SENATE BUDGET AND APPROPRIATIONS COMMITTEE

STATEMENT TO

SENATE COMMITTEE SUBSTITUTE FOR

SENATE, No. 41

STATE OF NEW JERSEY

DATED: MARCH 18, 1996

      The Senate Budget and Appropriations Committee reports favorably a Senate Committee Substitute for Senate Bill No. 41 of 1996.

      The Senate Committee Substitute for Senate Bill No. 41 of 1996 establishes a methodology for the distribution of charity care subsidies to hospitals and provides a funding mechanism for these subsidies and the Health Access New Jersey subsidized insurance program, as well as for other hospital and drug abuse treatment services.

      The charity care subsidy distribution methodology for 1996 and 1997 is similar to that used in 1995. The hospital-specific charity care subsidy shall be determined by allocating available charity care funds so as to equalize hospital-specific payer mix factors (as defined in the bill) to the Statewide target payer mix factor; except that, if the Statewide total of adjusted charity care is less than available charity care funding, a hospital's subsidy shall equal its adjusted charity care. The Statewide target payer mix factor is the lowest payer mix factor to which all hospitals receiving charity care subsidies can be reduced by spending all of the amount allocated in each year for charity care subsidies. Those hospitals with a payer mix factor greater than the Statewide target payer mix factor shall be eligible to receive a subsidy sufficient to bring their factor down to that Statewide level; those hospitals with a payer mix factor that is less than or equal to the Statewide target payer mix factor shall not be eligible to receive a subsidy.

      The charity care subsidy distribution methodology is based on documented (actual) charity care as verified by the Department of Health's most recent charity care audit, and valued at the same rate paid to that hospital by the Medicaid program.

      The bill provides that the Health Care Subsidy Fund will be funded at $350 million in 1996, and $350 million in 1997.

      The monies in the Health Care Subsidy Fund will be allocated as follows:

      -- for charity care subsidies, $275 million in 1996 and $265 million in 1997;

      -- for the Health Access New Jersey program, $40 million in 1996 and $40 million in 1997;

      -- for the Hospital Health Care Subsidy account in the Division of Medical Assistance and Health Services (Medicaid), to fund services at up to 30 disproportionate share hospitals with high numbers of AIDS, tuberculosis, substance abuse, neonatal and mental health patients, $35 million (State share) in calendar year 1996 and $45 million (State share) in calendar year 1997. In succeeding years, the Legislature shall appropriate funds for this purpose in the annual appropriation act; and

      -- for community-based residential and inpatient drug abuse treatment services, up to $10 million in 1996 and $20 million in 1997 and each succeeding year.

       The bill also specifies that the commissioner will report to the Governor and the Legislature by December 31 of each year on the status of the Health Care Subsidy Fund, including any remaining balances in the fund.

      In addition, the bill clarifies that the purpose of the Health Access New Jersey program will be to provide health insurance coverage for low-income, uninsured children, as well as working people and those temporarily unemployed.

      Finally, the bill:

      -- requires the Commissioner of Health to study the feasibility of such policy options as delivering charity care through a publicly or privately operated managed care network which includes both inpatient and outpatient services, and of reimbursing for charity care services on the basis of claims processed and at the lowest per diem or per case rate charged by a hospital to any third party payer for health care services;

      -- requires the Health Information Electronic Data Interchange Policy Council, which would be established under Senate Bill No. 50 or Assembly Bill No. 1476 of 1996, to study the feasibility of utilizing administrative cost savings accruing from the adoption of health care information electronic data interchange technology to first accelerate the scheduled reduction in the use of revenues from employee and employer contribution and then to reduce the need for General Fund appropriations to fund the Health Care Subsidy Fund;

      -- directs that the findings and recommendations from these studies be reported to the Governor and the Legislature within certain specified time periods; and

      -- appropriates $1.5 million to the Department of Health to fund these studies.

FISCAL IMPACT

      This bill provides $350 million annually in funding for the Health Care Subsidy Fund in 1996 and 1997.

      The Health Care Subsidy Fund will be funded in part by an assessment on employers and employees of $325 million in 1996 and $300 million in 1997.

      The balance of the funding for the Health Care Subsidy Fund will be derived from:

      -- appropriations from the General Fund of $25 million in calendar year 1996 and $50 million in calendar year 1997; and

      -- revenues generated from third party liability recoveries by the State, which are earmarked for community-based residential and inpatient drug abuse treatment services.

      The bill directs that the federal Medicaid match for the State monies provided to the Hospital Health Care Subsidy account will be appropriated to that account to fund services at eligible disproportionate share hospitals. These additional monies will increase the total amount of funding provided under this bill to $385 million in 1996.

      The bill also specifies that any charity care funds not distributed in a given year will lapse to the unemployment compensation fund.

      The bill further provides that, beginning in Fiscal Year 1997, the State will pay (from the General Fund) inpatient hospitalization costs for general public assistance recipients which are incurred by special hospitals and psychiatric hospital that are ineligible for a charity care subsidy and that received reimbursements for these costs from the General Fund prior to Fiscal Year 1992. The bill repeals P.L.1950, c.303 (C.44:8-146 et seq.), which requires municipalities in counties of the first class to pay these costs (which repeal accords with the budget language in the annual appropriations acts for Fiscal Years 1992 through 1996).

      Finally, the bill appropriates $1.5 million to the Department of Health from the General Fund for the studies required by the bill.