ANALYSIS OF THE NEW JERSEY BUDGET DEPARTMENT OF HUMAN SERVICES

Transcription

1 ANALYSIS OF THE NEW JERSEY BUDGET DEPARTMENT OF HUMAN SERVICES FISCAL YEAR PREPARED BY OFFICE OF LEGISLATIVE SERVICES NEW JERSEY LEGISLATURE MAY 2016

2 NEW JERSEY STATE LEGISLATURE SENATE BUDGET AND APPROPRIATIONS COMMITTEE Paul A. Sarlo (D), 36th District (Parts of Bergen and Passaic), Chair Brian P. Stack (D), 33rd District (Part of Hudson), Vice-Chair Jennifer Beck (R), 11th District (Part of Monmouth) Anthony R. Bucco (R), 25th District (Parts of Morris and Somerset) Sandra B. Cunningham (D), 31st District (Part of Hudson) Linda R. Greenstein (D), 14th District (Parts of Mercer and Middlesex) Steven V. Oroho (R), 24th District (All of Sussex, and parts of Morris and Warren) Kevin J. O'Toole (R), 40th District (Parts of Bergen, Essex, Morris and Passaic) Nellie Pou (D), 35th District (Parts of Bergen and Passaic) M. Teresa Ruiz (D), 29th District (Part of Essex) Samuel D. Thompson (R), 12th District (Parts of Burlington, Middlesex, Monmouth and Ocean) Jeff Van Drew (D), 1st District (All of Cape May, and parts of Atlantic and Cumberland) GENERAL ASSEMBLY BUDGET COMMITTEE Gary S. Schaer (D), 36th District (Parts of Bergen and Passaic), Chair John J. Burzichelli (D), 3rd District (All of Salem, parts of Cumberland and Gloucester), Vice-Chair Anthony M. Bucco (R), 25th District (Parts of Morris and Somerset) John DiMaio (R), 23rd District (Parts of Hunterdon, Somerset and Warren) Gordon M. Johnson (D), 37th District (Part of Bergen) John F. McKeon (D), 27th District (Parts of Essex and Morris) Raj Mukherji (D), 33rd District (Part of Hudson) Elizabeth Maher Muoio (D), 15th District (Parts of Hunterdon and Mercer) Declan J. O'Scanlon, Jr. (R), 13th District (Part of Monmouth) Eliana Pintor Marin (D), 29th District (Part of Essex) Maria Rodriguez-Gregg (R), 8th District (Parts of Atlantic, Burlington and Camden) Troy Singleton (D), 7th District (Part of Burlington) Benjie E. Wimberly (D), 35th District (Parts of Bergen and Passaic) OFFICE OF LEGISLATIVE SERVICES Frank W. Haines III, Legislative Budget and Finance Officer Thomas Koenig, Assistant Legislative Budget and Finance Officer Marvin W. Jiggetts, Director, Central Staff Brian McCord, Section Chief, Human Services Section This report was prepared by the Human Services Section of the Office of Legislative Services under the direction of the Legislative Budget and Finance Officer. The primary authors were David Drescher and Robin Ford. Questions and comments may be directed to the OLS Human Services Section (Tel ) or the Legislative Budget and Finance Office (Tel ).

3 DEPARTMENT OF HUMAN SERVICES Budget Pages... C-5, C-12, C-19, C-23, C-25, C-26, D-159 to D-217, E-1, F-1, F-3, F-4, F-7, F-8, F-10, G-3, G-4, H-3 to H-5, H-8, H-12 to H-15 Fiscal Summary ($000) Expended FY 2015 Adjusted Appropriation FY 2016 Recommended FY 2017 Percent State Budgeted $6,589,991 $6,712,615 $6,572,523 ( 2.1%) Federal Funds $8,963,407 $10,576,640 $9,716,568 ( 8.1%) Other 1 $956,192 $1,084,589 $1,465, % Grand Total $16,509,590 $18,373,844 $17,755,004 ( 3.4%) Personnel Summary - Positions By Funding Source Actual FY 2015 Revised FY 2016 Funded FY 2017 Percent State 8,398 7,864 7, % Federal 4,149 3,633 3,590 ( 1.2%) Other % Total Positions 12,606 11,553 11, % FY 2015 (as of December) and revised FY 2016 (as of January) personnel data reflect actual payroll counts. FY 2017 data reflect the number of positions funded. Link to Website: 1 Other Funds includes Revolving Funds displayed on page C-23 of the FY 2017 Governor s Budget Recommendation.

4 Highlights BUDGET OVERVIEW AND KEY DEVELOPMENTS The Governor s FY 2017 Budget recommends a total of $17.76 billion (gross) for the Department of Human Services (DHS) in Fiscal Year (FY) 2017, a decrease of about $619 million (3.4 percent) from the $18.37 billion in FY 2016 adjusted appropriations. State funds account for $6.57 billion of the total FY 2017 recommendation, representing a decrease of $140 million (2.1 percent) from adjusted FY 2016 State appropriations of $6.71 billion. Anticipated federal funds account for $9.72 billion of the FY 2017 recommendation, representing a decrease of $860 million (8.1 percent) from the FY 2016 adjusted appropriation of $10.58 billion. Anticipated Other funds account for $1.47 billion, increasing by $381 million (35.2 percent) over the FY 2016 adjusted appropriation of $1.08 billion. The largest shifts in recommended appropriations are based on projected enrollment spending in entitlement programs operated by the Department, including NJ FamilyCare and Work First New Jersey. New initiatives included in the FY 2017 Budget Recommendation, described below, have relatively modest budgetary impacts in FY 2017 MAJOR INITIATIVES IN FY 2017 Mental Health and Addiction Services Payment System Reforms The DHS plans to implement a new payment system for providers of mental health and substance use disorder treatment services funded through the Division of Mental Health and Addiction Services. Historically, many of these providers have been paid on a costreimbursement basis with resources from the General Fund and federal block grants. Under the new system, providers will be paid on a fee-for-service basis under a newly established rate structure. Providers will be better able to bill NJ FamilyCare, rather than the Division of Mental Health and Addiction Services, which will allow the State to receive federal matching funds for these expenditures. The budget includes a new $127.8 million line item, based on the Department s estimate of the net impact of the new reimbursement system. Of this total, approximately $20 million would be drawn from the General Fund, and the remainder would come from federal Medicaid funding. In furtherance of this conversion, the Executive proposes to expand coverage of behavioral health care services to all NJ FamilyCare enrollees. Previously, this coverage had only been provided to the Affordable Care Act (ACA) Medicaid Expansion population (generally, non-elderly adults with household incomes up to 138 percent of the Federal Poverty Level), as required by the ACA. DDD Shift to Medicaid-Supported Services The Division of Developmental Disabilities (DDD) is continuing to transition to providing standardized services which are eligible for federal Medicaid reimbursement. Eventually, all of these home- and community-based services will be reimbursed through Medicaid in a fee-for-service model, replacing the division s historical use of cost- 2

5 Highlights (Cont d) reimbursement contracting. Included in this transition is the requirement for DDD clients and DDD providers to become Medicaid eligible. In FY 2016, DDD began enrollment in the new Supports Program, which will continue through FY The Supports Program provides home- and community-based services to individuals in the DDD system who are living in their own or their family s home, and allows the State to claim federal Medicaid matching funds for these costs for the first time. In FY 2017, the department anticipates nearly 4,000 individuals will be enrolled in the Supports Program. Medicaid Expansion and the Affordable Care Act Effective January 1, 2014, the State expanded Medicaid/NJ FamilyCare eligibility to all non-elderly adults with household incomes up to 133 percent of the federal poverty level, pursuant to the ACA. (The ACA provides for a five percent income disregard, effectively raising the threshold to 138 percent of the federal poverty level.) This ACA Medicaid Expansion rendered many non-elderly and non-disabled adults without dependents newly eligible for Medicaid coverage. Medical coverage expenditures for these newly eligible enrollees are currently paid entirely by federal funds, but the federal matching rate will decrease to 95 percent in January 2017, and will gradually decline further to a 90 percent federal share by In addition, certain individuals eligible for coverage under the Medicaid/NJ FamilyCare program prior to January 1, 2014 are now deemed to be newly eligible for Medicaid under the ACA expansion, with expenditures for those individuals qualifying for enhanced federal reimbursement. The department anticipates $3.03 billion in State and federal funding to support the NJ Family Care Adult Expansion in FY 2017, providing health coverage for over 528,000 New Jersey residents. The sections below provide more detail regarding the Governor s FY 2017 Budget Recommendations for the specific DHS divisions, as well as some additional detail regarding key programmatic and fiscal developments in FY HIGHLIGHTS BY DIVISION Division of Mental Health and Addiction Services The Division of Mental Health and Addiction Services (DMHAS) provides a wide array of community-based mental health and substance use disorder treatment services. DMHAS also operates the State s four psychiatric hospitals and provides State Aid to support lowincome patients in five county psychiatric hospitals. The Governor s FY 2017 Budget recommends a grand total of $1.133 billion (gross) 2 for the division, an increase of $117 million (11.5 percent) from the FY 2016 adjusted appropriation, including State appropriations of $865 million, federal funding of $254 million, and $13.9 million from All Other Funds. 2 Revolving funds displayed on page C-23 but not within the department recommendation on pages D-167 to D-173 are included in the totals here. 3

6 Highlights (Cont d) The FY 2017 Budget Recommendation displays the funding for DMHAS in two sections. The funding intended for the State psychiatric hospitals is on pages D-166 to D-168; and the funding intended for Community Services and Addiction Services, which includes funding for community mental health services, county psychiatric hospitals, and addiction services, is reflected on pages D-169 to D-176. The Governor recommends a $3.45 million increase in funding for the four State psychiatric hospitals to hire additional staff, with a goal of improving patient care and strengthening safety for both patients and staff. State funding will be $303 million; federal funding is anticipated to be $53 million; and funding from All Other Funds will be $1.4 million. Gross funding for community services and addiction services is anticipated to increase by $114 million (17.1 percent) over the FY 2016 adjusted appropriations, as follows: State funding is recommended to increase by $5.8 million to $562 million; federal funding is recommended to increase by $108 million to $201 million, and funding from All Other Funds is anticipated to remain unchanged at $12.6 million. Highlights: The Department plans to implement a new reimbursement system for most communitybased service providers funded by the division. The budget includes $127.8 million for the Behavioral Health Rate Increase, offset by $107.8 million in Enhanced Federal Match and Third-Party Recoveries and a reduction of $10.5 million in the State-funded Community Care appropriation. $7.5 million in additional State funding is recommended for Olmstead Support Services, of which $2.0 million is to develop 220 new community-based placements for individuals in need of mental health services in FY 2017, and $5.5 million is to support the annualized costs of placements created in FY $8.5 million less in State Aid payments to counties is proposed for Support of Patients in County Psychiatric Hospitals, which is based primarily on lower rates paid to certain hospitals beginning in January The budget assumes $2.6 million in savings for salary costs at the division s central office in part resulting from the delayed filling of vacant positions. Division of Medical Assistance and Health Services The Division of Medical Assistance and Health Services (DMAHS) is the division primarily responsible for the Medicaid/NJ FamilyCare medical assistance program, which provides health care coverage to low-income New Jersey residents with a combination of State, federal, and Other funds. The Governor s FY 2017 Budget recommends a net decrease of $858 million (6.2 percent) in gross funding for the division, to a total of approximately $12.97 billion (gross). The decrease primarily reflects projections for enrollment and patient care costs. Total recommended State appropriations of $4.08 billion are approximately $87.8 million (2.1 4

7 Highlights (Cont d) percent) lower than the FY 2016 adjusted appropriations. Federal funding is expected to decrease by $1.15 billion (13.1 percent), to $7.60 billion. Other funds, in the form of Medicaid drug manufacturer rebates, hospital mental health offset payments, and dedicated fund payments for Medicaid/NJ FamilyCare, are recommended to increase by $379 million (41.7 percent), to $1.29 billion. The Governor s FY 2017 Budget substantially revises the display of the DMAHS budget relative to the FY 2016 Budget. Specifically, the FY 2017 representation is in a gross budget format, which displays recommended spending from all funding sources in each line item, rather than only State spending. In addition, the FY 2017 budget display restructures most Grants-in-Aid accounts to reflect spending based on the beneficiary of services (e.g. patients), rather than the immediate recipient of funding (e.g. managed care plans, hospitals, or nursing homes). Spending for nursing homes and community-based long term care in the Managed Long Term Services and Supports (MLTSS) program that appeared in the Division of Aging Services is included in the DMAHS budget recommendation in FY Highlights: $3.0 million in State and federal funding is recommended to provide support to NJ FamilyCare Accountable Care Organizations to support their efforts in coordinating care for high-risk patients in Camden, Trenton, and Greater Newark. Gross costs for health care coverage of NJ FamilyCare recipients in the six Medical Coverage line items are recommended to decrease from $11.98 billion in the FY 2016 adjusted appropriation to $10.83 billion in FY The decrease is primarily driven by adjusted projections based on underspending relative to appropriations in FY 2016, and projections of enrollment and utilization in FY State funding is recommended to decrease $137.8 million and federal funding by $1.19 billion. Other funds would increase by $175.2 million, primarily due to a proposed increase in the NJ FamilyCare dedication from the Health Care Subsidy Fund (made possible by the recommended decrease in Charity Care appropriations). The Medical Coverage recommendations include an increase of $15.0 million in State funds and $30.0 million in federal funds to annualize the physician reimbursement rate increase that was included in the FY 2016 Appropriations Act and took effect in January The recommendation includes approximately $75.0 million in additional State funds to cover the cost of the reduction in the federal matching rate for the Affordable Care Act Medicaid expansion, which takes effect on January 1, Approximately $16 million in State expenditures are shifted to federal funds in the Eligibility and Enrollment Services account, reflecting a provision of the Affordable Care Act that increases the federal matching rate for certain eligibility determination costs from 50 percent to 75 percent. 5

8 Highlights (Cont d) Division of Aging Services The Division of Aging Services (DoAS) budget includes New Jersey s programs for senior citizens and certain residents with disabilities. These include the State-funded pharmaceutical assistance programs, and several other programs intended to improve seniors quality of life, such as home delivered meals, transportation, and legal assistance. The division also provides State Aid to counties for the operations of the County Offices on Aging and the State share of the federal Older Americans Act. Spending for nursing homes and communitybased long term care in the Managed Long Term Services and Supports (MLTSS) program, which was included in the DoAS budget in FY 2016, is now displayed in the DMAHS budget (described above). The Governor s FY 2017 Budget recommends $253.4 million in gross appropriations for the DoAS in FY 2017, a decrease of $11.0 million (4.2 percent) from the FY 2016 adjusted appropriation. State appropriations from the General Fund, Casino Revenue Fund, and Property Tax Relief Fund are recommended to decrease by $11.1 million (7.6 percent), to $134.7 million, while federal funds and Other funds remain nearly unchanged from the FY 2016 adjusted appropriations. Highlights: $8.7 million in savings is assumed in the several accounts representing State pharmaceutical assistance programs Pharmaceutical Assistance to the Aged and Disabled (PAAD) and Senior Gold. The Executive attributes the funding decreases primarily to projected expenditures falling below appropriated levels in FY 2016 for pharmaceutical assistance programs and projected lower utilization rates in FY Two legislative additions to the FY 2016 Appropriations Act are not included in the Governor s Budget Recommendation: $200,000 for the NJ Elder Index and $400,000 for the Holocaust Survivor Assistance Program. Division of Developmental Disabilities The Division of Developmental Disabilities (DDD) funds a broad range of communitybased residential care services, individual and family support services, and day programs for individuals with developmental disabilities. DDD also operates the State s five residential developmental centers for individuals with developmental disabilities. In total, DDD is anticipated to spend $1.75 billion in FY 2017, $51.8 million (3.0 percent) more than in FY 2016, including: $917 million in State appropriations from the General Fund and Casino Revenue Fund; $773.1 million in federal funds; and $61.8 million from Other funds. The FY 2017 Budget Recommendation displays the funding for DDD in two sections. The funding for the developmental centers is on page D-199 and the funding for community programs is reflected on paged D-201 to D-203. Gross funding for the State developmental centers is recommended to decrease by $20.2 million (6.2 percent), to $307.2 million. State funding is anticipated to decrease by $25.0 million (19.8 percent) to $101.6 million in FY Federal funds are anticipated to increase by $4.8 million (2.4 percent) to $205.6 million in FY

9 Highlights (Cont d) Gross funding for Community Programs is recommended to increase by $72.0 million (5.2 percent) to $1.44 billion. State funding is anticipated to decrease by $1.9 million to $815.4 million; federal funds are anticipated to increase by $71.8 million (14.5 percent) to $567.4 million in FY Funding from Other funds is anticipated to increase by $2.1 million (3.6 percent) to $61.8 million in FY Highlights: A $20.2 million decrease in gross funding is recommended for developmental centers, including a decrease of $25 million from the General Fund, which is offset by a $4.8 million increase in federal funding. The reduction is primarily in State funds dedicated to salaries and wages and is related to the continued initiative by the department to move individuals from the developmental centers into the community. Budget data on pages D-197 to D-198 indicate that the average daily population for all centers will decrease by 131 (8.5 percent) from 1,549 in FY 2016 to 1,418 in FY The decrease in population is matched by an estimated decrease of 105 positions (2.3 percent), from 4,590 in FY 2016 to 4,485 in FY 2017 (page D-198). The budget display for DDD Community Programs has been modified in FY 2017 to represent the department s transition to providing a majority of its services to individuals through two primary enrollment-based programs: the Community Care Waiver (CCW), which primarily provides services to individuals who are living in State-licensed residential facilities; and the Supports Program, which is directed to individuals who are residing in unlicensed community residences, but receive services which are funded by the division. Federal funding for Community Programs is anticipated to increase by $71.8 million (14.5 percent) for DDD programs which are eligible for federal Medicaid matching funds. This is reflective of the department s continued initiative to shift most DDD services to Medicaid-eligible services. 3 Increases in federal funds are anticipated for: CCW Individual Supports ($30.9 million); CCW Individual and Family Support Services ($391,000); Supports Program Individuals and Family Support Services ($13.0 million); Supports Program Employment and Day Services ($24.1 million); and CCW Employment and Day Services ($5.8 million). These increases are offset by a $2.5 million anticipated decrease in federal funds for Intermediate Care Facilities and previously contracted community programs. Division of Family Development The Division of Family Development (DFD) provides various support services and assistance to financially insecure families and adults without dependents. In cooperation with the county welfare agencies, DFD provides nutrition assistance, temporary cash assistance, rental and emergency housing assistance, child care subsidies, and other support services to these families and individuals. These programs include the federal Supplemental Nutrition Assistance Program (SNAP), the Temporary Assistance to Needy Families (TANF) block grant, and the Child Care and Development block grant. 3 See background paper DDD - Transition in Service System starting on page 47 for more information. 7

10 Highlights (Cont d) Overall funding for the division is recommended to increase by $85.9 million (6.0 percent), to $1.52 billion (gross). 4 Of this amount, $496.3 million represents State appropriations from the General Fund and Property Tax Relief Fund, which decrease by $18.7 million (3.6 percent). Federal funds are anticipated to increase by $105 million (12.1 percent), to $977.4 million in FY Other funds are to remain nearly unchanged at $47.9 million. Highlights: The Division expects to achieve net savings of approximately $2.6 million by expanding its emergency assistance review teams. The division anticipates that the teams additional salary costs would be offset by savings in emergency assistance costs when the review teams reverse eligibility determinations by county welfare agencies. The FY 2017 Budget Recommendation includes approximately $33.2 million less than the FY 2016 adjusted appropriation in the four Work First New Jersey-TANF and General Assistance cash assistance line items, based on the anticipated continuation of declining enrollment trends. The budget shifts TANF block grant funds among several accounts based on expected spending need, most notably by increasing the allocation to the Earned Income Tax Credit program by $80 million. $3.7 million in additional State funding is recommended to comply with new federal requirements under the Child Care and Development Block Grant mainly the requirement for family day care providers to submit to criminal history record background checks. The Department expects to save approximately $5.5 million by shifting the administration of the State supplement to Supplemental Security Income (SSI) from the federal government to the State of Pennsylvania, which is expected to begin in January. Other Divisions The other divisions of the DHS the Division of Disability Services, the Commission for the Blind and Visually Impaired (CBVI), the Division for the Deaf and Hard of Hearing, and the Division of Management and Budget (DMB) see relatively small changes in the Governor s FY 2017 Budget Recommendation. The budget assumes savings in salary costs resulting from delayed filling of vacant positions ($460,000 in CBVI and $4.2 million in DMB). Other minor funding shifts have negligible budgetary impacts. Background Papers: Behavioral Health Services Payment Reforms p. 44 Division of Developmental Disabilities Transition in Service System p Revolving funds displayed on page C-23 but not within the department recommendation on pages D-209 to D-211 are included in the totals. 8

11 Fiscal and Personnel Summary AGENCY FUNDING BY SOURCE OF FUNDS ($000) General Fund Adj. Expended Approp. Recom. Percent FY 2015 FY 2016 FY Direct State Services $648,999 $610,964 $577,913 ( 11.0%) ( 5.4%) Grants-In-Aid $5,241,778 $5,485,110 $5,413, % ( 1.3%) State Aid $287,666 $265,863 $242,373 ( 15.7%) ( 8.8%) Capital Construction $2,397 $0 $0 ( 100.0%) 0.0% Debt Service $0 $0 $0 0.0% 0.0% Sub-Total $6,180,840 $6,361,937 $6,233, % ( 2.0%) Property Tax Relief Fund Direct State Services $0 $0 $0 0.0% 0.0% Grants-In-Aid $0 $0 $0 0.0% 0.0% State Aid $160,368 $168,134 $159,615 ( 0.5%) ( 5.1%) Sub-Total $160,368 $168,134 $159,615 ( 0.5%) ( 5.1%) Casino Revenue Fund $248,783 $182,544 $179,587 ( 27.8%) ( 1.6%) Casino Control Fund $0 $0 $0 0.0% 0.0% State Total $6,589,991 $6,712,615 $6,572,523 ( 0.3%) ( 2.1%) Federal Funds $8,963,407 $10,576,640 $9,716, % ( 8.1%) Other Funds $956,192 $1,084,589 $1,465, % 35.2% Grand Total $16,509,590 $18,373,844 $17,755, % ( 3.4%) PERSONNEL SUMMARY - POSITIONS BY FUNDING SOURCE Actual Revised Funded Percent FY 2015 FY 2016 FY State 8,398 7,864 7,974 ( 5.0%) 1.4% Federal 4,149 3,633 3,590 ( 13.5%) ( 1.2%) All Other % 7.1% Total Positions 12,606 11,553 11,624 ( 7.8%) 0.6% FY 2015 (as of December) and revised FY 2016 (as of January) personnel data reflect actual payroll counts. FY 2017 data reflect the number of positions funded. AFFIRMATIVE ACTION DATA Total Minority Percent 70.3% 68.6% N/A

12 Significant s/new Programs ($000) Budget Item Adj. Approp. FY 2016 Recomm. FY 2017 Dollar Percent Budget Page Division of Mental Health and Addiction Services (DMHAS) STATE PSYCHIATRIC HOSPITALS DIRECT STATE SERVICES Salaries and Wages $266,601 $270,051 $ 3, % D-168 The Governor s FY 2017 Budget Recommendation provides a $3.45 million increase in funding over the FY 2016 adjusted appropriation for salaries and wages for State psychiatric hospitals staff. Of this amount, $825,000 is allocated to Greystone Park Psychiatric Hospital, $805,000 is allocated to Trenton Psychiatric Hospital, $750,000 is allocated to Ann Klein Forensic Center, and $1.07 million is allocated to Ancora Psychiatric Hospital. Evaluation data on page D-167 indicate that a total of 155 funded positions are to be added, from 4,073 in FY 2016 to 4,228 in FY 2017, serving a combined average daily census of 1,578 (approximately 0.37 patients per position). By way of comparison, there were 4,634 funded positions in FY 2010 serving a combined average daily census of 1,858 patients (0.4 patients per position). 5 This proposed funding level is intended to improve hospitals capacity to meet patients health care needs and ensure safety for staff and patients. According to the department, patients in State psychiatric hospitals have more acute needs and are more disposed to violent behavior, on average, than was the case in previous years. This is partially the result of relatively well patients being discharged to community placements, which leaves only the more acute patients in the hospital. Ancora Psychiatric Hospital, in particular, has struggled with high numbers of assaults and injuries in recent years, and briefly lost its Medicare certification in the spring of 2015 after an unfavorable inspection. COMMUNITY PROGRAMS DIRECT STATE SERVICES Administration and Support Services $17,394 $14,756 ($2,638) ( 15.2%) D-172 The Governor s Budget Recommendation reflects a $2.6 million decrease in funding for salaries for administrative staff at the Division of Mental Health and Addiction Services. Nonetheless, evaluation data on page D-171 indicate an increase in funded positions in the Administration and Support Services program class, from 132 positions in FY 2016 to 138 positions in FY Supplementary budget materials available to the OLS suggest that the savings result in part from an increase in the assumed time between a position becoming vacant and the vacancy being filled, and in part due to overbudgeting for salary costs in FY Governor s FY 2012 Budget, pages D-168 and D

13 Significant s/new Programs ($000) (Cont d) Budget Item Adj. Approp. FY 2016 Recomm. FY 2017 Dollar Percent Budget Page GRANTS-IN-AID Olmstead Support Services $104,262 $111,762 $ 7, % D-172 The Governor s FY 2017 Budget recommends an increase of $7.5 million for Olmstead Support Services, for a total State appropriation of $111.8 million. Olmstead Support Services funds contracts with community mental health agencies to provide an array of mental health services, with a focus on assisting individuals discharged or diverted from the State s psychiatric hospitals, in accordance with the State s long-term efforts to reduce the number of institutionalized individuals pursuant to the U.S. Supreme Court s decision in Olmstead v. L.C., 527 U.S. 581 (1999), which requires that individuals with mental illness receive services in the least restrictive appropriate environment. More detailed utilization and spending data for the Olmstead Support Services and Community Care accounts is provided on pages D-169 and D- 170 of the Governor s Budget Recommendation. Information from the Executive indicates that $5.5 million of this increase represents the annualized cost of community-based beds developed during FY (Performance data on page D-164 indicate that 220 beds will have been added by the end of FY 2016.) The remaining $2.0 million will be used to develop 220 new community placements during FY 2017, of which 145 are specifically for patients discharged from the State s psychiatric hospitals, and 75 will serve individuals at risk of hospitalization or homelessness. GRANTS-IN-AID Community Care $266,461 $255,943 ($10,518) ( 3.9%) D-172 The Governor recommends a State appropriation for Community Care of $255.9 million, a net decrease of $10.5 million from FY This line item funds contracts with community mental health agencies to provide an array of mental health services, including early intervention and support services; screening services; outpatient, partial care, and residential services; supported housing and employment; integrated case management; legal services; and family support services. More detailed utilization and spending data for the Olmstead Support Services and Community Care accounts is provided on pages D-169 and D-170 of the Governor s Budget Recommendation. According to the Executive, the decrease in the recommended appropriation in FY 2017 is due to an assumption of increased federal funding related to the transition of existing services from State-only funding to Medicaid. 11

14 Significant s/new Programs ($000) (Cont d) Budget Item Adj. Approp. FY 2016 Recomm. FY 2017 Dollar Percent Budget Page GRANTS-IN-AID Behavioral Health Rate Increase $ 0 $127,769 $127,769 D-172 Less: Enhanced Federal Match and Third- Party Recoveries $ 0 ($107,785) ($107,785) D-173 The Governor s FY 2017 Budget Recommendation includes approximately $20 million in new State funds and $107.8 million in federal matching funds related to several payment system reforms for mental health and addiction services providers. Proposed language provisions would authorize the Commissioner of Human Services to establish the new rate methodology, and to transfer funds between DMHAS and the Division of Medical Assistance and Health services to implement the new reimbursement system and claim federal matching funds. According to the department, the recommended appropriations assume that service utilization will remain unchanged from the current utilization rates, but that payment will be made according to the new fee-for-service payment system and rates when they take effect. Actual spending will depend upon providers furnishing and documenting services and submitting individual claims. More information on the planned transition to the new fee-for-service rate system is provided in a background paper starting on page 44 of this analysis. STATE AID Support of Patients in County Psychiatric Hospitals (PTRF) $113,733 $105,214 ($8,519) ( 7.5%) D-173 Currently, five counties (Bergen, Burlington, Essex, Hudson, and Union) operate county psychiatric hospitals, which primarily serve individuals who are involuntarily committed to inpatient psychiatric treatment. The State pays 85 percent of the reasonable cost of maintenance of patients with a legal residence in the county (with the county paying the remaining 15 percent), and 100 percent of the cost of those who have not established legal residence in any county. The methodology for determining the reasonable cost of maintenance is established annually by the DHS. According to the Executive, the proposed $8.5 million decrease in State Aid payments to counties for Support of Patients in County Psychiatric Hospitals is primarily a result of lower billable rates at Essex and Hudson county hospitals. The new rates went into effect January 2016, and are assumed to be in effect for all of FY

15 Significant s/new Programs ($000) (Cont d) Budget Item Adj. Approp. FY 2016 Recomm. FY 2017 Dollar Percent Budget Page Division of Medical Assistance and Health Services (DMAHS/Medicaid/NJ FamilyCare) Note: The Governor s Budget Recommendation displays the Division of Medical Assistance and Health Services budget line items in a gross budget format, indicating the aggregated total of State, Federal, and Other Funds. Below, the OLS disaggregates each line item into its various components, as applicable. The Governor s FY 2017 Budget Recommendation displays Medicaid/NJ FamilyCare appropriations differently from prior years. Most costs directly related to health care coverage are now displayed in the six Medical Coverage accounts, which correspond to the six major NJ FamilyCare eligibility categories. Each of these accounts includes both managed care capitation costs and fee-for-service payments to specific providers incurred on behalf of NJ FamilyCare recipients in each category. Total spending for certain select service categories (hospitals, prescriptions drugs, nursing homes, etc.) is displayed in evaluation data on pages D- 178 and D-179 of the Governor s FY 2017 Budget. Notably, the DMAHS budget does not include spending associated with Medicaid services provided by other departments or divisions, such as functional services provided through the Division of Developmental Disabilities or behavioral health services for children and youth provided through the Department of Children and Families. The OLS notes that many of the new grants-in-aid line items appear to correspond to evaluation data on pages D-177 and D-178. However, in many cases the two data sources do not match one another. This analysis assumes that the evaluation data provide a more accurate representation of actual spending in each category. The discrepancies in the two data sources are primarily due to the following factors: The FY 2016 adjusted appropriations include appropriated funds that may exceed expected spending in FY Unspent State appropriations may be transferred to other accounts, lapsed to the General Fund, or carried forward into FY 2017, depending upon authority granted by the appropriations act applicable to the specific appropriation. Unlike State appropriations, unspent federal appropriations do not expire until several years after the original appropriation. Certain dedicated revenues are appropriated in the Provider Settlements and Adjustments account, but the OLS does not have detailed information on how all of these revenues are expected to be spent. Some of the appropriation in this account has the effect of reducing appropriations in other accounts. Long-standing appropriations language gives the Executive broad authority to transfer funds among various NJ FamilyCare accounts. Such transfers are common when actual spending in one category exceeds the appropriation and another category falls short of the appropriation. These transfers may not be reflected in the FY 2016 Adjusted Appropriations. 13

16 Significant s/new Programs ($000) (Cont d) Budget Item Adj. Approp. FY 2016 Recomm. FY 2017 Dollar Percent Budget Page DIRECT STATE SERVICES Services Other Than Personal $11,407 $12,907 $ 1, % D-179 General Fund $2,936 $4,436 $ 1, % Federal Funds $8,471 $8,471 $ 0 The Budget Summary indicates that the FY 2017 Budget Recommendation includes $3.0 million to support the State s three Medicaid Accountable Care Organizations (ACOs), located in Camden, Trenton, and Newark (page 15). The $1.5 million State portion of this funding is appropriated in the Services Other Than Personal Account on page D-179 of the Governor s FY 2017 Budget. Medicaid ACOs are community nonprofit organizations that bring together acute care hospitals, federally qualified health centers, and many primary care and social services providers in their regions to identify high-need, high-cost patients and coordinate their medical care, behavioral health care, and social services in attempt to improve the quality of their lives and minimize unnecessary and inappropriate utilizations of health care services. Medicaid ACOs are authorized by P.L.2011, c.114 (C.30:4D-8.1 et seq.). GRANTS-IN-AID Medical Coverage Aged, Blind and Disabled $2,740,177 $2,770,240 $30, % D-180 General Fund $1,325,803 $1,301,274 ($24,529) ( 1.9%) Federal Funds $1,414,374 $1,468,966 $54, % This account represents most health care coverage costs for individuals eligible for Medicaid on the basis of clinical criteria, but who are not residing in a nursing home or receiving community-based long term care services through the Managed Long Term Services and Supports program. The federal matching rate for costs in this category is 50 percent. Evaluation data on page D-177 indicate that actual spending for this category is expected to increase slightly from $3.133 billion in FY 2016 to $3.169 billion in FY 2017 (combining data for Medicare/Medicaid dual eligibles and those enrolled only in Medicaid). The OLS notes that the level of State funding recommended for FY 2017 assumes that $45 million in unexpended FY 2016 appropriations balances will carry forward to fund FY 2017 costs. The FY 2016 adjusted appropriation thus overstates projected spending by the same amount. There may also be other factors causing the mismatch between the evaluation data and appropriations data, as described above. 14

17 Significant s/new Programs ($000) (Cont d) Budget Item Adj. Approp. FY 2016 Recomm. FY 2017 Dollar Percent Budget Page GRANTS-IN-AID Medical Coverage Community-Based Long Term Care Recipients $903,533 $862,478 ($41,055) ( 4.5%) D-180 General Fund $439,943 $431,239 ($8,704) ( 2.0%) Federal Funds $463,590 $431,239 ($32,351) ( 7.0%) This account represents most health care coverage costs for NJ FamilyCare recipients who are receiving community-based long term care services in the Managed Long Term Services and Supports (MLTSS) program. It includes both acute care costs such as physician and hospital services, as well as long-term care costs provided through MLTSS. The federal government pays 50 percent of costs in this category. Evaluation data on page D-177 indicate that actual spending for this category is expected to increase from approximately $690 million in FY 2016 to $864 million in FY This is primarily due to an expected increase in the size of this population, from a monthly average of 16,757 participants to 20,453 participants. Enrollment in MLTSS has been rapidly increasing since the program began in FY 2015, in significant part due to the NJ FamilyCare managed care plans identifying non-mltss clients who may be eligible for the program and encouraging them to apply for the additional services the program offers. As in the case of the Aged, Blind, and Disabled account, the appropriation data differ from the evaluation data. In this case, it appears that the main difference is an overappropriation in FY 2016 relative to the costs expected to be incurred. The Executive currently plans to lapse $27.5 million in State expenditures from the FY 2016 Managed Long Term Services and Supports appropriation, which roughly corresponds to Medical Coverage Community-Based Long Term Care Recipients in the new display. GRANTS-IN-AID Medical Coverage Nursing Home Residents $2,004,386 $1,821,405 ($182,981) ( 9.1%) D-180 General Fund $847,304 $765,267 ($82,037) ( 9.7%) Federal Funds $1,029,906 $928,962 ($100,944) ( 9.8%) Other Funds $127,176 $127,176 $ 0 This account represents most health care coverage costs for NJ FamilyCare recipients who are residents of nursing facilities. It includes capitation payments to managed care organizations on behalf of nursing facility residents enrolled in MLTSS, fee-for-service payments directly to nursing facilities for residents not enrolled in MLTSS, and payments for other health care 15

18 Significant s/new Programs ($000) (Cont d) Budget Item Adj. Approp. FY 2016 Recomm. FY 2017 Dollar Percent Budget Page services provided to this population. The federal government pays 50 percent of costs in this category. Evaluation data on page D-177 indicate that actual spending for this category is expected to increase from approximately $1.730 billion in FY 2016 to $1.821 million in FY Additional evaluation data on page D-178 show that costs for nursing home services are expected to grow by only one-tenth of one percent, so the difference appears to be related to increases in other care received by these individuals. As with other Medical Care accounts, appropriations data differ somewhat from the evaluation data. It appears that the FY 2016 appropriation was significantly greater than current estimates of spending, though the OLS has no specific indication from the Executive that it plans to lapse any funds from this account. GRANTS-IN-AID Medical Coverage Title XIX Parents and Children $2,106,872 $2,163,758 $56, % D-180 General Fund $848,430 $724,585 ($123,845) ( 14.6%) Federal Funds $1,082,670 $1,085,988 $ 3, % Other Funds $175,772 $353,185 $177, % This account represents most health care coverage costs for NJ FamilyCare recipients eligible for Medicaid coverage according to financial criteria generally those with countable household income under 107 percent of the federal poverty level. The federal government pays 50 percent of costs in this category. A substantial portion of State costs is paid from the Health Care Subsidy Fund. The decrease in General Fund appropriations and the increase in Other Funds reflects the impact of reducing Charity Care expenditures paid from the Health Care Subsidy Fund by $150 million in FY Evaluation data on page D-177 indicate that actual spending for this category is expected to increase from approximately $2.265 billion in FY 2016 to $2.296 billion in FY This increase appears to be primarily related to an expectation of increasing enrollment, and a small increase in per-enrollee expenses is also projected. The recommended appropriations differ somewhat from the evaluation data, though the direction and magnitude of change from FY 2016 to FY 2017 is comparable across the two data sources. 16

19 Significant s/new Programs ($000) (Cont d) Budget Item Adj. Approp. FY 2016 Recomm. FY 2017 Dollar Percent Budget Page GRANTS-IN-AID Medical Coverage Title XXI Children $395,001 $377,361 ($17,640) ( 4.5%) D-180 Federal Funds $329,493 $314,071 ($15,422) ( 4.7%) Other Funds $65,508 $63,290 ($2,218) ( 3.4%) This account represents most health care coverage costs for children who are enrolled in the segment of NJ FamilyCare financed under the Children s Health Insurance Program (CHIP), Title XXI of the Social Security Act whose household income is below 350 percent of the federal poverty level, but higher than the Medicaid income limit. The federal matching rate for this category was 65 percent through federal fiscal year 2015, and increased to 88 percent beginning in federal fiscal year 2016 (though federal spending is subject to a ceiling). The State share of costs are paid from the Health Care Subsidy Fund. Evaluation data on page D-178 indicate that total spending for this category is expected to remain approximately flat from FY 2016 to FY 2017, at $377 million. The State share of costs is recommended to decrease somewhat, reflecting the annualized impact of the increased federal share that took effect in October GRANTS-IN-AID Medical Coverage ACA Expansion Population $3,829,611 $2,831,293 ($998,318) ( 26.1%) D-180 General Fund $25,627 $126,981 $101, % Federal Funds $3,803,984 $2,704,312 ($1,099,672) ( 28.9%) This account represents most health care coverage costs for the Medicaid Expansion under the Affordable Care Act, which expanded coverage to adults with household incomes under 138 percent of the federal poverty level. This includes low-income childless adults that historically were ineligible for Medicaid or received medical coverage under the General Assistance program, as well as parents earning over 107 percent of the federal poverty level. The federal matching rate for this population is currently 100 percent, but will decrease to 95 percent in January 2017, at an estimated cost to the State of $75 million. The federal matching rate is scheduled to decrease further in future years, to a minimum of 90 percent in Evaluation data on page D-177 indicates that actual spending for this category is expected to decrease from $3.188 billion in FY 2016 to $3.029 billion in FY The data indicate a projected decrease in both enrollment and per-enrollee costs, though no specific information is available to explain these projections. It is not clear why the recommended appropriation for FY 2017 is so much lower than the FY 2016 adjusted appropriation, or the FY 2017 costs indicated in the evaluation data. It is 17

20 Significant s/new Programs ($000) (Cont d) Budget Item Adj. Approp. FY 2016 Recomm. FY 2017 Dollar Percent Budget Page possible that unspent federal appropriations from prior years will be used to cover these costs in FY GRANTS-IN-AID Medicare Parts A and B $346,983 $384,726 $37, % D-180 General Fund $169,667 $192,363 $22, % Federal Funds $177,316 $192,363 $15, % Medicare Part D $355,966 $408,673 $52, % D-180 General Fund $355,966 $408,673 $52, % The NJ FamilyCare program pays enrollment premiums for enrollees who are also enrolled in the federal Medicare program. For these individuals, Medicare is the primary payer, so dual enrollment helps to reduce State costs by shifting them to the federal government. The recommended increase in appropriations from FY 2016 to FY 2017 appears to be the result of anticipated growth in both enrollment and premium costs. The Medicare Part D appropriation represents Part D clawback payments, which the State is required to make to the federal government. The clawback payments calculated by the federal government according to a formula, and are intended to reflect roughly 75% of the State Medicaid savings that result from the Part D program s coverage of prescription drug costs for Medicaid/Medicare dual eligibiles. Clawback payments increased significantly in calendar year 2016 and are expected to increase further in calendar year 2017 due to increased Medicare Part D costs, which are largely related to the recent proliferation of new high-cost specialty drugs. GRANTS-IN-AID Eligibility and Enrollment Services $81,506 $80,600 ($ 906) ( 1.1%) D-180 General Fund $41,813 $25,000 ($16,813) ( 40.2%) Federal Funds $39,693 $55,600 $15, % This account includes payments to the division s Health Benefits Coordinator (Xerox) and to county welfare agencies responsible for making NJ FamilyCare eligibility determinations and annual redeterminations. The FY 2017 Budget Recommendation includes a substantial increase in federal funds and an offsetting decrease in General Fund appropriations relative to FY 2016, reflecting an increase in the federal matching rate from 50 percent to 75 percent for certain costs, which is related to provisions of the Affordable Care Act. 18

21 Significant s/new Programs ($000) (Cont d) Budget Item Adj. Approp. FY 2016 Recomm. FY 2017 Dollar Percent Budget Page GRANTS-IN-AID Provider Settlements and Adjustments $584,423 $793,813 $209, % D-180 General Fund $26,541 $21,897 ($4,644) ( 17.5%) Federal Funds $32,331 $41,363 $ 9, % Other Funds $525,551 $730,553 $205, % This account includes various dedicated revenues specifically related to NJ FamilyCare, including approximately $655 million in expected drug manufacturer rebates and $75 million in cost recoveries from providers (including fraud recoveries) in FY According to the department, these revenues are used to pay some retroactive payments to providers, wraparound payments to federally qualified health centers, and some coverage costs. The increase from the FY 2016 to FY 2017 is mainly attributable to increases in expected drug rebates and cost recoveries. Evaluation data indicate that expected drug rebates for FY 2016 are significantly higher ($719 million) than originally appropriated ($565 million). The $75 million in cost recoveries is not included in the FY 2016 adjusted appropriation, but they do appear in evaluation data it is possible that these recoveries are treated as negative costs (i.e., they reduce expenditures) rather than as revenues in the appropriations for years preceding FY GRANTS-IN-AID ACA Health Insurance Providers Fee $167,641 $161,798 ($5,843) ( 3.5%) D-180 General Fund $60,351 $54,873 ($5,478) ( 9.1%) Federal Funds $107,290 $106,925 ($ 365) ( 0.3%) The Affordable Care Act imposes a fee on certain health insurance plans to support the health insurance exchanges established under the law. This appropriation represents the fees owed by NJ FamilyCare managed care plans. The FY 2017 appropriation is identical to the expected actual spending for FY 2016, according to evaluation data on page D