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LEGISLATIVE FISCAL ESTIMATE

[First Reprint]



ASSEMBLY COMMITTEE SUBSTITUTE FOR

ASSEMBLY, Nos. 1269 and 4507

STATE OF NEW JERSEY

215th LEGISLATURE
DATED: JANUARY 16, 2014

SUMMARY



Synopsis:

Provides loan redemption for certain physicians who work in State four years.

Type of Impact:

Indeterminate expenditure increase; Indeterminate revenue loss.

Agencies Affected:

Higher Education Student Assistance Authority.




Office of Legislative Services Estimate

Fiscal Impact

Year 1

Year 2

Year 3

State Cost

Indeterminate expenditure increase.

State Revenue

Indeterminate revenue loss.







  • The Office of Legislative Services (OLS) believes that First Reprint for Assembly Committee Substitute for Assembly Bill Nos. 1269 and 4507 will result in an indeterminate increase in State General Fund expenditures and an indeterminate revenue loss. However, there is not enough information available to reasonably estimate the impacts.

  • Information on the number of physicians who might be eligible to participate under the program’s provisions, the number who might choose to participate in the program, the amount of their loan indebtedness, the level of service a participating physician chooses, the number of State-designated medically underserved areas, and the number of approved sites would be necessary to estimate the program’s cost. This information is not available.

  • The OLS notes that there will be an indeterminate revenue loss from the State income tax exemption under the bill for all practice revenues received for providing services under the Medicaid program by an approved site that is a private primary care physician practice that has hired a loan redemption program participant.

  • While the bill provides for a minimum annual State expenditure of $750,000 for the Physician Loan Redemption Program established under this bill, and a maximum annual State expenditure of $750,000 for the existing Primary Care Practitioner Loan Redemption Program, the OLS notes that such funding is subject to the annual appropriations act.




BILL DESCRIPTION
The First Reprint of the Assembly Committee Substitute for Assembly Bill Nos. 1269 and 4507 of 2012 establishes the Physician Loan Redemption Program to provide for the redemption of qualifying loan expenses for physicians in primary care or in the clinical practice of specialties that are projected to experience a significant shortage in the State, if they meet certain eligibility criteria.

In order to participate in this program, a physician must: (1) reside in the State; (2) graduate from a medical school approved by the State Board of Medical Examiners and receive a recommendation from the school’s medical staff; (3) complete an accredited residency program and receive a recommendation from the director of the training program; and (4) agree to practice in a full-time or half-time clinical practice of primary care or specialized care in the State for at least four years at an approved site.

Under the bill, an approved site is a site located within a State-designated medically underserved area or within five miles of the State-designated medically underserved area. A State-designated medically underserved area is a municipality designated by the Commissioner of Health, in consultation with the Commissioner of Human Services and the New Jersey Council of Teaching Hospitals. The Commissioner of Health will annually establish a list of State-designated medically underserved areas using criteria enumerated in the bill; however, a municipality which has more than 20 percent of its households under 200 percent of the federal poverty level will be automatically deemed a State-designated medically underserved area without action by the Commissioner of Health. The commissioner will transmit the list of State-designated medically underserved areas and the number of positions needed in a specialty area to the Higher Education Student Assistance Authority, which will administer the program, by January 1 of each year.

Under the bill, a program participant’s eligible qualifying loan expenses will be reimbursed, subject to the maximum amount authorized by federal law, over a four-year period. Maximum loan redemption under the bill will equal 100 percent of eligible qualifying loan expenses for full-time service and 50 percent for half-time service. A physician who is a participant in the National Health Service Corps Loan Repayment Program or in the State’s Primary Care Practitioner Loan Redemption Program would not be eligible to participate in the program established by the bill.

Under the bill, the redemption of eligible qualifying loan expenses under the program will be exempt from the program participant’s individual New Jersey State income tax. In the case of an approved site that is a private primary care physician practice that has hired a loan redemption program participant, the site will have a State income tax exemption for all practice revenues received from providing services under the Medicaid program.

The bill further provides that beginning in FY 2015 and each subsequent fiscal year thereafter, no more than $750,000 will be appropriated annually to the Primary Care Practitioner Loan Redemption Program, and no less than $750,000 will be appropriated annually to the Physician Loan Redemption Program established under this bill.



FISCAL ANALYSIS
EXECUTIVE BRANCH
None received.
OFFICE OF LEGISLATIVE SERVICES
The OLS believes that First Reprint for Assembly Committee Substitute for Assembly Bill Nos. 1269 and 4507 will result in an indeterminate increase in State General Fund expenditures and an indeterminate revenue loss. However, there is not enough information available for OLS to reasonably estimate the costs.

According to the 2010 New Jersey Physician Workforce Task Force Report, by 2020 there will be a projected shortage of 2,835 physicians, 1,006 of whom will be primary care physicians and 1,829 of whom will be specialized care physicians. However, the OLS cannot determine the number of these physicians who may be eligible to participate in the Physician Loan Redemption Program, the number of eligible physicians who may choose to participate, the loan indebtedness of those participants, and the level of service that a participating physician may choose under the program.

The OLS cannot estimate the number of eligible physicians who attended a public or private undergraduate institution of higher education and a public or private institution of medical professional education. A private institution is costlier than a public institution, and may lead to higher qualifying loan indebtedness that would increase the amount of loan redemption under the Physician Loan Redemption Program. For example, according to the Association of American Medical Colleges, as of October 2013, the mean debt for physicians graduating from a public medical school is $162,736, while the mean debt for graduation from a private medical school is $181,058. These figures include debt incurred at an undergraduate institution.

The OLS also does not have information on the type of loan repayment option each participating physician chooses. For example, a physician under a 30-year repayment plan for federal loans would have a higher balance of loan indebtedness than a physician under a 10-year repayment plan.

The amount of eligible qualifying loan expenses reimbursed over a four-year period under the bill is also dependent on whether a participating physician chooses full-time or half-time service under the program, the number of State-designated medically underserved areas, and the number of approved sites.

The OLS estimates that 118 of the 565 municipalities in the State have more than 20 percent of their households under 200 percent of the federal poverty level and would be automatically deemed a State-designated medically underserved area. Due to the fact that the bill defines an approved site as a site located within a State-designated medically underserved area or within five miles of the State-designated medically underserved area, the OLS notes that there could be a significant number of approved sites that may result in a large number of program participants and consequently increased program costs.

The OLS also notes that there will be an indeterminate revenue loss due to the State income tax exemption under the bill for all practice revenues received for providing services under the Medicaid program by an approved site that is a private primary care physician practice that has hired a loan redemption program participant. The number of such private primary care physician practices that might qualify under this bill cannot be ascertained. In addition, the amount of State income tax exemption per practice depends on the services provided under the Medicaid program.

While the bill provides for a minimum annual State expenditure of $750,000 for the Physician Loan Redemption Program established under this bill, and a maximum annual State expenditure of $750,000 for the existing Primary Care Practitioner Loan Redemption Program, the OLS notes that such funding is subject to the annual appropriations act.





Section:

Education

Analyst:

Jonathan Tang

Associate Fiscal Analyst

Approved:

David J. Rosen

Legislative Budget and Finance Officer

This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.


This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).










Office of Legislative Services

State House Annex

P.O. Box 068

Trenton, New Jersey 08625




Legislative Budget and Finance Office

Phone (609) 292-8030

Fax (609) 777-2442

www.njleg.state.nj.us





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