A top hospital executive on Wednesday painted a chilling scenario for the health care landscape in New Mexico, predicting increasing strains on the system.
Steve McKernan, CEO of University of New Mexico Hospital, pointed to changes in costs, an aging generation that will need more medical care and a “constrained” provider network that can barely keep up with the newly insured under Medicaid expansion and the Affordable Care Act. He also cited the rich benefits and what he called low government reimbursements for Medicaid, the government-funded insurance program for low-income people.
McKernan also said the way Medicaid is structured could dissuade some low-skilled recipients from moving to full-time work with employer-paid benefits. That’s because moving from Medicaid to employer benefits could cost workers more, sometimes wiping out any income increase and putting them in a worse financial situation, said McKernan, a certified public accountant who has been running the UNM hospital system for 20 years.
“I know it sounds like doom and gloom, but it’s a tough market,” McKernan said during an Economic Forum meeting.
The challenges faced by UNM are not unique to the institution; they affect the other hospital systems in New Mexico, as well, he said.
Government-funded programs are the overwhelming driver in the health care sector, he said, and Medicaid rolls are unlikely to drop anytime soon given the current rules on eligibility and the program’s generous coverage.
“Almost no one could buy as good a health coverage as Medicaid,” said McKernan, who said the program insures about 45 percent of New Mexico’s 2 million residents.
With Medicare added in, the federal government is picking up the lion’s share of the health insurance tab for 60 percent of the state’s population. Under Obamacare, 240,000 additional New Mexicans went on the Medicaid rolls based on Gov. Susana Martinez’s decision to opt in, despite roughly the same number of doctors and hospital beds to treat them.
Many of the new Medicaid recipients have not received much previous care so they are on average costing twice as much as other patients, he said. And the Medicaid payments of $6 billion to New Mexico providers have historically been on average below the actual cost of care, resulting in payment shortfalls, said McKernan.
As Medicaid continues to cover more state residents, New Mexico will soon start assuming an even larger share of the health care bill. The federal government now pays the state 100 percent of coverage for the new Medicaid patients, but that amount will start gradually tapering off to 90 percent by calendar year 2020.
An already strained state budget will have to find the money to fund the expansion of the program, which is projected to be an additional $41 million in 2017. The Legislature recently ended a special session during which it approved an estimated $417.5 million in savings toward a projected state budget deficit of $458 million for the fiscal year that started in July.
In addition, the cost of covering new Medicare enrollees will continue to skyrocket.
“Health care consumption triples for patients over 65,” said McKernan.
UNM, the state’s only teaching hospital, is looking to train more doctors, nurses, occupational therapists and medical technicians to keep up with demand.
In terms of the economic impact, UNM rakes in about $160 million each year for biomedical research.
“This is externally-produced funding coming into the state,” McKernan said of a revenue stream that represents nearly 10 percent of the institution’s $1 billion annual budget.
McKernan said it is “extraordinarily important,” that voters approve continuation of an eight-year property tax on the Bernalillo County election ballot, which will generate $95 million in property taxes annually and go to support hospital operations and maintenance.
A vote in favor of the 6.4-mill tax would not increase current property tax levies. The owner of a home valued at $195,000, for example, would continue to pay $416 a year for the hospital.