New Jersey's Department of Human Services plans to slash Medicaid inpatient payments to 84 acute-care and general hospitals by $135 million, a 20% reduction.
"It's all part of an effort to bring market forces to bear for Medicaid," said John McKeegan, a human services spokesman. With increases averaging 18% annually during the past five years, New Jersey's rates for Medicaid reimbursement to hospitals are the third highest in the nation, behind New York and Rhode Island, he said.
The proposed trims would eliminate adjustments made to hospitals' rates to help them make the transition to a market-based system, Mr. McKeegan said. State lawmakers ended the state's rate-setting system at the end of 1992. Other savings will come from alterations in the base payment rate and capital allowances, Mr. McKeegan said.
If adopted, the plan would go into effect in March 1995.
"Slashing payment rates to hospitals...when demand for services is increasing and proposed alternatives like managed care for Medicaid are still on the drawing boards is simply wrong," said Gary S. Carter, president of the New Jersey Hospital Association. He said the cuts will hurt the most vulnerable hospitals and patients.