Layoffs are occurring in many places of employment in New Jersey, including hospitals. Hospital layoffs often generate a lot of news coverage, largely because hospitals are integral parts of their communities – often the largest employer and a key driver of the local economy. Overall, healthcare is the second largest employer in the state.

Just about every day I read three to four newspapers – the ink-on-paper versions that get your hands dirty. But during the day, when I am at work, I often check a couple of newspaper Web sites for breaking New Jersey and national news. And I have noticed a recent phenomenon. When a hospital announces a layoff and it is reported on a newspaper Web site, there often follows a series of comments from members of the public about how this is related to free care to undocumented immigrants (often the phrase used is “illegal aliens.”) So I thought I should comment.

N.J. hospitals and healthcare facilities are wonderful institutions that provide quality of care to all individuals. There is no doubt that federal law requires hospitals to provide emergency care to all, regardless of their ability to pay. That requirement extends even further under New Jersey law, which requires hospitals to provide care to all persons in all settings – not just in the emergency room – regardless of their ability to pay.

The United States has close to 50 million uninsured residents, and the State of New Jersey has 1.3 million uninsured. The state’s own statistics show that N.J. hospitals provide close to $1 billion in state-mandated care to the uninsured. That number is based on what the state’s Medicaid program would have paid hospitals for those services, but Medicaid only covers about 70 cents of every dollar of care provided by hospitals. In reality, the value of the care our hospitals provide to the uninsured reaches $1.3 billion annually.

How much do hospitals receive back from the state for that $1.3 billion in healthcare for the uninsured? The amount is subject to the state budget process each year, but the current budget reimburses hospitals just $603 million for that care. The obvious underfunding, nearly $700 million this year, creates a budget hole for N.J. hospitals. Other holes exist in hospital budgets because Medicaid doesn’t cover the cost of care they provide, nor does Medicare, the federal program that provides health coverage for seniors. This is true for doctors and hospitals alike.

So believe it or not, we have a system where major government payers do not cover the true cost of caring for the folks who come through hospitals’ doors each and every day. You can be the smartest person in the world, but if you have a large number of your patients who are a combination of uninsured (charity care), Medicaid and Medicare, you are likely losing money on each patient you see – hence the layoffs. The layoffs are occurring now because hospitals used to be able to rely on investment income to plug budgetary holes, but nobody is making money on investments these days.

So where do the undocumented immigrants come in? They are a portion of the uninsured that receive care from N.J. hospitals all over the state, but they are by no means the largest component. We estimate that N.J. hospitals provide approximately $200 million to $300 million in free care for this population each year (on top of the almost $1.3 billion in state-mandated charity care we provide). That’s a lot of money, but caring for undocumented immigrants is just one component of a much greater problem. The larger issue for hospitals – and for patients and communities – is the growing number of uninsured. And most of these folks are good old American citizens.