A federal court ruling last week effectively dismantled New Jersey's system of paying health-care costs, sending hospitals across the state into fiscal turmoil and forcing the postponement of at least two bond issues.

Judge Alfred M. Wolin of U.S. District Court in Newark last Wednesday invalidated the state's practice of tacking huge surcharges onto every hospital bill. The state uses a 19.1% surcharge to pay-health care costs for 823,000 uninsured residents and similar cost-shifting mechanisms to pay for other underfunded health programs.

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