June 11, 2011 for The Associated Press
by Josh Lederman

As states across the country look for ways to trim billions off their spending on Medicaid, New Jersey is garnering particular attention for a proposal that opponents characterize as an unprecedented and draconian attempt to balance the state’s precarious budget on the backs of society’s most vulnerable populations.

The debates taking place in statehouses, clinics and living rooms crystalize the unfortunate truth about economic recessions: Citizens rely most on public services just when the government has the least money to spend on those services.

In New Jersey’s case, changes would mean a parent of two earning more than $103 per week would be ineligible.

As a joint federal-state venture, Medicaid changes provide endless opportunities for political collision. New Jersey’s proposal to cut more than half a billion dollars occupies the delicate intersection between the Republican governor’s budget, the Democratic Legislature’s priorities, President Barack Obama’s health care reforms and U.S. Rep. Paul Ryan’s proposed entitlement overhauls.

The 46-year-old Medicaid program provides government-funded health care to low-income people at risk due to disability, age, chronic illness or other circumstances. It was expanded in 1997 to cover more individuals through the Children’s Health Insurance Program, known in New Jersey as NJ FamilyCare. States have substantial flexibility to determine the “who,” “what” and “how” of services offered.

At issue in New Jersey is a $540 million cut to state Medicaid funding that Gov. Chris Christie proposed for next year’s budget. About $240 million comes from specific program cuts, such as $140 million dropped from nursing home coverage.

“If the cuts go through, it could mean more dangerous falls, not getting my medicine,” said Maureen Liberatore, 77, whose care in a Cinnaminson, N.J. nursing home is Medicaid-funded.

Christie hopes to save $300 million through a “comprehensive Medicaid waiver.” States submit waivers to the federal government requesting permission to restructure their program outside the core parameters for what they must cover.

A provision of the health care changes Obama championed prevents states from turning away previously eligible residents without such a waiver. It’s a stop-gap measure until 2014, when another part of health care reform will expand Medicaid to anyone earning less than 133 percent of the poverty level.

“The state is effectively telling these families to wait until 2014 to get coverage again,” U.S. Sen. Robert Menendez, D-N.J., said Friday. “Unfortunately, there is no such thing as a waiver for getting cancer.”

About 1 million of New Jersey’s nearly 9 million residents are enrolled in Medicaid or NJ FamilyCare. Even with the proposed cuts, the state will spend almost $5 billion to fund the programs in 2012. The federal government chips in about an equal amount.

“We must do these things, not only to fill the hole created by the loss of over a billion dollars of federal stimulus money since 2010, but because it is the right thing to do,” Christie said in his budget address. “Medicaid’s growth is out of control.”

New Jersey’s waiver, which it plans to submit June 30, would drop the income cap for new adult enrollees to about 25 percent of the poverty level. Although current enrollees can stay enrolled, the state estimates 23,000 parents will be denied coverage next year. That’s in addition to 70,000 turned away due to separate 2011 reduction.

“It is the worst health policy decision I’ve seen in my 13 years in the Senate,” said state Sen. Joseph Vitale, while his Democratic colleague in the Assembly, Gordon Johnson, made it personal:

“No one but this anti-working class governor would propose making it difficult for the poorest of the poor to obtain health care coverage,” Johnson said.

Responding to pointed questions from lawmakers about why no detailed breakdown of the savings had been presented, the Department of Human Services on Friday released its estimates. The state projects eligibility cuts will save $17 million to $32 million, while moving patients from fee-for-service plans into managed-care will save up to $40 million. Officials are also counting on $200 million in increased federal funding.

With state revenues falling across the country, almost every governor is seeking to rein in Medicaid costs. But most have focused on dropping services from the benefits package, reducing reimbursement rates or expanding managed-care. Only New Jersey and Arizona have gone as far in turning patients away.

In Arizona, Republican Gov. Jan Brewer signed a law dropping hundreds of thousands from the Medicaid rolls. That law is being challenged in court.

“They are in a very unique situation because their entire Medicaid program operates under a waiver,” said Samantha Artiga, health analyst for the Kaiser Commission on Medicaid and the Uninsured. “Their waiver is scheduled to expire, so the Centers for Medicare and Medicaid Services essentially said they couldn’t force Arizona to renew their waiver.”

Governors seeking increased state control have looked to Rhode Island, where federal officials approved a 2009 comprehensive waiver that essentially converts the program into a block grant. Rhode Island promised the federal government that costs won’t exceed $12 billion over five years in exchange for authority to make its own coverage decisions.

But critics are leery the move is actually saving Rhode Island money. That mirrors concerns in New Jersey that the state is building estimates of projected savings into the budget. And since federal funds match state funds, any cut to state Medicaid spending means fewer federal dollars.

The idea to convert Medicaid into block grants, where states get a set amount of federal dollars to do with as they wish, echoes Rep. Ryan’s fiscal austerity budget, which sent shockwaves through Washington. His budget attempts to tackle the U.S. deficit through steep cuts to entitlement programs, including Medicaid and Medicare.

Ryan, R-Wis., succeeded in moving his budget through the GOP-controlled House, but it is unlikely to pass the Senate and would face a certain presidential veto. Both of New Jersey’s U.S. senators signed a letter Tuesday commending Obama for opposing Medicaid cuts.

U.S. Rep. Bill Pascrell, a Democrat, serves in the House Budget Committee that Ryan chairs. In an act of opposition to both federal and state Medicaid cuts, he visited a Medicaid-funded adolescent group home Wednesday in his north Jersey district.

In a two-story Clifton home, a wall tapestry lists the rules of the house: “Always be honest. Look after each other. Forgive and forget.” On the bookshelf, SAT preparation books sit next to a portrait of the married couple who live fulltime with three teenage girls in their foster care.

“When you have those demonic cuts, they are bound to lead to a lot of hurt and pain,” Pascrell said. “These people’s lives are worth a lot.”