In 2024, New Jersey state investigators uncovered a nursing home scheme in Union County where operators improperly diverted millions of dollars in Medicaid funds away from patient care and into affiliated business interests. Around the same time, federal prosecutors brought cases across New Jersey, including in Newark and Trenton, charging health care providers with billing Medicaid for services, prescriptions and medical equipment that were never provided or were not medically necessary.
These cases are not outliers. They reflect ongoing weaknesses in how Medicaid eligibility and spending are verified.
Unless these loopholes are addressed, New Jersey taxpayers are poised to face a significant financial penalty because the state cannot accurately determine who qualifies for Medicaid benefits.
Here is the problem. New Jersey’s Medicaid eligibility error rate is 4.1%, above the new federal threshold of 3% that takes effect in October 2029. That gap could cost the state roughly $155 million annually in lost federal funding for a program that serves more than 1 million residents. When federal dollars are reduced, New Jersey taxpayers will have to make up the difference.
This is a steep price to pay for a problem that is entirely fixable if the state acts now.
A system that verifies too little, too late
New Jersey’s Medicaid enrollment system relies heavily on self-attestation. Counties primarily verify income, while other eligibility factors such as residency, household size and existing coverage are often accepted with limited documentation.
Once enrolled, beneficiaries are typically redetermined only once per year. That creates predictable gaps when circumstances change. People move out of state, gain employer coverage or otherwise become ineligible, yet remain on the rolls.
Basic data matching tools are also underused. Regular cross-checks against wage records, residency files and death registries would allow the state to identify ineligible enrollees more quickly and reduce improper payments without affecting eligible residents.
States with large Medicaid programs have shown that stronger verification systems can improve accuracy without reducing access. The goal is not to restrict care, but to ensure benefits go to those who qualify. Federal oversight agencies, including the U.S. Government Accountability Office and the Centers for Medicare and Medicaid Services, have recommended enhanced eligibility verification, automated data matching, and more frequent redeterminations as tools to reduce improper payments while preserving access for eligible beneficiaries.
New Jersey should require more frequent eligibility redeterminations for able-bodied adults, who experience more frequent changes in income and employment. It should also implement routine automated data matching to continuously clean enrollment rolls.
Strengthening work and self-sufficiency
Federal reforms include a modest work requirement for able-bodied adults without dependents. The standard is 80 hours per month of work, training, volunteering or education.
This reflects a basic expectation that those who can work should be engaged in work or preparing for it.
When paired with supportive services, work requirements in safety net programs have been associated in many states with increased labor force participation and higher earnings over time. The objective is not to reduce access to health care, but to strengthen long-term self-sufficiency and ensure limited resources are directed to those most in need.
New Jersey should implement these requirements in a way that prioritizes both accountability and pathways to employment.
Ending budget practices that obscure costs
New Jersey also relies heavily on health care provider taxes to finance its share of Medicaid spending. While legal, these arrangements can obscure the true cost of the program and increase federal matching payments in ways that are increasingly restricted under federal rules.
These financing mechanisms weaken transparency and reduce incentives for cost control. As federal requirements tighten, New Jersey will need to adjust, either proactively or under fiscal pressure later.
Improving eligibility accuracy and encouraging workforce participation would help reduce unnecessary spending and stabilize long-term Medicaid costs without cutting benefits for those who qualify.
The stakes for New Jersey are real
This is about stewardship of public resources. Every dollar spent on someone who is not eligible is a dollar unavailable for a child with asthma, a disabled veteran awaiting approval or a working parent managing a chronic illness.
States that have strengthened program integrity have not weakened their safety nets. They have improved them by reducing waste and protecting access for those who truly need care. For example, Ohio expanded automated eligibility checks and cross-agency data matching, identifying thousands of potentially ineligible beneficiaries while maintaining coverage for eligible residents. Colorado similarly modernized eligibility systems to allow continuous verification rather than relying solely on annual redeterminations.
Time is running out for New Jersey
The worst response would be delay. Every year New Jersey waits, the eventual adjustments become more abrupt and more expensive.
Other states are already modernizing eligibility systems and strengthening program integrity. Texas, Florida and Indiana have implemented more frequent eligibility reviews and automated data matching to better ensure program accuracy.
New Jersey can either follow suit or absorb substantial federal funding losses for failing to act.
New Jersey taxpayers deserve better. So do the residents who depend on Medicaid for essential care. There is still time to fix the system, but only if the state acts now, before the bill comes due.
Audrey Lane is president of the Garden State Initiative, a nonpartisan policy research organization focused on New Jersey’s affordability and economic competitiveness. Allen Cambon is senior director of state affairs at the Foundation for Government Accountability, where he focuses on Medicaid policy and program integrity.
