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Senators Fred H. Madden (D-Camden and Gloucester)

TRENTON Legislation sponsored by Senator Fred Madden that would establish a Medicaid Smart Card Pilot Program cleared the Senate Health, Human Services and Senior Citizens Committee today.

“Smart cards contain a secure microchip that would store information about the Medicaid user, which would make the utilization of the program more efficient for enrollees and help to protect against fraud within the system,” said Senator Madden (D-Gloucester, Camden).  “This initiative will also prevent improper billing practices and reduce previous forms of abuse and fraud. It is time we provide a smart card pilot program that can make the process more effective and efficient, and potentially reduce the total amount of Medicaid expenditures for the public.”

The bill, S1250, would establish the Medicaid Smart Card Pilot Program within the Division of Medical Assistance and Health Services (DMAHS) of the Department of Human Services (DHS).  Under the bill, the DHS Commissioner would determine the geographic area to be included in the pilot program. The pilot program would be required to include: enrollment of designated recipients as pilot program participants; distribution of Medicaid Smart Cards to those recipients, to be used by them in lieu of their current Medicaid eligibility identification cards; authentication of designated recipients at the point of transaction, at the onset and completion of each transaction, in order to prevent card sharing and other forms of abuse or fraud; denial of ineligible persons at the point of transaction; authentication of providers at the point of transaction to prevent phantom billing and other forms of abuse or fraud; and any efforts necessary to secure and protect the personal identity and information of designated recipients.

Medicaid fraud is a costly and pervasive issue in New Jersey.  A State Comptroller’s Office report uncovered $122.8 million in improper Medicaid spending in FY 2012.  A smart card is a credit card-sized plastic card with an embedded, secure microchip or USB capability. Unlike an ordinary credit or debit card, which stores data on a magnetic stripe, a smart card can both contain and process information. The cards serve to authenticate both the Medicaid recipient and the health care provider.  As a result, the card would protect against card sharing and forms of provider fraud, such as phantom billing.

Several states, including Texas, Virginia, North Carolina, Georgia, Pennsylvania and New York have undertaken smart card pilot programs for public benefit programs or have enacted legislation to create such programs.

It cleared the Committee by a vote of 7-0. The bill now heads to the Budget and Appropriations Committee.


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