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.

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5 Replies to “The $777 Million Medicaid Deficit”

  1. Can a state’s Medicaid expansion even been reversed after made? I have no idea whether the legal authority exists to do so. If the decision were reversed, would NM have to reimburse the feds for millions already paid at the 100% rate?

    1. Thanks for the question, Charles. According to the Foundation for Government Accountability’s Jonathan Ingram, the best Medicaid expert I know, there are two options: “File a state plan amendment to eliminate Medicaid expansion eligibility, effective on a specific date, and, “File a state plan amendment to eliminate Medicaid expansion eligibility, effective on a specific date, but also negotiate … for a temporary waiver to continue covering existing enrollees for some period of time without adding new enrollees.”

      So technically, it can be done. But the politics? Well, that’s another thing.

      Not sure about the reimbursement issue. I’ll see what I can dig up.

  2. On August 1, 2016, the Dallas Morning News published an Op-Ed titled, “Texas MUST expand Medicaid.” That was the same day that I started as the Director of the Center for Health Care Policy at the Texas Public Policy Foundation. I remain a Board member at RGF as well as a Director on the New Mexico Health Insurance Exchange.
    I had to respond to the DMN story and so, the article below was published August 17 in the same venue: DMN.

    “Texas must NOT expand Medicaid
    By Dr. Deane Waldman, MD MBA

    On August 1, 2016, the Dallas Morning News editorial headline read, “Here’s why Texas must expand Medicaid.” The author clearly intended his or her exhortation to benefit poor patients, particularly at Parkland Hospital and other Texas medical facilities by increasing federal dollars into our state.

    However, as far back as the 12th century, Saint Bernard of Clairvaux warned that, “Hell is full of good intentions or desires.” Expanding Medicaid may be well intended but it will lead to a fiery end for the people of Texas.

    We need look no further than our neighboring state, New Mexico, to see what happens when a state expands Medicaid under the Affordable Care Act. As originally signed into law on March 23, 2010, the ACA required all states to expand their Medicaid programs to cover individuals with incomes up to 138 percent of the federal poverty level. In NFIB v. Sebelius (2012), the U.S. Supreme Court struck down that provision of the law saying that Medicaid expansion must be voluntary and could not be federally mandated.

    Nineteen states including the Lone Star State chose not to expand their Medicaid eligibility standards. Thirty-one states and the District of Columbia did expand, including New Mexico.

    There, a Legislative Finance Committee analysis suggested that expansion could bring in as much as 3.5 billion additional federal dollars into a state where the total budget was only $5.6 billion. Both the Legislature and a Republican governor could not resist all that “free” cash. Medicaid expansion was passed, signed into state law, and became effective on January 1, 2014 along with the rest of the ACA.

    The New Mexico Legislative Finance Committee had also projected that enrollment in their state Medicaid program could increase by as much as 212,000 persons over six years, from 2014 to 2020. In fact, within two years, more than 300,000 were added to the rolls making 41 percent of the entire state population of New Mexico eligible for “free” Medicaid insurance. (In Texas, 17.9 percent of the population is enrolled in Medicaid.)

    New Mexico is now facing a Medicaid budget shortfall of $416 million for 2017, despite the influx of federal dollars. With no other alternative, the state had to cut the already low Medicaid reimbursement schedule for doctors even further. Thus, there will be fewer providers to care for an even greater number of Medicaid patients. As Robert Moffitt of Heritage Foundation warned Congress in 2009, “You can’t get more of something by paying less for it.”

    At the same time as the ACA increases the number of insured Americans, Obamacare also reduced the number of providers. In 2014, the United States had 385 licensed physicians per 100,000 individuals. Two years into implementation of Obamacare, the national ratio had dropped from 385 to 280. In Texas, even without Medicaid expansion, our provider shortage worsened: between 2014 and 2016, the ratio of doctors-to-patients fell from 269 doctors per 100,000 people to 208.

    A recent web-based survey done by Nielsen Holdings, Inc. found that over sixty percent of 1000 Texans surveyed said they favored Medicaid expansion here. Interestingly, most admitted that they knew nothing about what such expansion meant or would do. They thought that healthcare was in such a sorry state, any change had to be an improvement. Regrettably, that is not so. Medicaid expansion in Texas would be change for the worse, not for the better.

    When you look carefully at the evidence-of-effect, it is clear that expanding a Medicaid program actually REDUCES the availability of medical care to poor patients while at the same time raising costs. That is precisely what Texas does not need.

    Dr. Deane Waldman, MD MBA, is the Director of the Center for Health Care Policy at the Texas Public Policy Foundation.”

  3. From what I have seen, newly covered people under ACA, including Medicaid, runs about 10 million. But those insured who lost insurance, those with individual policies with reduced benefits at (much) higher cost, and those with insurance supplements that no longer pay or pay very reduced benefits, is up by over 30 million. Many of those who lost are those who earn little above the 138% of poverty rate.
    Sounds like the third step back from the 1-2 forward.
    Any strong evidence of this impression?

  4. If a true reading of our Constitution is applied, Medicaid is unConstitutional. The Federal Government should not be allowed to give welfare to people. Welfare clause and all, it is not a function of the Feds. This whole discussion is mute. Now then, there is unfortunately reality.

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