Amid federal uncertainty, bill creating new state Medicaid trust fund passes Senate

SANTA FE — With New Mexico staring at the possibility of a dip in federal funds, state lawmakers are advancing a bill creating a new trust fund to help pay for Medicaid programs in future years.

The Senate voted 37-0 on Wednesday to approve the bill, Senate Bill 88, which now advances to the House of Representatives with just over two weeks left in the 60-day legislative session.

In all, slightly more than 840,000 New Mexico residents were enrolled in Medicaid as of December — about 40% of the state’s population.

Given those figures, Senate Majority Leader Peter Wirth, D-Santa Fe, described Medicaid as a “game-changer” for New Mexico.

“I think this is a very smart, proactive move to prepare” for possible federal funding reductions, Wirth said during Wednesday’s debate.

He also credited former Gov. Susana Martinez for opting in to Medicaid expansion in 2013, a decision that paved the way for more New Mexicans to receive coverage under the joint federal-state health care program.

A new state Medicaid trust fund would be the latest in a string of similar funds created by New Mexico lawmakers over the last several years amid an oil-fueled state revenue windfall. Other funds are focused on early childhood and conservation programs.

Money for the new fund would come from investment earnings from the State Treasurer’s Office — which are estimated to total about $280 million in the coming budget year.

Eventually, the fund would be expected to grow to about $2 billion, allowing annual 5% distributions — of about $100 million — to help pay for Medicaid programs, said Senate GOP floor leader William Sharer of Farmington.

“I think this is a very prudent use of our resources,” Sharer said.

But he disagreed with Democrats’ warnings about Republican-led budget cuts in Washington, D.C., saying, “I think they’re looking for fraud, waste and abuse, not to harm us.”

A concurrent budget resolution recently approved by the U.S. House calls for $880 billion in savings from federal health programs.

While it’s not clear if those savings might mean a reduction in Medicaid spending levels or the elimination of certain waiver programs, Gov. Michelle Lujan Grisham warned last week that federal budget cuts could prompt her to call legislators back to Santa Fe later this year for a special session.

New Mexico currently receives the highest federal matching rate in the nation for Medicaid spending. Federal cuts of 12%-13% would require New Mexico lawmakers to come up with more than $1.1 billion in state dollars to avoid a disruption in health care coverage, according to legislative data presented to lawmakers this week.

The bill approved Wednesday includes contingency language that would allow money in the trust fund to be used to maintain Medicaid services in the case of federal funding cuts. That authority would be in place for a three-year period, starting in July.

“If there are cuts to Medicaid, we need to have the resources to take care of that,” said Sen. Pete Campos, D-Las Vegas, during Wednesday’s debate.

New Mexico’s Medicaid spending has surged in recent years, jumping from about $3.7 billion in the 2011 budget year to roughly $10.4 billion this year, according to legislative data.

Most of that money is federal dollars, though state Medicaid spending currently represents the second-largest portion of the state budget — behind only public schools.

Meanwhile, the idea of a new Medicaid trust fund was pushed by advocates even before the specter of federal funding cuts emerged.

Think New Mexico, a Santa Fe-based think tank, has urged lawmakers since last fall to enact such a fund, saying it could help the state increase reimbursement rates for health care providers who treat patients insured under Medicaid.