Medicaid, Medicare Threaten New Mexico’s Budget

Published July 24, 2015

High health care costs in government programs and other expenses have New Mexico on its way to becoming the Greece of the United States.

One out of every 2.5 New Mexico residents is on Medicaid, compared to the national average of one out of every 4.5 Americans, according to the U.S. Census Bureau. New Mexico, similar to Greece, is becoming a textbook example of what happens when politicians hand out too much to people without requiring anything in return, the Albuquerque Journal observed in a July editorial.

New Mexico will need to come up with $1.1 billion annually to cover its base Medicaid program and the expansion by 2020, when almost half of all state residents will be on the newly expanded Medicaid program, the Journal notes. That’s with the federal government still paying 90 percent of the cost. The federal government currently pays 100 percent of the expansion cost.

Huge Enrollment Expansion

New Mexico was one of 28 states that expanded Medicaid coverage for impoverished adults under Obamacare, resulting in more than 216,000 people joining the state’s Medicaid rolls, pushing the total to nearly 800,000 enrollees.

Combined with the loss of federal funds used to pay for the expansion in 2016, the state will soon face a serious budget crunch, says an Associated Press report.

The reduction of the federal government’s share of the expansion payments from 100 percent down to 90 percent, beginning in 2017, will result in New Mexico having to pay about $120 million of the expansion’s expenses in that year. By 2020, more than 895,000 people could be on the rolls, including 257,000 who will be covered under the expansion. Based on current projections, total general fund dollars needed to cover the state’s Medicaid program by fiscal year 2020 will be $1.1 billion annually, including $268 million caused by the expansion.

“In the near term, Medicaid expansion is certainly affordable, but starting in fiscal year 2018–19, it will start to present some challenges for appropriators,” said Charles Sallee, deputy director of New Mexico’s Legislative Finance Committee.

Not Limited to the Needy

Costs of government-funded health care have continually grown in recent years because of eligibility expansions, says Linda Gorman, director of the Health Care Policy Center at the Independence Institute, a free-market think tank.

“For starters, it is no longer accurate to characterize Medicaid as a health care program for the poor,” Gorman said. “It is true the program was designed for the seriously ill who cannot help themselves, but enrollment by the seriously ill is now far outnumbered by enrollment by healthy children and able-bodied adults.”

Gorman says with spending increasing rapidly because of the surge in enrollment, governments see only two ways to contain costs: cut payments to the people who provide medical services or ration the services they provide. Both courses lead to a reduction in the quality of care for the needy.

Calls for Federal Block Grants

Under the current design, spending rises continually because state governments get more money the more people they add to the program, Gorman says.

“This is one reason why one solution to out-of-control Medicaid, aside from returning it to being a program that covers only people who are seriously ill or disabled and cannot [get health care] without public help, is to start fixing the incentives by moving to [a system that offers] federal block grants to the states,” Gorman said. “After all, there is little evidence that Medicaid expansions improve [low-income people’s] health.”

A study of Oregon’s Medicaid program found expansions “increase utilization, increasing state and federal expenditures, without noticeably improving on health,” Gorman said.         Gorman says there is considerable evidence Medicaid does a poor job of helping people who are seriously ill, and its low payments ensure poor quality of care for those enrolled in the program.

That’s a bitter pill for those forced into the program to swallow, she says.

“Remember that before Obamacare they had other choices, such as mini-med coverage through part-time jobs, relatively cheap catastrophic coverage, and student health plans in college,” Gorman said.

“It’s time for a serious reform of the program, but as a practical matter this will require an Obamacare repeal,” Gorman said. “A major problem is that Obamacare’s insurance requirements seem designed to make coverage a very poor deal for people with low incomes.”

Costs Roll Downhill

Paul Gessing, president of the Rio Grande Institute, says Medicaid is going to become an increasing burden on New Mexico’s budget in the years ahead, as the state is forced to share an ever-greater portion of the expanded program’s costs because of budget pressures at the federal level.

“Medicare is becoming an increasingly heavy burden on the federal taxpayer,” Gessing said. “Entitlements are crowding out other traditional federal priorities, [which creates pressure to move more of the cost burden to the states.]”

Gessing says it will be very difficult for New Mexico to assume that responsibility because the state has long suffered from a culture of dependency.

“Like Greece, too few New Mexicans are working to support those who are not involved in the workforce,” Gessing said.

Kenneth Artz ([email protected]) is managing editor of Health Care News.

Internet Info

Editorial Board, “NM, U.S. can and should learn from Greece crisis,” Albuquerque Journal, July 3, 2015:

Susan Montoya Bryan, “Expert: Medicaid costs to skyrocket for New Mexico,” Associated Press:

Paul J. Gessing, “The Troubling Case of New Mexico’s Disappearing Workforce,” Rio Grande Foundation, June 26, 2014: