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Department outlines hospital subsidies and changes to charity care redistribution; administration proposes small raise in hospital admission fee
Summary
Department officials told the Senate Budget Committee the FY26 budget continues large hospital subsidies and proposes two technical changes: allowing declined direct charity care payments to be redistributed within hospital systems and raising the hospital admission assessment from $10 to $12.50 to meet federal requirements.
The Department of Health detailed how the governor's fiscal year 2026 budget would support hospitals and charity care while seeking to reconfigure certain assessments to draw more federal matching funds.
"Hospitals are critical to the state of the art healthcare New Jersey is known for," Dr. Baston said, listing program amounts in the department's budget. The department told the committee the state provides $3,600,000,000 in direct subsidies for hospital systems since the governor took office, including $336,500,000 for the Graduate Medical Education Program, roughly $210,000,000 in combined state and federal Quality Improvement funding, and roughly $600,000,000 across agencies to support charity care (including $61,000,000 in direct charity care subsidies and $539,000,000 in Medicaid outpatient state‑directed payments).
Charity care redistribution: Committee members asked about new budget language governing how direct charity care dollars are redistributed when a hospital declines payments because it is over a DISH cap. "This budget language would change how it's redistributed — as opposed to being redistributed to all hospitals, it would be redistributed to the hospitals in that system," said one committee exchange summarizing department testimony. Deputy Commissioner Jeff Brown explained the change is intended to recognize charity care that was delivered while keeping funds within the health system if an individual property is capped.
Hospital admission assessment: The administration proposes raising the hospital admission assessment from $10 to $12.50 per adjusted admission. Dr. Baston and committee members framed the change as a technical step to make the assessment "broad based" and compliant with federal rules so the state can avoid penalties and draw down additional federal matching dollars. "Because it's a broad based tax, we're able to draw down better federal dollars," the commissioner said in response to questions.
Why it matters: Committee members questioned distributional effects and asked for written analyses. Senators sought a payer‑level list showing which ambulatory and hospital providers will see increases or decreases under reconfigured assessments. The department agreed to provide the committee chair a written explanation and payer impact list.
Context: Department staff said the proposed redistribution would apply only to direct charity care subsidies and would not change Medicaid state‑directed payment mechanisms, which are administered by the Department of Human Services. Department officials said they track SFRF/ARPA hospital allocations and reported about 58% of certain earlier federal hospital funds had been spent, noting multi‑year spending windows extend into 2026.
