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State Medicaid costs called a ‘runaway train’

SANTA FE – Top-ranking Human Services Department officials told legislators Tuesday they will need nearly $1 billion next year for the state’s share of rapidly rising Medicaid costs – described by one key lawmaker as a “runaway train.”

Members of a key legislative panel reacted with alarm to the request for an additional $85.2 million, or 8.5 percent, to keep up with skyrocketing enrollment and a looming decrease in the federal matching rate for states like New Mexico that opted to expand their Medicaid programs.

Several legislators also point out that plummeting oil prices have made it unclear how much money they will have to spend in the coming year.

“This is not a pretty picture, but it’s something we’re going to have to deal with,” said Rep. Larry Larrañaga, R-Albuquerque, during Tuesday’s meeting of the Legislative Finance Committee.

Human Services Secretary Brent Earnest said Medicaid enrollment has increased much more rapidly than the agency expected. By June 2017, the department now projects there will be more than 919,000 New Mexicans enrolled in Medicaid – a figure that would be more than one-third of the state’s total population. That’s up from about 560,000 New Mexicans on Medicaid rolls at the start of 2013.

Medicaid is a joint federal-state health care program that has historically provided health care coverage primarily for low-income children, pregnant women, disabled adults and the elderly.

Under the federal Affordable Care Act, or Obamacare, states were able to decide whether to expand Medicaid benefits to adults earning 138 percent of the federal poverty level, or roughly $15,856 a year for a single adult.

Gov. Susana Martinez decided in 2013 to accept Medicaid expansion, saying the move would help New Mexico families and would not jeopardize the state’s long-term budget outlook. The federal government initially funded 100 percent of the expansion costs for participating states, but that will be decreased to 95 percent starting in 2017, and to 90 percent by 2020. The federal government also pays for about 70 percent of general, non-expansion Medicaid costs in New Mexico.

Ernest told legislators the agency has adopted several cost-cutting measures in an attempt to slow down Medicaid spending growth.

While some lawmakers said Tuesday the Medicaid expansion has created new health care jobs, others expressed concern about its budgetary impact not just for next year, but for the future.

“I think having more than 1 out of 3 New Mexicans having their health care being covered by Medicaid is going to be a budget-buster,” said Rep. Jason Harper, R-Rio Rancho. “I see this as not sustainable – we need to be very careful.”

In addition, Rep. Larrañaga described Medicaid spending as a “runaway train.”

After several largely flat spending years, Medicaid spending for the current budget year that started in July is $891.7 million – or about 14 percent of the state’s $6.2 billion budget. Under the proposal for the coming fiscal year, that would increase to $976.9 billion.

A separate LFC report released Tuesday said as much as $103 million could be saved by replacing state funding with Medicaid dollars, or other similar changes, in 16 different programs across state government. One program identified was inmate health care in New Mexico prisons.

Meanwhile, executive and legislative branch economists estimated in August that lawmakers could have $293 million in “new” money to spend in the coming budget year, but plummeting oil prices could undermine those projections. New money is the difference between projected revenue for next year and current state spending levels.

The revenue estimates are expected to be revised before lawmakers convene in January for a 30-day legislative session. Passing the annual budget bill will be one of the legislators’ top tasks during the session.

Sen. John Arthur Smith, D-Deming, the LFC’s chairman, said uncertainty over the state’s revenue estimates is as high as he can recall in his nearly 26-year legislative career. He also expressed concern about the state’s increasing Medicaid bill.

“My experience is you can’t put the brakes on health care (costs),” Smith told reporters after Tuesday’s hearing.

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