The hospitals that serve New Jersey’s poorest residents are asking state officials and legislators for protection from potential cuts in federal Medicaid funding, arguing that it’s premature to say how quickly they will benefit from increasing the number of residents with health insurance.

Under the 2010 Affordable Care Act, most Americans are required to have health insurance, which was expected to benefit the hospitals that have long provided charity care to the uninsured. With hospitals expected to receive more insurance payments, the law included a series of cuts to the federal program that traditionally funded charity care.

But hospitals are concerned that the cuts will occur before enough people become newly insured through private insurance.

The cuts are due begin on January 1, with New Jersey hospitals potentially seeing a $29.3 million annual reduction in disproportionate share hospital (DSH) funding, which is part of the federal Medicaid program, according to Suzanne Ianni, president and CEO of the Hospital Alliance of New Jersey. The alliance, which represents the state’s 16 safety-net hospitals, focused on the looming spending cuts during an event held Friday to mark the organization’s 20th anniversary.

While President Barack Obama has requested that the cuts be delayed until the fiscal year that starts next October, the delay itself has been stalled as part of ongoing federal budget talks.

Ianni believes that the safety-net hospitals should be protected from the cuts when they occur, at least until it’s clear that insurance payment increases will offset the cuts that the hospitals would see.

The ACA was premature in scheduling funding cuts to hospitals before the increase in insurance clients was assured, according to alliance Chairman Joseph F. Scott, president and CEO of LibertyHealth System, which operates Jersey City Medical Center.

While all Americans are required to buy insurance under the provisions of the ACA, Scott is concerned that the penalty in the first year – the greater of $95 or 1 percent of a person’s income – will not be enough of an incentive.

Technical problems that have plagued the website for the federal healthcare marketplace or exchange also worry Scott. The site, healthcare.gov, is intended to be a one-stop shop for residents to purchase insurance and learn whether they’re eligible for federal insurance subsidies.

“The whole thought process was hospitals like ours would turn around and see all these people with insurance,” Scott said. “And now I’m concerned. Between what’s happening with the exchange, (hospitals) getting people to understand why it’s important for them to have insurance and this whole timing issue of getting the cuts before people are on the exchange, it could have devastating impacts on hospitals that serve the highest-need populations.”

The alliance also is pushing fora local hospital tax, which would allow the safety-net hospitals to qualify for federal funding to match the local funding. The bill is opposed by hospitals that serve fewer low-income residents, which contend that it sets a bad precedent for more local hospital taxes.

“It’s crazy for us not to get those matching dollars, particularly in light of the cuts that are coming,” Scott said, adding that opponents of the bill “have high operating margins and they don’t serve the medically needy,” and noting that other states have begun to explore whether hospitals with high operating margins should maintain their nonprofit status.

The alliance’s lobbying effort at the state level is matched by a federal effort. Dr. Bruce Siegel, leader of America’s Essential Hospitals, called the ACA an important milestone in improving the country’s healthcare system, saying it could provide insurance for 600,000 to 800,000 New Jerseyans.

“It will make this state a better place to do business,” Siegel said, before adding that the bill’s treatment of Medicaid cuts was an error. “Purely and simply, getting the Affordable Care Act right means getting the safety-net right.”

If the funding cuts occur without offsetting gains in insurance payments, “you’ll be forced to make choices that no community should ever have to make,” said Siegel, who was state health commissioner from 1992 to 1994.

Siegel’s organization, which represents safety-net hospitals nationally, is pushing for a three-year delay in any Medicaid funding cuts, so that federal officials can assess how the increase in insurance is progressing.

“It’s foolhardy and it’s reckless,” to make cuts based on pre-ACA data, Siegel said.

East Orange General Hospital President and CEO Kevin Slavin said cuts to his hospital’s budget would force it to look at cutting programs that serve the broader region so it could maintain services to its local community.

“The economic impact that these hospitals have on their cities is going to suffer as well,” Slavin said. “I think we’ve all learned that when the urban hospitals in the past have closed, it’s not just healthcare and the individuals that have suffered, communities have suffered, with businesses closing, banks closing around the hospitals.”

Sister Jane Frances Brady, the alliance’s first leader, attended the event. She said the ongoing struggles for funding for the safety-net hospitals showed the continuing need for the alliance.

“I don’t think there will ever be a time when these safety-net hospitals are financially secure,” said Brady, adding that the alliance plays a vital role in protecting their interests.

Although most press accounts about the rollout of federal healthcare reform in New Jersey have focused on computer glitches related to the online health insurance marketplace, one key component is running smoothly: the state’s online application for Medicaid coverage at njfamilycare.org.

Since most people who are expected to apply for coverage next year under the Affordable Care Act will be eligible for Medicaid, not the premium subsidies that will fuel the marketplace, this is an enormously important story that is not being told.

According to reports from the state, some counties, insurers and the navigators who help people find the insurance plans right for them, New Jersey’s Medicaid application process is working. Most very low-income adults (for example a single person earning less than $15,856 annually) who were not eligible for Medicaid in the past can sign up now for coverage that starts January 1. A single person making more than that but less than $45,960 will be eligible for premium subsidies to help him or her afford private health coverage through the marketplace.

It may make sense for New Jerseyans without health insurance to apply online for Medicaid now if they believe they are eligible. If they are not, the state will transfer their application to the federal marketplace to determine if they are eligible for premium subsidies.

Uninsured New Jerseyans who lack Internet access or need help filling out the application can go to any County Board of Social Services, where they can apply for Medicaid in person. In addition, the state’s NJ FamilyCare website identifies 178 other agencies that can provide personal assistance or information.

Many parents and children may find that they are already eligible for immediate health coverage in Medicaid and other programs, rather than having to wait until January 1 when the expanded Medicaid coverage takes effect.
Not all of the news is great. Many county boards haven’t seen a large increase in Medicaid applications. Part of the reason may be a lack of information: There hasn’t been a state or county media campaign to let New Jerseyans know that they may be eligible. Intensive outreach is needed since the potential beneficiaries include a disproportionate number of difficult-to-reach New Jerseyans, like young adults who are not convinced they need health coverage, non-English speakers, and people with disabilities.

Still, New Jerseyans who need health coverage are fortunate to have the Medicaid option. Only about half of the 50 states have taken the federal government up on this great offer so far. There was a bipartisan consensus in New Jersey to expand Medicaid because it is a no-brainer: It will save the state billions of dollars, reduce charity-care costs at hospitals, stimulate the state’s economy, and provide health coverage to many working New Jerseyans. The entire cost of the expansion will be paid with federal dollars for the next three years, and no less than 90 percent of the cost after that.

Unfortunately, unlike 31 other states, New Jersey chose not to create a state marketplace for private health insurance, a state/federal partnership, or even help with management of health insurance plans offered to New Jersey residents through the marketplace, leaving all non-Medicaid tasks solely to the federal government. The result is that there are now two eligibility systems for New Jerseyans looking for health coverage: one state-run system for Medicaid and another federal-run system for premium subsidies. Had New Jersey opted for a state exchange, it could have created one system for everyone.

The state-run system for the Medicaid expansion is not without its own challenges. Those eligible only for premium subsidies will not get a prompt determination of those subsidies, and there could be staffing challenges at some County Boards of Social Services as enrollment increases leading up to December 15, the cutoff date for those who want their Medicaid eligibility to start January 1. But the good start clearly demonstrates that health insurance reform is already working in New Jersey.

Hospital systems across New Jersey are signing contracts with insurers participating in the new health insurance marketplace or exchange that launches today. While they’re doing it because they want to attract new patients, their initiative is also expected to benefit uninsured residents by improving access to coverage and care.

An example of this trend is Meridian Health, which operates six hospitals in Monmouth and Ocean counties.

Terry Manna, vice president for managed care for Meridian, said the health system will be a “prominent player” in providing care to patients who buy insurance through the marketplace. Meridian has contracts with Horizon Blue Cross Blue Shield of New Jersey and AmeriHealth, two of the three companies that will offer insurance through the marketplace.

“We did it with a lot of thought,” Manna said in testimony before an Assembly Health and Senior Services Committee yesterday. “We have a mission to provide access to the patients we serve in our service area.”

Manna said AmeriHealth expects its local enrollment through the marketplace in Monmouth and Ocean counties to grow from 2,280 in 2014 to 5,640 in 2016.

In addition, Horizon expects to enroll 4,500 residents in Monmouth County and 3,800 residents in Ocean County in 2014, he said.

Kerry McKean Kelly, spokeswoman for the New Jersey Hospital Association, said hospitals believe they can benefit from adding patients who are newly insured by the marketplace.

“They want to be a part of it,” she said.

The insurance agreements could prove to be favorable for all three parties: the hospitals, the insurers and the newly insured patients.

For example, Meridian’s agreements with both insurers mean that the health system will be a “tier 1 provider” for those patients who purchase insurance through the marketplace. This will result in these patients paying less for care from Meridian than they would have if they had chosen “tier 2” providers whose contracts with insurers may be costly to the insurers.

Manna provided some details of how this will affect patients through co-insurance – the costs that patients must pay after they have reached their annual deductible. Those who purchase a “gold” plan from Horizon will pay for 20 percent of the cost of their care from Meridian and other tier 1 providers, while the health plan will cover 80 percent of cost. However, patients who choose to go to tier 2 providers will have to pay for 40 percent of the cost of their care, Manna said.

“There’s a real financial incentive for patients” to use the tier 1 providers, he said.

McKean Kelly, the hospital association spokesperson, said these tiered agreements have become increasingly attractive to hospitals.

“Some hospitals most certainly are testing this concept with the payers and are having some good conversations with them to see if they can negotiate being a tier 1 provider,” she said.

McKean Kelly said these agreements could prove beneficial to all participants. Insurance companies are able to negotiate payment rates lower than their agreements with tier 2 providers, while hospitals can have more patients due to the incentive for patients to go to a less-expensive provider.

The marketplace is designed to be a one-stop shop to enable people without employer-sponsored health plans to buy insurance and learn whether they are eligible for insurance subsidies. They are able to enroll for insurance through a website, by phone, in person or by mail.

A key feature of the 2010 Affordable Care Act requires most Americans to have insurance or pay a penalty. The open enrollment period that starts today will last until March 31. Coverage purchased before December 15 will start on January 1, 2014.

Manna noted that Monmouth and Ocean counties have 10 percent of the state’s uninsured population.

Meridian operates Jersey Shore University Medical Center and K. Hovnanian Children’s Hospital in Neptune; Ocean Medical Center; Riverview Medical Center in Brick; Riverview Medical Center in Red Bank; Southern Ocean Medical Center in Manahawkin; and Bayshore Community Hospital in Holmdel.

Horizon and AmeriHealth are two of the three companies offering insurance on the marketplace. Meridian has also been in talks with the third insurer, Health Republic of New Jersey, which is one of 24 Consumer Operated and Oriented Plans established in different states under the ACA.

Manna said at least one other company might join the marketplace after its first year, potentially increasing competition. Healthcare advocates have cited the competition between insurers as having the potential for driving down the premiums that will be available through the marketplace.

He predicted that Aetna – which recently dropped its plans for offering insurance through the marketplace in 2014 in New Jersey – would choose to enter the market in 2015. He said the company may not have had the time to manage a plan on the marketplace because of the work involved with acquiring Maryland-based managed care company Coventry Health Care Inc. Aetna currently sells a small number of individual health plans in the state.

“My own personal belief is that Aetna is committing a lot of resources to its recent Coventry acquisition and (considering) the fact that they only serve 1.7 percent of the state’s individual market, I do believe they will want to sit back and wait and see, and probably get back into the game in 2015,” Manna said.

Along with the marketplace expansion, Manna added that local providers like Meridian will also serve a growing population that will be covered under the state’s Medicaid eligibility expansion. Meridian officials estimate that 10,000 new Medicaid enrollees will file an average of 2.3 health claims – such as visits to the hospital — annually.

“We have an infrastructure throughout the health system to be able to – whether it’s an inpatient setting or an outpatient setting – educate our uninsured of the options that they have under Medicaid and to steer them through the enrollment process,” Manna said.

Some low-income New Jersey residents will be eligible for treatment for drug and alcohol addictions, as well as some mental health services, under the upcoming Medicaid expansion.

But most Medicaid recipients won’t be eligible for the new benefits.

Under the 2010 Affordable Care Act, states that choose to expand Medicaid – known as New Jersey FamilyCare in the state — must cover these treatments for people who are newly eligible for the program. However, that provision doesn’t apply to those who are already eligible for the program.

Gov. Chris Christie opted to expand Medicaid eligibility to include residents with incomes above the maximum allowed for the state’s General Assistance program, or $2,520 per year for a single person who isn’t disabled, but below 138 percent of the federal poverty line, which is currently $15,415 for a single person.

This is expected to provide insurance for 104,000 newly covered adults, according to Rutgers Center for State Health Policy estimates. In addition, outreach efforts tied to the Medicaid expansion and the new federal health insurance marketplace or exchange, are expected to draw another 130,000 residents who are already eligible into the program but haven’t enrolled.

The combined 234,000 new recipients will join more than 1 million residents already enrolled in the program.

But only 104,000 newly eligible recipients will be able to receive what state officials described as “alternative benefits.” These include treatments for psychiatric emergencies; nonmedical detoxification; and substance use disorder outpatient, halfway house and short-term residential services.

Enrollment for Medicaid expansion will begin on October 1 with coverage starting on January 1, 2014, the same date that other state residents will begin receiving insurance through the federal Affordable Care Act marketplace.

It’s disappointing that not all Medicaid recipients will receive the new coverage, said Dennis Lafer, a consultant for the Mental Health Association in New Jersey.

“We think it’s good that the expanded population are getting these additional services, but we certainly would encourage the state as soon as it’s economically feasible to expand these benefits to the entire population,” said Lafer, former deputy director for the state Division of Mental Health Services.

Lafer said it is “wonderful” that the state opted for Medicaid expansion.

“Many states are going in a different direction,” he said.

The federal government will 100 percent of the cost of covering the newly eligible Medicaid recipients for the next three years, with the state portion of those costs rising to 10 percent by 2020. In comparison, the federal government pays 50 percent of the cost of most Medicaid services for the residents who are now eligible for the program.

Raymond J. Castro, senior policy analyst for the nonprofit New Jersey Policy Perspective, said he understood why the state wouldn’t be able to offer the expanded benefits immediately.

“Ideally we’d like to have everybody have the same higher benefits, but there’s a fiscal issue here,” Castro said. “The view of the state right now is, ‘Let’s see how this works.’ ”

Castro said he believes state officials will be actively reviewing whether the additional coverage is affordable for beneficiaries.

“I think it’s important that the state monitor that,” Castro said. “I think they’re taking this sort of incrementally.”

Lafer noted another major way that people who need mental-health or substance-abuse treatment could benefit from the Affordable Care Act: Insurance plans available through the health insurance marketplace will be required to cover those services.

The marketplace is a website where people will be able to buy insurance and learn whether they are eligible for subsidies.

The mental-health and substance-abuse services are one of 10 essential health benefits required for all qualifying health plans.

The federal government hasn’t released details about the coverage or cost of the plans, although that information is expected to be publicly available by October 1. Therefore, it’s not clear how the required benefits will compare with current available insurance plans.

Lafer said advocates and providers are hopeful that the plans will help residents, but that will depend on how extensive they are and how much they cost. He added, “It can only be helpful as long as the plans cost people a reasonable amount of money.”

New Jersey has the nation’s lowest percentage of doctors who accept Medicaid patients – while the state is anticipating the addition of more than 200,000 new patients to the program’s rolls.

Healthcare experts said it’s not surprising that a wealthy state like New Jersey would face a shortage of doctors willing to take Medicaid, particularly because a promise of increased funding will expire after next year and since there are plenty of non-Medicaid patients in the state.

In addition, doctors cited the cost of practicing primary care medicine in New Jersey, including high administrative costs and relatively low salaries compared to specialists.

The journal Health Affairs found that 54 percent of New Jersey primary-care doctors didn’t take new Medicaid patients in 2011 and 2012, well above the national average of 33 percent.

The study, based on an annual survey of office-based doctors, looked at only one measure of access and didn’t factor in whether Medicaid patients had difficulty finding providers, geographic proximity, or whether patients experienced long wait times for appointments,
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“New Jersey has a tremendous shortage of primary-care physicians and a surplus of specialists,” said Dr. Robert Eidus, principal of Vanguard Medical Group at Cranford, a family practice.

Eidus said primary-care doctors working at or close to capacity frequently can’t accept new Medicaid patients.

He described his difficulty in finding another doctor to join his practice.

“It took me three years to get someone to finally join my practice,” Eidus said. Until the new doctor joined, Eidus only accepted patients from one Medicaid health plan – adding the doctor allowed him to accept patients from a second plan.

“If we make New Jersey more hospitable to primary care, we’ll have more capacity” and doctors will be more likely to accept Medicaid recipients, Eidus said.

Medicaid, funded by the federal and state governments, is the primary system for paying for healthcare for low-income adults and children.

The report comes at a time when the state is preparing to enroll an estimated 234,000 additional residents in Medicaid after Gov. Chris Christie’s decision to expand eligibility for the program under the 2010 Affordable Care Act.

In addition, the country is in the middle of a ta two-year project under the ACA in which doctors are scheduled to receive the same payments for Medicaid patients as they receive from the higher-paying Medicare program.

In New Jersey, the increase in Medicaid payments is 109 percent. However, federal and state officials are still working out details of the payments, which will be postdated to the beginning of the year.

Eidus said his colleagues have been wary of taking on additional Medicaid patients, even with the promised additional money, since the higher payment rates are set to expire at the end of 2014.

“We don’t want to say goodbye to patients once we’ve established a relationship,” Eidus said, adding that doctors will also hesitate to add staff to support additional patients knowing that the fees for those patients will be cut after next year.

The goal of the Health Affairs report was to establish a baseline for comparing doctors’ acceptance rate of Medicaid patients in the future.

Eidus noted that while specialists are paid more than primary-care doctors nationally, the difference is greater in New Jersey.

“I think if the overall (primary care) climate improves, then we’re going to be much more likely to take care of patients who have a less substantial payment structure,” he said.

Joel Cantor, director of the Rutgers Center for State Health Policy, said it’s not surprising that New Jersey doctors accept fewer new Medicaid patients than those in other states.

“We have a large well-to-do population and many of us are well-insured and of course physicians would do much better serving that large population,” Cantor said.
He added, “I also think it’s not as alarming as it may seem at first blush.”

He noted that the more than 1 million state residents enrolled in Medicaid do receive healthcare. The Health Affairs report didn’t examine what portion of Medicaid patients have difficulty finding healthcare providers.

But Cantor didn’t minimize the seriousness of the issue.

“It’s a fairly sick population — some of the sickest,” Cantor said of Medicaid patients. “I think access is a question.”

Cantor said the new patients expected to enroll in 2014 would pose a challenge.

“It’s a fairly sizable addition to our Medicaid roll,” Cantor said.

Supporters of a proposed bill that would allow advanced practice nurses to establish their own practices have cited the need to meet the demand of more Medicaid patients.

Eidus rejected the notion that advanced practice nurses are the answer to the shortage of doctors accepting Medicaid patients. “There’s no evidence that APNs are going to take care of a larger percentage of Medicaid patients” than doctors, he said.

Claudine Leone, government affairs director for the New Jersey Academy of Family Physicians, noted costs affect whether a doctor participates in Medicaid.

Leone said in a statement that doctors must have a good mix of commercially insured and Medicaid patients to subsidize the low payment and high administrative costs associated with Medicaid.

She said a doctor may receive $23 for a 45-minute visit with a Medicaid patient with multiple and complicated chronic diseases. The costs to the practice far exceed the payment.

“That has been the reality in New Jersey for years and has significantly impacted physician participation, regardless of specialty, in Medicaid,” Leone said.

She added that the two-year funding increase is promising and that the NJAFP hopes that the state’s Medicaid program can maintain the higher payment level beyond 2014.