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Medicaid Expansion’s Major Impact in New Mexico

October 2, 2017

New Mexico is one of the 32 states that took advantage of the Medicaid expansion provision in the Patient Protection and Affordable Care Act of 2010 (ACA), which has brought New Mexico’s Medicaid rolls up to more than 900,000 New Mexicans, making up more than 43% of the state’s residents. Before the Medicaid expansion took effect, New Mexico’s Medicaid program only covered people who were disabled, blind, or aged; and pregnant women, parents, and children up to certain income levels. Low-income adults without children were not eligible for Medicaid, no matter how little money they made.

The Medicaid expansion has opened Medicaid enrollment up to all New Mexicans who make up to 138% of poverty level, and now more than 900,000 people have health insurance through Medicaid. The Medicaid expansion and the other provisions of the ACA have lowered New Mexico’s uninsured rate from 18% in 2013 to 9% in 2016.

The increase in New Mexicans with health insurance has also boosted the state’s economy through additional jobs added in the healthcare sector, and this additional hiring has likely contributed to keeping the state out of recession. According to the Santa Fe New Mexican, Barbara Webber of Health Action New Mexico, a consumer advocacy organization, said that rolling back the Medicaid expansion at the federal level would be “devastating” for New Mexico. She told the New Mexican that the job losses connected with so many people losing health insurance would “trigger a depression for New Mexico.”

Graham-Cassidy Bill Would Have Gutted Medicaid in New Mexico

The Graham-Cassidy bill, the healthcare legislation in September that didn’t have the votes to pass “would have ended the Medicaid Expansion that provides healthcare coverage to more than 255,000 low-income adult New Mexicans, and resulted in New Mexico losing $9 billion federal dollars by the year 2027, according to the nonpartisan research group Avalere. The bill capped funding for the entire Medicaid program and eliminated tax credits that help people buy insurance. States would have been allowed to let insurance plans stop covering essential health benefits and to charge more to consumers with pre-existing conditions.”

“’New Mexico would have been forced to pay billions more in healthcare costs or slash Medicaid coverage for more than 230,000 people and cut services for the most vulnerable populations – including children, seniors, and people with disabilities,’ said [Sireesha] Manne (an attorney with the New Mexico Center on Law and Poverty).”

Earlier Republican Proposals Would Have Pulled the Expansion too

The cuts to Medicaid in the summer’s failed American Health Care Act bill would have caused the loss of about 31,792 jobs and $1.6 billion in salaries by 2026 in New Mexico alone. According to a report from the Robert Wood Johnson Center for Health Policy at the University of New Mexico (UNM), “the healthcare sector will suffer the greatest losses, but the industries that supply healthcare providers with goods and services and the many businesses patronized by healthcare workers and their families will also be impacted.”

Medicaid Expansion Provides Crucial State Funds

There would also be impacts on state revenues. Again, the UNM report explains that “federal Medicaid funding generates substantial tax revenue for the New Mexico general fund. The most significant direct source of Medicaid-related tax revenue is the 4.003 percent insurance premium tax that New Mexico levies on managed care organizations. Other Medicaid-related tax revenue comes from gross receipts taxes on some healthcare providers. In addition, by stimulating job creation, federal Medicaid funding contributes to state personal income tax, gross receipts, and selective excise tax revenue. State tax revenue foregone as a result of the Medicaid cuts will total roughly $31 million in 2020, $145 million in 2026, and cost the state over $759 million over the 7-year period.”

The UNM report says that the total loss in federal funding for Medicaid in New Mexico if the ACA were repealed without a replacement, or under a replacement that revokes the Medicaid Expansion “would cost New Mexico an additional $3 billion by the year 2026 – an average of $427 million annually – to maintain Medicaid for current enrollees.” If the state were to absorb the cost with state funds, current coverage levels could be maintained. Those added to the Medicaid rolls through the ACA’s expansion would be able to keep their insurance, and healthcare providers would not be stuck with a major increase in uncompensated care. The additional cost would have to be borne ultimately by New Mexicans—either state taxes would have to increase, other state funds would have to be diverted from other purposes, or both. The largest line item in the state’s budget is public education—elementary, middle, high schools, and the state’s colleges and universities, which make up 59% of the state budget. Medicaid is the #2 expenditure, at 15% of the budget.

New Mexico Struggles to Maintain Expanded Medicaid With 95% Federal Contribution

It’s worth noting that as a relatively poor state, New Mexico is struggling to even maintain the Medicaid expansion. In the first few years after it went into effect in 2013, the federal government paid for the expansion 100%, footing all the costs for adding all the additional people to Medicaid rolls. In 2017, the federal contribution dropped to 95% and will phase down to 90% in 2020. The federal contribution level will stay at 90% after that under the ACA.

It’s unlikely that the state would absorb the cost burden of the federal government’s added cost sharing under the ACA if the Medicaid expansion were revoked. In 2017, the federal government is paying for 95% of the Medicaid expansion costs, and New Mexico is struggling to come up with the remaining 5% share. So it doesn’t seem likely that New Mexico would be able maintain Medicaid at the ACA’s expansion levels in the event that federal funds were cut off. According to the UNM report, it’s much more likely that the state would choose to drop coverage for adults added to Medicare rolls by the expansion. More than 250,000 low-income adults could lose their health insurance. Those who remain covered, like adults who are blind, disabled, or elderly, may face limits on the care they receive, like lifetime maximums or per capita caps on their healthcare costs under Medicaid.

The Medicaid expansion has cut New Mexico’s uninsured rate in half and bolstered the economy through added jobs and tax revenues. Any new healthcare law that pulls back the Medicaid expansion would be disastrous for New Mexico and New Mexicans.