historical information. See Bovbjerg, Randall R., Alison Evans, John Holahan, Frank Ullman, and Susan Flanagan. 1998. Health Policy for Low-Income People in New Jersey . Washington, D.C.: The Urban Institute. Assessing the New Federalism State Report.
2. Twelve other states are also covered: Alabama, California, Colorado, Florida, Massachusetts, Michigan, Minnesota, Mississippi, New York, Texas, Washington, and Wisconsin. The states were selected to present a balanced view of state activity and its impact on low-income families. See Kondratas, Anna, Alan Weil, and Naomi Goldstein. 1998. "Assessing the New Federalism: An Introduction," Health Affairs 17(3): 17–24.
3. Important written sources appear in endnotes.
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Disclaimer: The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.