New Jersey faces $3.3 billion in annual Medicaid cuts that could take 18% of state Medicaid subscribers off of insurance rolls. (iStock / Getty Images Plus)
New Jersey should tighten Medicaid income thresholds, shift more senior care out of nursing homes, and move to boost its nursing workforce to maintain the program amid steep federal cuts, a new report says.
Thursday’s report by right-leaning think tank Garden State Initiative found looming federal cuts, rising health care costs, and enrollment that remains expanded following the pandemic threaten state finances despite the gains in health coverage brought by NJ FamilyCare, the state’s Medicaid program.
“New Jersey cannot keep patching Medicaid with temporary fixes. Without reforms, costs will overwhelm the budget and force cuts elsewhere,” said Danielle Zanzalari, an assistant professor of economics at Seton Hall University and the report’s author.
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New Jersey expects to spend nearly $25.5 billion on Medicaid in the current July-to-June fiscal year, including $6.3 billion in state funds, $15 billion in federal funds, and $4.1 billion from drug manufacturer rebates, health insurance assessments, and other miscellaneous sources.
But changes to the federal insurance program made by Republicans’ One Big Beautiful Bill Act will reduce that funding by $990 billion over 10 years, establish work requirements for certain subscribers beginning in January 2027, and limit NJ FamilyCare coverage for children.
Officials at the Department of Community Affairs, which manages the state’s Medicaid program, have said New Jersey could lose $3.3 billion in annual Medicaid dollars. The reductions could take 350,000 residents — about 18% of all FamilyCare subscribers — off insurance rolls.
Lawmakers have repeatedly said the state lacks the ability to backfill the federal cuts.
The Garden State Initiative report says New Jersey should regularly audit its membership to ensure eligibility — Medicaid eligibility reviews were paused during the pandemic and resumed in April 2023 — and consider lowering the income limit for children under the age of 19.
To be eligible to enroll in NJ FamilyCare, a household must make no more than 138% of the federal poverty level. That’s $21,600 annually for a single person and $44,376 for a four-person household.
Individuals aged 18 and under are eligible as long as their household income is no more than 355% of the federal poverty level, or $110,760 annually for a family of four.
“New Jersey should assess whether current eligibility thresholds remain fiscally sustainable and adjust them to balance access with budget realities,” the report says.
It adds that New Jersey should consider barring pharmacy benefit managers — an insurance middleman that negotiates drug prices with manufacturers on behalf of insurers — from owning pharmacies. Health care affordability advocates have regularly pointed to pharmacy benefit managers as a cause of rising prescription drug prices.
New Jersey should weigh joining a multi-state drug purchasing pool to boost its negotiating power and reduce Medicaid-related pharmacy costs, though that purchasing pool should have allowances for new drugs, the report says.
And the state should establish a separate reserve fund for Medicaid to guard against future funding cuts or enrollment surges that, absent reserves, could imperil plan coverage, according to the report.
Deemphasizing nursing homes in favor of assisted living facilities and home care could also save the state money, the report found.
Average monthly costs for nursing homes in New Jersey in 2022 ($11,253) were 344% higher than they were for home care ($2,534) and 73% higher than assisted living ($6,495), according to a 2023 AARP survey. Nursing home services often include costs not covered by assisted living facilities or home care.
“Without long-term care reform and workforce investment, the system will remain financially strained and structurally unsustainable,” the report says.
The state should also look to boost its nursing workforce following pandemic departures and amid projections from the New Jersey Collaborative Center for Nursing that warn the state will lack 24,450 nurses by 2036.
The state should boost scholarships, certification programs, and technical education for nurses to expand access to the profession; recruit nurses from other states or nations; and create pathways that afford aides and lower-practice nurses advancement opportunities to higher practices.
“The solutions are not complicated: contain costs by addressing eligibility and holding (managed care plans) accountable, shift care toward in-home and community-based services, and invest in the nurse workforce,” Zanzalari said.
Lawmakers have weighed legislation that would allow nurses, physicians, and other health care professionals to practice in New Jersey for up to a year while awaiting decisions on their New Jersey licensure applications. An earlier version of that bill won unanimous Assembly approval last March, but its amended version has yet to see floor votes in either chamber.
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