Medicaid Set to Overwhelm New Mexico’s Budget

Published June 23, 2015

New Mexico is one of 28 states that expanded Medicaid coverage for impoverished adults as part of the implementation of Obamacare, resulting in more than 216,000 people joining the state’s Medicaid roster and pushing the total to nearly 800,000 enrollees.

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

The federal government currently pays 100 percent of the cost of the expansion, but that percentage will decrease beginning in 2017 to 90 percent, resulting in New Mexico having to pay about $120 million of the expansion’s expenses. By 2020, more than 895,000 people could be on the rolls, including 257,000 who will be covered by 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, including $268 million caused by the expansion.

David Abbey, director of the state’s Legislative Finance Committee, says other parts of the budget are going to have to shrink to accommodate the rapidly expanding Medicaid spending.

Behind the Eight Ball

Paul J. Gessing, president of the Rio Grande Foundation, a think tank based in Albuquerque, New Mexico, says New Mexico’s budget is always in doubt because it is highly reliant on oil and gas tax revenues and the state’s economy is not very diversified.

“It’s been described as a two-legged stool with one leg being the federal government and the other being oil and gas,” Gessing said.

“We have not recovered like many other states have from the 2008 economic recession,” Gessing said. “Another thing is New Mexico’s population declined during that period. Population loss is unheard of in a Western state.”

The state’s chronically bad economy makes it difficult to imagine how the state can find a way to pay for the huge expenses of the Medicaid expansion, Gessing says.

“Because of the politics in the state, Republican Gov. Susana Martinez faced a very difficult decision to expand the program,” Gessing said. “I’m sure she felt like she had no choice and she had to do it, but it’s a bit ironic a government program designed to alleviate poverty is going to spread it widely.”

Tax Burden Will Grow

Michael Cannon, director of health policy studies at the Cato Institute, says New Mexico’s officials should have listened to critics who warned the state’s motto, “It grows as it goes,” applies to the tax burden Obamacare’s Medicaid expansion is imposing on New Mexicans.

“That tax burden will grow further still, because both Congress and President Obama have proposed to renege on the federal government’s commitment to pay 90 percent of the cost,” Cannon said.

Meanwhile, the expansion creates a huge incentive for officials to protect able-bodied, childless adults at the expense of pregnant women and children, Cannon says.

Medicaid delivers only 40 cents of benefits to enrollees for every dollar spent, and it appears to have little if any impact on enrollees’ health, Cannon says. Under Medicaid expansion, the federal government pays 90 percent of the cost and the state pays 10 percent. New Mexico’s regular Medicaid match is about 70 percent, so the federal government pays two-thirds of the cost, and the state pays one-third.

With New Mexico facing a budget gap, its officials want to reduce its Medicaid outlays by one dollar. The state can then cut Medicaid services for pregnant women and children by three dollars, which saves the state one dollar while inflicting just three dollars of political pain. Or it can cut services to able-bodied, childless adults by 10 dollars, inflicting $10 of political pain, Cannon says.

“You can see the incentive this creates,” Cannon said. “States get much more bang for their buck by cutting services for pregnant women and children.

“New Mexico needs to opt out of the Medicaid expansion and enact real reforms that bring quality health care within the reach of more low-income residents,” Cannon said.

Matthew Glans ([email protected]) is a senior policy analyst at The Heartland Institute.

Internet Info:

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