With New Mexico still awash in cash, new trust fund would help offset Medicaid budget strain

SANTA FE — With trust fund fever spreading at the Roundhouse, New Mexico’s latest new fund could be targeted at the state’s growing Medicaid budget.

A bill filed by a bipartisan group of senators would earmark $300 million for a new health care trust fund, while additional dollars could be funneled from stalled state capital outlay projects.

Backers say the bill, Senate Bill 88, could eventually generate $100 million annually toward the state’s Medicaid spending.

That could allow for additional reimbursement rate increases for health care providers who treat Medicaid patients.

Sen. George Muñoz, D-Gallup, one of the bill’s sponsors, pointed out Medicaid has become a major expense for the state, with more than 40% of state residents enrolled in the program.

New Mexico’s Medicaid budget has more than doubled between the 2019 and 2025 fiscal years, and the state is projected to spend more than $11.6 billion on the program this year.

That figure includes both state and federal dollars, as New Mexico receives a roughly 3-to-1 federal match for each dollar it spends on Medicaid.

Muñoz said the new trust fund would be modeled after other similar funds, such as an early childhood trust fund created in 2020.

That fund has seen its value balloon from $300 million to a projected $9.8 billion at the end of the current budget year due to record-high revenue levels.

“This is not going to last forever,” Muñoz told the Journal, referring to the state’s revenue windfall. “This allows us to save money and invest money.”

With revenue levels for the coming year projected to exceed current total spending levels by nearly $900 million, lawmakers have proposed the creation of at least three new trust funds during this year’s 60-day session — targeted at behavioral health, health care and natural disasters.

But the proposed health care fund would be unique in part due to how it would be funded.

In addition to the $300 million start-up appropriation, the bill also calls for money to be diverted to the new fund from three other sources until the total value of the fund hits $2 billion.

Those sources include any unspent funds from the state’s annual budget bill, interest on investments made by the State Treasurer’s Office and unspent capital outlay dollars.

At the end of the 2024 budget year, there was roughly $5.8 billion in outstanding capital outlay funding spread across about 5,300 projects, according to Legislative Finance Committee data.

Under the state’s system, which has come under scrutiny in recent years, capital outlay funds revert, or expire, after five years unless the money is reauthorized by the Legislature.

Fred Nathan, the executive director of Think New Mexico, a Santa Fe-based think tank behind a package of proposals dealing with a statewide health care provider shortage, said setting aside state dollars for Medicaid is a prudent long-term investment.

He also said the creation of a new trust fund could allow the state to continue its efforts to recruit more doctors and nurses, as New Mexico has had an average shortage of 5,000 health care workers over the past several years, according to legislative data.

“Increasing Medicaid reimbursement rates will go a long way toward recruiting and retaining more of the doctors that New Mexico urgently needs,” Nathan said.

The other sponsors of the health care trust fund bill include Senate Minority Leader William Sharer, R-Farmington, and Senate Minority Whip Pat Woods, R-Broadview.