State officials say rural health fund could provide $175M annually for New Mexico

SANTA FE — While top New Mexico health officials have raised the alarm about the impact of a federal budget bill signed last month by President Donald Trump, the state plans to apply for money from a rural health fund added to the bill just before its approval.

A state Health Care Authority preliminary estimate projects New Mexico could receive $175 million — or more — annually under the plan, which could at least partially offset a reduction in funding in other areas.

A top legislative staffer said last week the rural health fund could be a “windfall” for New Mexico, which has long struggled with recruiting and retaining health care providers in rural parts of the state.

Under the $50 billion rural health fund, a total of $10 billion will be distributed annually over five years. Half of that money would be split evenly among approved states, with the other half divvied up based on a formula that’s expected to include rural population and other factors.

Given that backdrop, a Health Care Authority spokeswoman said this week the state agency projects it could receive at least $175 million annually over the five-year period if the state’s application is approved.

A deadline for applications has not yet been set, but HCA spokeswoman Marina Piña said a federal agency is requiring all applications to be approved or denied by the end of this year.

New Mexico’s two U.S. senators — Martin Heinrich and Ben Ray Luján — joined other Senate Democrats this week in sending a letter to Mehmet Oz, the administrator for the U.S. Centers for Medicare and Medicaid Services, seeking more information about how the $50 billion rural health fund will be spent.

The letter criticized the fund’s creation as a way to buy the votes of Senate Republicans and provide them with political cover.

“The rural health slush fund appears to be nothing more than a political parachute to pay off members of Congress for their unpopular votes,” said the letter, which was signed by 16 senators.

Gov. Michelle Lujan Grisham’s administration has warned that six to eight rural hospitals in New Mexico could close over the next several years due to the federal bill’s Medicaid changes.

State health officials have also predicted nearly 90,000 state residents could lose health care coverage, while more than 250,000 residents could face new co-pays and increased administrative hurdles to remain enrolled.

New Mexico has the highest percentage of Medicaid enrollees in the country, with nearly 40% of the state’s population getting their health care from the joint federal-state program.

A recently created legislative interim committee has been studying the state-level impacts of the federal budget bill, and the governor’s chief legal counsel told lawmakers this week that bills dealing with Medicaid and food assistance are expected to be on the agenda of a special session.

Lujan Grisham has not yet set a specific date for the special session, which is likely to also feature debate on other issues.

But some lawmakers have pointed out many of the federal bill’s provisions do not take effect until 2027, including a new funding match requirement for the Supplemental Nutrition Assistance Program, also known as food stamps, that some states could face.

Meanwhile, states that receive money from the new rural health fund will be able to use it to pay for health care services, expand their rural workforce and promote care interventions, according to a Kaiser Family Fund analysis.

But the nonprofit group’s analysis also said the federal law does not require transparency about how funds are distributed and why certain state applications are ultimately approved or denied.