The hospital funding crisis arose due to changes in the way Medicaid works in New Mexico. In the past, most hospitals had access to a special Medicaid fund that helped them with the high costs of treating uninsured patients. Each county paid into the special fund set up by the state which would then be matched 3-to-1 in federal dollars.
Because the matching funds were a good deal, many hospitals even helped counties pay into the fund. The fund then paid about $250 million per year to the hospitals.
However, the Medicaid fund is ending and must be replaced.
Instead, New Mexico is seeking to create a new safety net pool to help vulnerable hospitals with uncompensated care costs. It will offer less funding than before – approximately $70 million per year – and it is only for smaller hospitals.
The safety net pool recognizes that hospitals will have fewer uninsured patients under Obamacare, but that many people will still be left out of coverage. There are significant enrollment problems with the federal Exchange and insurance is still not affordable for most low wage workers and families who are just above the income threshold for Medicaid.
This is where the disagreements began. The hospitals claimed that the safety net pool underestimated their costs for uninsured patients and pointed out that hospitals are also reimbursed at lower rates for patients with Medicaid coverage than those with private insurance.
In response, the Human Services Department proposed to increase the Medicaid rates to raise another $125 million per year. However, rather than budget for this expense, the department wanted the counties to bear the lion’s share of the cost, which amounted to more than the counties had paid in the past.
This would have forced counties to raise new taxes or slash their indigent care programs. These programs provide important non-hospital medical services for uninsured and low-income patients.
Additionally, the proposal included no guarantee that county tax money would be fairly distributed for use in the counties. In fact, counties would lose all control over how their funds were used.
Fortunately, the Legislature arrived at a solution that shares responsibility among all the parties. The counties agreed to come up with enough funding to support rural hospitals, but they would keep enough funding to maintain local indigent care programs.
The Human Services Department must come up with further funding to increase Medicaid reimbursement rates for hospitals – a program cost that the state is responsible for. This is doable, amounting to about $9 million – less than 1 percent of the Department’s $1 billion budget for Medicaid.
The legislation also strengthens protections for indigent patients. The legislation requires hospitals to accept every indigent patient, have financial assistance policies and not send indigent people to collections.
This is important because while hospitals will receive over $150 million in public funds to provide indigent care, indigent patients are often sent to collections for unpaid hospital bills.
Some hospitals are trying to avoid these responsibilities and have asked the governor to line item veto the provisions. However, the state Constitution prohibits line item vetoes of bills like this one.
Like all compromises, nobody is entirely happy with the final legislation. Yet in a showing of bipartisan unity, most legislators voted for it. It is a temporary fix that will sunset in three years, giving time to understand the impact of the changes to the health care system in New Mexico and to find a better solution if needed.
For now, it represents a balanced approach that saves our hospitals while protecting indigent patients. The governor should make it law.