NJ Supreme Court Upholds Charity Care Law Amid Declining State Funding

The New Jersey Supreme Court affirmed the constitutionality of the state's charity care law, which requires hospitals to provide care to patients unable to pay and reimburses hospitals partially for these costs. This unanimous ruling ended a legal challenge by 14 New Jersey hospitals claiming the program unlawfully seized hospital resources without just compensation, a claim the court found unsupported based on legal precedent and the public service nature of hospitals.

The charity care program, established in 1992, plays a key role in supporting hospitals that treat uninsured and indigent patients, with annual funding provided by the state. However, over the past decade, state funding for charity care has declined sharply, from $650 million in 2015 to just around $61 million in the 2024 state budget. This has coincided with a policy shift emphasizing Medicaid as the primary support mechanism for hospital aid.

Despite increased overall insurance coverage driven by the Affordable Care Act, many hospitals argue the charity care payments are insufficient to cover the costs of uncompensated care. Medicaid cuts at the federal level threaten to further reduce funding streams that hospitals depend on, creating financial pressures that may impact hospital operations, workforce levels, and patient access.

The court recognized the hospitals' concerns about fairness in subsidy allocations but clarified that determining funding adequacy is a legislative matter, not a judicial one. The ruling emphasized that hospitals remain "quasi-public" entities with longstanding obligations to provide care regardless of patient payment ability, and they retain administrative and legislative avenues to seek policy changes.

The decision also aligns with federal requirements mandating emergency care regardless of a patient's insurance status, reinforcing the obligations hospitals face under state and federal law. The New Jersey Hospital Association highlighted how anticipated Medicaid cuts could exacerbate challenges in maintaining healthcare coverage, staffing, and emergency services capacity across the state.

This legal affirmation of the charity care obligations underscores ongoing financial and regulatory challenges hospitals face amidst evolving healthcare funding landscapes. The decision may influence how states balance uncompensated care mandates with supporting hospital financial viability in changing policy environments.