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NM faces $417M Medicaid shortfall

Copyright © 2016 Albuquerque Journal

SANTA FE – New Mexico’s budget crunch has left the state facing a $417 million Medicaid shortfall over the next 16 months, a daunting figure that could mean reduced reimbursement rates for providers and hospitals and, down the road, new mandatory payments for some patients.

The belt-tightening measures, some of which will probably take effect in July, come at a time when the state’s Medicaid enrollment is skyrocketing – roughly 850,000 New Mexicans are on the state’s rolls, and that number is expected to rise.

State funding is not expected to keep up, and without that match, New Mexico loses hundreds of millions of federal dollars.

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At a Friday meeting of a state Medicaid advisory committee, Human Services Secretary Brent Earnest said his agency will seek to avoid affecting patients, if possible.

“We want, frankly, to protect benefits and eligibility as much as we can,” Earnest told a crowd of about 100 health care executives, advocates and others.

But some health care providers warned that cuts to their reimbursement rates could result in clinics turning away Medicaid patients and physicians leaving the state.

“It would be helpful, if you want to see more providers in the state, not to reduce reimbursement rates,” said Nancy Resnick, an Albuquerque doctor.

The state’s Medicaid shortfall is due to a combination of factors: Skyrocketing enrollment, a pending decrease in the federal matching rate and soaring drug costs.

During this year’s 30-day legislative session, lawmakers approved a $6.2 billion budget for the fiscal year starting in July that includes $928.5 million in state funds for Medicaid in the coming year – a $20.8 million increase over this year’s levels.

However, the Human Services Department had requested an $85.2 million increase to keep up with enrollment growth and the looming decrease in the federal matching rate for states like New Mexico that opted to expand their Medicaid programs.

The agency had also asked for $41 million in state funding to help get through the rest of the current year, but less than half that amount was appropriated as legislators grappled with a decline in state revenue caused by plummeting oil and gas prices.

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As a result, HSD came up $86 million short of what it projected it needed in state funds for the next 16 months. The federal government pays New Mexico from $3 to $4 for every dollar it spends – so the total shortfall balloons to $417 million when the missing federal matching funds are factored in.

Although the budget bill includes language directing HSD to cut provider rates and examine other cost-saving measures, Earnest said that making up the entire shortfall by cutting costs is impossible and that the agency will ask lawmakers for an emergency appropriation during the 2017 legislative session.

But a number of cost-cutting options are on the table – including the provider rate cuts and new co-payments for some services – and will be studied in the coming weeks by subcommittees made up of state officials, health care executives and advocates.

“Given the position of the budget, we’re going to have to consider a lot of things,” Earnest said Friday.

Cost cutting

Jim Hinton, CEO and president of Presbyterian Healthcare Services, said Friday that his company will have to reduce its costs by about $50 million due to the state’s Medicaid shortfall.

That could mean not filling vacant jobs and not recruiting as many physicians, he said.

Presbyterian operates a for-profit Medicaid managed care plan for 208,000 New Mexicans, about one-fourth of the state’s beneficiaries.

“It’s just simply not possible to take that much money out of Medicaid and not directly affect patients, members and health care providers,” Hinton told the Journal.

Mary Eden, vice president for government programs at Presbyterian Health Plan, a subsidiary of Presbyterian Healthcare Services, said none of three basic options for Medicaid cost savings – cutting provider rates, eligibility or benefits – are easy to swallow.

“None of those are really popular, but that’s kind of what we’re faced with,” Eden said Friday.

However, several individuals representing health care advocacy groups said during Friday’s hearing in Santa Fe that the Legislature and the Martinez administration should look for ways to increase Medicaid spending instead of relying on cuts.

Despite the state’s worsening budgetary situation, Martinez has stuck to the “no tax increase” stance she’s held since taking office in 2011.

Abuko Estrada, a staff attorney for the New Mexico Center on Law and Poverty, called the Medicaid shortfall a “deliberate” choice by lawmakers and the governor.

Obamacare

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. For 2016, that equates to roughly $16,242 a year for a single adult, and $33,465 for a family of four.

Gov. 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 gradually be scaled back to 90 percent by 2020. The federal government also pays for about 70 percent of general, non-expansion Medicaid costs in New Mexico.

Human Services Department officials have said Medicaid enrollment has increased much more rapidly than the agency expected.

By July 2017, the department now projects, more than 925,000 New Mexicans – nearly half the state’s population – will be enrolled in Medicaid. That’s up from about 560,000 New Mexicans on Medicaid rolls at the start of 2013.

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