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The Costs of Cutting Health Care
An Analysis of Recent Changes to New Jersey FamilyCare

Author: Kalyani Thampi
Publication Date: November 2011

This is an excerpt from the full report.

Across the country, states grapple with the reality of unflagging unemployment and weak revenues. Fiscal prudence competes with an unprecedented need for public services as poverty rates continue to rise. In 2010, 15.4 percent of children living in poverty were uninsured, yet Medicaid has taken primacy over other public programs being targeted for cuts. New Jersey serves as an example of the challenging fiscal environment in which critical programs operate across states. Although Governor Christie recently revoked his initial proposal to drastically reduce parents’ enrollment in New Jersey FamilyCare (the state’s public health insurance program), it does not seem likely that he will amend the 2010 cuts, which reduced income eligibility levels for parents from 200 percent to 133 percent of the federal poverty level (FPL). Cutting Medicaid would have deleterious effects on working families and the state. Medicaid supports insurance providers, provides counter-cyclical coverage to those who need health insurance the most, and ensures access to long-term care services. Findings from NCCP’s Family Resource Simulator (FRS) show that public health insurance can mediate the high cost of basic needs and more effectively support workers’ advancement toward economic self-sufficiency. Parents’ access to public health insurance can also strengthen the health and wellbeing of New Jersey’s children. Finally, Medicaid plays a vital role in New Jersey’s economy and in the acquisition of federal funding. The fiscal reality of Medicaid’s role in state budgets is far more complex than is often reported. This report uses results from the FRS to analyze New Jersey’s work support policies through the lens of cuts to New Jersey FamilyCare (NJFC) and subsequent threats to Medicaid. It examines the significant and measurable ways in which these cuts affect the economic well-being of working families and recommends policy priorities that would provide a better investment in New Jersey’s economy and its residents.

Tools for Policy Analysis

NCCP’s Family Resource Simulator is an innovative, web-based tool that calculates the impact of federal and state work supports on the budgets of low- to moderate-income families. The Simulator illustrates the effectiveness of current policies that reward and encourage work. NCCP also uses this tool to model potential policy reforms. Family Resource Simulators are available for 25 states, with more than 100 localities.

The Basic Needs Budget Calculator is a related tool that shows how much a family needs to make ends meet without the help of work supports. Users can select different household scenarios, and the Calculator adjusts the family’s tax liability and budget. Budgets are provided for nearly 100 localities across 19 states.

Making Ends Meet in New Jersey

Although state finances are showing signs of revenue growth, there is still a long road to recovery. New data from the U.S. Census reveal that 46.2 million people are living in poverty of which 24 percent are children. In New Jersey, poverty rates rose from 12 percent in 2008 to 14 percent in 2009, and employment declined in 13 of the 15 largest counties in New Jersey from 2009 to 2010.5 Not only are more people slipping into poverty, but employment is growing at a slower rate in New Jersey compared to the nation. A recent study showed that in June, 2011, the unemployment rate reached 9.2 percent, and only 11 percent of jobs lost during the recession have been added back to payrolls, compared to 20 percent in the U.S.

Low-income families face particular disadvantages compared to their counterparts. According to data from the National Center for Children in Poverty (NCCP), 22 percent of children in New Jersey lived in low-income households with parents who were unemployed in 2009, compared to two percent of children who lived in above low-income households with parents who were unemployed. Moreover, 78 percent of children in low-income families had parents who did not have a high school degree and 51 percent had no college education. This compounds an already bleak situation for New Jersey’s most vulnerable residents, as many workers who lost their jobs in the recession do not have the education nor the skills necessary for the industries that show the most promise of growth. Furthermore, employment opportunities for workers without a college degree can be found in industries that have shrunk since the recession and are associated with even lower earnings levels than before the recession. Thus, structural unemployment in New Jersey (or the mismatch of those who are looking for jobs and the jobs available with their skill set) continues to stymie job growth among low-wage workers. Almost every county we identified in the FRS experienced an increase in poverty between 2008 and 2009, and where there was not an increase, poverty rates stayed the same or decreased only slightly. The change in the labor market coupled with rising rates of poverty only strengthens the argument for better counter-cyclical work supports that may mitigate the risk of long-term and persistent poverty.