State health officials eye changes to charity care in bid to win more federal funds

State health officials told members of the Senate Budget Committee Tuesday that a proposed $204.8 million cut to the state’s charity care program would net New Jersey more money by securing Medicaid funds that come with a more generous federal match.

New Jersey’s charity care program is meant to reduce or eliminate certain hospital charges based on a resident’s income and assets, and to partially reimburse hospitals for those costs. The state is looking to start a new program that would allow it to directly pay some bills under Medicaid, a program that would bring New Jersey $2 from Medicaid for every dollar the state spends — double the match the state gets for charity care now.

“That will actually, overall, increase the number of dollars that are going to hospitals caring for vulnerable populations, both under and uninsured patients,” Health Commissioner Kaitlan Baston told the committee.

Officials said the proposed shift would bring the state $345 million in matching Medicaid funds, outstripping the $204.8 million in proposed cuts to charity care that would go toward the new program.

But the shift may create some confusion, not least because the Department of Health doesn’t oversee state Medicaid spending. That responsibility falls to the Department of Human Services, and Baston said that the agency was still running Medicaid numbers for the plan, which would also need to win federal approval prior to enactment.

Sen. Paul Sarlo (D-Bergen), the panel’s chair, said the Legislature had adopted a “wait-and-see approach” to the proposal but warned lawmakers would be frustrated if charity care distributions delay budget talks.

“I don’t want to be the chairman who receives it the night before. That’s not going to work well,” he said. “This committee wants ample time to be able to — and I think every member agrees with that — we’re going to want ample time to look at these charity care runs.”

The proposed changes would also tweak charity care reimbursement rates, locking them to 40% for the 10 hospitals where charity care is most frequent, or 50% if that hospital operates at a loss of 15% or more. Acute care hospitals and hospitals in the state’s poorest municipalities would be reimbursed at 30%.

At present, charity care reimbursement rates range widely — in some cases covering almost all charity care expenses — to a floor of 43%.

The impact of the shifting funds won’t be clear until the Department of Human Services completes its analysis and reconciles those numbers with the Department of Health’s charity care figures.

The charity care reduction was the highlight of a budget proposal that calls for the Department of Health to spend nearly $289 million less than it is projected to in the current fiscal year as New Jersey faces moderating revenue and an expanding structural deficit. The new budget year begins July 1.

The proposed 9.8% cut would bring the department’s spending to just under where it was in the last fiscal year, with hospital funding accounting for the lion’s share of cuts.