Medicaid cuts could cost NJ $3.7B annually, NJ officials say

By the end of the decade, New Jersey stands to lose up to $3.7 billion dollars in federal healthcare funding each year under the Trump administration’s changes to Medicaid, much of it in cuts to state-directed aid for hospitals and doctors, state officials warned lawmakers Thursday.

The shifts in Medicaid, the state and federally funded program known here as NJ Family Care, are also expected to force up to 330,000 people off their existing health plans, a change that Human Services Commissioner Stephen Cha said could reduce payments through the program to Garden State doctors and hospitals by an additional $2 billion to $3 billion annually.

“Behind every number is a person: someone who needs a checkup, a parent managing a chronic condition,” Cha told legislators during a hearing at the Trenton Statehouse.

Cha joined Health Department Commissioner Raynard Washington and Susan Ochs, head of the Department of Banking and Insurance, Thursday to brief the Senate’s health committee on the likely impacts of the changes to Medicaid and other social service programs triggered by a law Trump signed in July 2025.

Some of the changes, like tighter restrictions on which groups of legal immigrants can qualify for Medicaid, have already taken effect, while cuts to hospital funding will be phased in over the years to come.

The biggest change comes in January, when 540,000 low-income adults on NJ Family Care will need to start submitting documents to prove they are working, volunteering, or in school at least 20 hours a week to still get benefits. Limited exemptions are available for people who are disabled or have a chronic health condition that makes them unable to work, rules New Jersey and other states are challenging in court.

Cha said his department is working with county welfare agencies, the insurance companies that provide NJ Family Care plans, community groups, and others to inform people about the pending changes and help them navigate the additional bureaucracy involved. Members facing the new work requirements will also be forced to enroll in Medicaid every six months, instead of once a year like now.

“New Jersey cannot fully offset every federal reduction, but we can invest thoughtfully, reduce administrative complexity, and work with the Legislature, providers, counties, and community organizations to build a system that can withstand change,” Cha said.

Even if the state succeeds in limiting the impact of the new law, Cha’s office predicted it will cost New Jersey at least $1.8 billion annually and leave at least 165,000 additional adults uninsured. NJ Family Care currently covers 1.8 million residents.

Sen. Holly Schepisi (R-Bergen) pressed Cha on the potential funding gap, noting that the state spent more than $250 million less on Medicaid last year than it had anticipated, a savings she said could offset future funding loss. Cha said the decline reflected actual costs that were lower than expected, noting that the Treasury Department allotted the extra money to other programs.

Sen. Owen Henry (R-Middlesex) lamented the Democratic majority’s use of funds for pet projects.

“The priorities need to change. The money is here,” he said.

The loss of federal Medicaid dollars will result in cuts to state-run programs that fund hospital outpatient services, something New Jersey has relied on heavily in recent years, but shrinking insurance coverage also means fewer reimbursements for doctors who treat these patients. Even if it’s not reflected in the state budget, the cuts will impact healthcare in New Jersey, Cha explained.

“We are going to see those cuts in different ways. It’s not going to show up as a $1.3 billion to $3 billion deficit, but it’s $1.3 billion to $3 billion less from the federal government,” he said.

Trump said the changes he approved to Medicaid aim to reduce costs to the federal government, which pays for roughly two-thirds of all Medicaid expenses nationwide.