Sarlo bill seeks to address Medicaid funding concerns

TRENTON – A bill has been introduced that would enable cities and counties to charge hospitals fees to raise more revenues for themselves and for the state’s share of Medicaid funding.

The bill, S2466, sponsored by Sen. Paul Sarlo, (D-36), of Wood-Ridge, would levy a 6 percent fee on hospital revenues in five cities and two counties, as part of a five-year “local hospital fee” pilot program.

The cities would keep a portion of the revenues and the other portion would be given to the state in the form of intergovernmental transfers (IGTs) to the state Department of Human Services, which runs the Medicaid program. A greater share of state Medicaid funds means a large chunk of federal dollars, given the fixed ratio, Sarlo said.

The places where the pilot program would be in effect are Newark, Jersey City, New Brunswick, Trenton, Camden, and the counties of Passaic and Atlantic. All of them fulfill the conditions outlined in the bill for eligibility in the program.  All of those cities serve a disproportionately large amount of patients who receive Medicaid of Charity Care services.

They include cities or counties with two or more general hospitals within their borders; places with at least 250,000 but not more than 275,000 residents;  or places with at least 500,000 residents but not more than 510,000 residents.

“It’s another way of getting revenue and taking advantage of federal Medicaid dollars,” Sarlo said in a phone interview about the need for such a fee mechanism.

Sarlo said that any one of the large urban areas could raise as much as $84 million by imposing that fee.

While the bill leaves it open-ended for the municipalities to determine how they can spend the proceeds, Sarlo said that, “we may put a restriction.”

Sarlo said similar programs have been tried in Philadelphia, Texas and Florida. The intergovernmental transfers aspect has been a growing trend in many states as they grapple with ways of dealing with increased costs of Medicaid, with is jointly funded by the federal government and the states.

For the 2012-13 budget year, the Office of Legislative Services projected some $2.7 billion would be appropriated for Medicaid, a $189.2 million increase from the prior budget year. There are more than 900,000 people who receive Medicaid, according to OLS.

The Kaiser Foundation, a leading organization on health issues, noted the growing trend of IGTs, among other mechanisms, to produce more revenues.

“Some of these creative financing arrangements have also helped states to fill budget gaps and maintain services by increasing the federal share of total spending during tough economic times.

It added that “although IGTs are permissible, states’ use of them has come under federal scrutiny when they have been used in conjunction with supplemental payments to increase the federal share of Medicaid spending.”

The New Jersey Hospitals Association was not immediately available for comment.

  Sarlo bill seeks to address Medicaid funding concerns