There’s a lot of money in play in governor’s 2021 spending plan; here’s a close look at where it’s going

Controversial issues like the millionaires tax, school spending and investments in New Jersey Transit have largely dominated the public discussions since Gov. Phil Murphy introduced his state budget proposal last week.

But there are countless other details in the governor’s $40.85 billion spending plan for fiscal year 2021, which starts in July, that drive major policy decisions for Garden State leaders. That is especially true in the health care sector, where public dollars are a major funding source. Lawmakers must approve the proposal by the end of June.

For New Jersey’s hospitals, this includes nearly $767 million in state and federal dollars for treating uninsured patients, training new doctors and improving care. The plan also allocates nearly $15 billion for Medicaid — roughly two-thirds of it from federal sources — to pay for hospitalizations and other medical care, including treatment for mental health and substance-use disorder, for some 1.7 million people statewide.

Murphy has also pledged another $100 million to address the state’s opioid epidemic, as he has in the past two budget cycles. While details have been limited, budget documents said this money supports some 30 programs across eight departments. These include efforts to prevent access to addictive drugs, expand treatment options, reduce risk for those with substance-use disorders and connect people with social services to improve their overall quality of life.

Hospital funding in the fiscal 2021 budget breaks down as follows:

$269 million – charity care: More than one-third of the hospital support comes through charity care, which is distributed among the state’s 71 acute-care hospitals based on a formula that takes into account what they spent on treating patients without insurance coverage. The state traditionally releases details on how this will be allocated in early spring. Some hospitals are reimbursed tens of millions of dollars to cover much of the costs they incur, while others get pennies on the dollars they spend. The distribution can create struggles between urban safety-net facilities, which tend to get more, and suburban providers, which generally collect lower amounts.

Charity-care funding — half state, half federal dollars — is flat from last year and has held fairly stable in recent years, following steady declines starting in 2014 when insurance coverage began to expand under the federal Affordable Care Act. Then-Gov. Chris Christie — no fan of the ACA — provided $750 million to fund the state’s charity-care costs that year.

$242 million – graduate medical education: Federal and state money is also used to help New Jersey’s 42 teaching hospitals train the next generation of doctors and other clinicians. (For each $1 the state invests, federal officials allocate $2.) That includes $218 million in funding for regular graduate medical education, designed to help compensate facilities for what they spend on medical residents and interns. In 2018 Murphy signed a law that expanded the use of hospital admissions fees to generate revenue for a supplementary GME fund. That will provide an extra $24 million to 14 teaching hospitals that care for higher numbers of poor patients. Details of GME distribution are released with the charity-care figures.

$211 million – quality improvement fund: Murphy’s fiscal 2021 plan also includes $211 million for the Quality Improvement Program – New Jersey, which uses state and federal funds to improve outcomes in maternal health, behavioral care and other areas. This program essentially replaces a federal initiative now sun-setting, the Delivery System Reform Incentive Payment, which funneled nearly $167 million in recent years to several dozen hospitals that met specific quality metrics. There is no DSRIP funding in the new budget.

The budget also includes close to $70 million for the state’s four psychiatric hospitals and Newark’s University Hospital, which has a unique public mission in New Jersey.

Other health-related line items include:

$20 million – family-planning services: Murphy has capitalized publicly on his work to restore funding for women’s health and family-planning services, which had been suspended under Christie. Days after taking office, Murphy signed a supplemental funding measure to spend nearly $7.5 million to support Planned Parenthood and similar facilities. The following year this funding was upped to almost $10.5 million. The governor has doubled that in the current plan, which he said was necessary given federal funding cuts. (The money is prevented by law from being used to pay for abortions.)

$53 million – PAAD and senior gold: The governor’s fiscal year 2021 plan continues level funding for two programs designed to help lower-income Garden State seniors afford their medications. Murphy called for expanding eligibility for PAAD, or Pharmaceutical Assistance to the Aged and Disabled, to enable more people to qualify.

$7.4 million – anti-smoking programs: With a proposed 60% hike in the cigarette tax, Murphy wants to fund health insurance subsidies and other items in the upcoming budget. This new revenue stream would also allow the state to invest an extra $2 million in anti-smoking efforts next year.

$1.5 million – Governor’s Health Care Affordability and Transparency Office: This funding will support the work of an entity Murphy sketched out in his State of the State speech earlier this year. The office, to be headed by policy expert Shabnam Salih, will use information from the state Department of Banking and Insurance, Medicaid system and public-employee benefit plans to identify how the cost of health care is escalating and what the state and public can do to buffer this trend.

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