For NJ Hospitals, Deep Concerns Over Medicaid Repeal

The state's med centers have become less reliant on charity care. Loss of Obamacare funds may put them on shaky ground.

The federal expansion of Medicaid under Obamacare has been a runaway success in New Jersey — not only covering 552,000 residents over three years, but firming up the finances of the state's most vulnerable hospitals.

But all that may unravel if the Republican effort to repeal that aspect of the Affordable Care Act, passed by two House committees after its introduction Monday, becomes law.

Embraced by Gov. Chris Christie, the Medicaid expansion brought more than $3 billion into the state. It led to three years of steady improvement in hospital finances, resulting in credit upgrades and technology investment. State budgets for charity care plummeted as hundreds of thousands of residents left the ranks of the uninsured.

Those newly insured patients have been covered for visits to primary care doctors, prescription drugs and consultations with specialists — no longer relying on hospital emergency rooms for most of their health needs.

And because of the increase in coverage, there is less of a need for charity care funds from the state. This week, Christie announced an additional $50 million in cuts to charity care for the fiscal year starting in July, a total reduction of 61 percent from the $650 million in state funding before the ACA took effect.

During a time of tight state budgets, those savings have been welcome.

Now, with Republicans planning to end the higher level of federal funding for Medicaid expansion in 2020, hospitals are worried the state won't be able to fill the gap as those people gradually become uninsured. And they worry about the implications for the 142,000 people employed by the state's hospitals.

"Medicaid expansion has absolutely been positive for hospitals, and good for patients, too," said Sean Hopkins, senior vice president of the New Jersey Hospital Association. "We're looking at a $1 billion shortfall for hospitals," if the Republican proposal doesn't change, and state funding doesn't revert to its former levels.

"This bill is risky to the health of New Jersey residents now covered … as well as to a sector that represents 17 percent of our nation's gross domestic product," the association's president, Elizabeth Ryan, wrote New Jersey's congressional delegation, explaining why hospitals here and across the United States oppose the current bill. Without careful analysis — including a review by the Congressional Budget Office — it could have "unintended consequences that could carry grave costs for years to come," she said.

Congressional Republicans want to change federal funding for Medicaid to a per-capita grant to the states, rather than an open-ended entitlement, in 2020. They also want to cut federal support for the Medicaid expansion from 90 percent of costs to 50 percent in New Jersey. Under their proposal, if a person who has enrolled through Medicaid expansion became ineligible because of an uptick in income, he or she would not be allowed to return to the program.

That could slowly erode the number of those who are eligible, considering that roughly 19,000 people in New Jersey left Medicaid in a recent month for various reasons. If that rate were to continue under the Republican plan, nearly half of the Medicaid expansion population would lose coverage in a year.

Credit downgrades?

Moody's investors Service, analyzing the effects of the proposed legislation, said it would have a negative impact on the creditworthiness of hospitals because it "would reduce the number of people with health insurance and increase bad debt and uncompensated care costs." A lower credit rating would mean higher interest rates when hospitals borrow money for capital improvements.

New Jersey hospitals, by law, must care for everyone — regardless of a patient's ability to pay. But hospital finances are more stable if patients are insured — privately or through Medicaid or Medicare — rather than reliant on charity care. That's because insurers generally pay the bills within a few months. In contrast, when patients are uninsured, the hospital submits its charity-care expenses to the Department of Health; two years later, depending on the money allocated in the state budget, a portion of each hospital's costs is reimbursed.

This year's charity care funding formula gave priority to safety-net hospitals, according to state Health Commissioner Cathleen Bennett. And it recognized the "continuing decline in documented charity care," which fell 53 percent from 2013 to 2015 — from more than $1 billion to $479 million, she said.

That priority was a boon to St. Joseph's Healthcare System, one of the largest providers of charity care in the state, which is to receive $41.5 million in charity care funds and another $17.2 million for its role in graduate medical education in 2018.

Despite "challenging economic times" in New Jersey, the allocation recognized "the essential role that hospitals like St. Joseph’s plays in caring for New Jersey’s most vulnerable patients," said Dennis Roemer, the system's chief financial officer.

As to Congressional action to repeal the Medicaid expansion, he said, it's most important that whatever changes occur be phased in gradually. "We can handle that," he said. But if changes need to made rapidly if the funding falls off a cliff, he said, "it will not only affect health care, it will affect the entire economy."

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