The $777 Million Medicaid Deficit

The Foundation has repeatedly exposed the specious reasoning behind the left’s campaign to make tax cuts the culprit for New Mexico’s budget woes. Neither cutting the income tax nor reducing the corporate tax caused the big deficits we face today. This is a spending-driven fiscal crisis, and if the state’s projections on Medicaid expansion are to be believed, there will be red ink for many years to come.

In February, Medicaid-expansion apologist Lee Reynis, a UNM professor, cited data from the Human Services Department in a presentation on the fiscal impacts of Medicaid expansion. In fiscal 2017, which began July 1st, the federal government stopped covering 100 percent of expansion expenditures. Thus, the cost to New Mexico taxpayers will be $44.5 million. And as the chart below indicates, the gaps only increase.


Add it all up, and in the current and next four fiscal years, New Mexico-derived revenue will have to rise by $777.9 million to pay for Medicaid expansion. Again, that’s just the gap for the broadening of the program. It doesn’t include the shortfalls that are likely to result from growing “demand” by those who meet the pre-expansion eligibility criteria. Neither does it address the “woodwork effect,” whereby “people who could have been covered by Medicaid before, but for some reason had not signed up for it, and may not have even been aware they could do so,” join the rolls.

Barring a massive injection of tax revenue — unlikely in the short term, given the state’s moribund economy and misguided growth policies — New Mexico’s books will need to be balanced with smart cuts. The Foundation explored many promising expenditure reductions in a recent paper. Another idea worth examining is rolling back Medicaid expansion. It’s been a fiscal nightmare and has not served as a “stimulus.” Governor Martinez’s worst policy decision is overdue for some serious scrutiny — and probably, a complete reversal.