NJ Medicaid Cuts: Why Advocates Say Sherrill’s Budget Falls Short

New Jersey stands to lose more than $3.3 billion in annual Medicaid funding under federal changes that impose new work and immigration status requirements, eliminate subsidies, and change access to health coverage. The New Jersey Department of Human Services has also estimated that these new regulations would cut $360 million per year from the state budget.

 Local advocates say the state’s response, while meaningful, falls short of what residents will need.  

Maggie Garbarino, a spokesperson for Gov. Mikie Sherrill (D), said in a written statement that the Trump Administration’s “reckless Medicaid cuts and blatant disregard for the health of the American people” will put 304,000 New Jerseyans at risk of losing their benefits.

“Many will remain eligible for assistance but will lose their Medicaid coverage simply due to bureaucratic hurdles imposed by the Trump Administration and designed to kick people off their health coverage,” Garbarino added.

In response to these looming funding cuts, Sherrill released a $60.7 billion budget proposal for Fiscal Year 2027 that includes measures to keep eligible residents on NJ FamilyCare, the state’s Medicaid program, which provides health benefits to 1.8 million residents.

The budget proposal included $34.6 million in additional state costs resulting from the federal government reducing its Medicaid match for emergency services from 90% to 50%. The budget will also feature $10.5 million for state agencies, counties, and vendors as they prepare for new Medicaid work requirements and more frequent eligibility checks.

Laura Waddell, health care program director at New Jersey Citizen Action, said that the state must also look for ways to raise revenue and keep as many health care programs running as possible. 

Due to higher premiums, 70,000 New Jerseyans have already dropped their health insurance since Jan. 2026. New Jersey Citizen Action also reported that 20,000 more NJ FamilyCare enrollees will lose coverage on Oct. 1 due to new immigrant status requirements. 

In addition, a Public Citizen analysis found that 12 hospitals in New Jersey are at high risk of shutting down, cutting health care services, or laying off workers. 

“[The Medicaid cuts] will be impacting everyone…Medical debt will be going up because patients don’t have health coverage, and they will still have to figure out how to pay for their health care,” said Waddell.

Sherrill plans to allocate $7.2 billion in state funding for NJ FamilyCare to compensate for rising health care costs, strengthen Medicaid enrollment systems, and improve administrative coordination. This budget plan will also see the state’s 70 acute care hospitals receive $3.6 billion in direct subsidies.

However, Brittany Holom-Trundy, senior policy analyst at New Jersey Policy Perspective (NJPP), said that Sherrill’s budget proposal focuses too much on altering the state’s health care system to keep people enrolled in Medicaid to alleviate the crisis caused by federal funding cuts.

“It will help people with coverage, help their affordability, and help the state keep federal dollars coming in. But the reality is it’s not going to be able to stop it all, and the restrictions on immigrant eligibility are going to cut coverage,” Holom-Trundy said in a statement.

Rethinking how New Jersey finances health care entirely may be unavoidable, said Linda Schwimmer, president and CEO of the New Jersey Health Care Quality Institute. For example, she said New Jersey needs to increase funding and capacity for its federally qualified health centers. She also called for building out primary care and management for people with more acute medical needs.

“It’s not a perfect solution,” said Schwimmer. “It’s not as good as having people being covered, but it’s absolutely better than neglecting people or having people go to the emergency room, so that’s a huge focus area for us and other organizations across the state.”

Though Waddell supported Sherrill’s plan to have employers with workers on NJ FamilyCare pay a greater share to cover higher Medicaid costs, she said that this policy must be “structured thoughtfully” to avoid stigmatizing low-wage workers and framing them as “public burdens.”

“So covering our residents is an investment in a healthier, more productive state. And a balanced approach should be taken to account for employer size and other metrics so that sustainable revenue can be generated to advance equity and really continue New Jersey’s leadership and expand access to care,” added Waddell.

In response, Garbarino stated that “the state alone cannot backfill this unprecedented, devastating loss of billions of dollars in federal funding.”

“The Governor’s proposed budget ensures that we are doing our best to protect New Jerseyans and mitigate harm by optimizing health coverage and planning for the phase-in of further funding losses caused by [the federal spending bill],” said Garbarino.

Nevertheless, local advocates continue to push for additional solutions that will support New Jerseyans who will become ineligible for Medicaid later in the year.

“Fixing these healthcare issues is really how we make New Jersey a more affordable…more accessible, human place to live for everybody,” said Schwimmer.