State struggles to rein in Medicaid spending

by Bruce Krasnow, Santa Fe New Mexican

The Medicaid health insurance program is the state’s newest fiscal elephant.

With the program’s expansion under the federal Affordable Care Act to 260,000 more New Mexicans — many of them low-income, working adults — spending on health care services and administration for Medicaid is expected to reach almost $6 billion in 2017, with combined money from the state and federal governments.

That is twice as much as the state spends on all its public education services, including colleges and universities, and almost as much as the $6.2 billion general fund budget for all government services signed into law last week by Gov. Susana Martinez.

But only a portion of Medicaid money comes from state coffers. The federal government contributes about 79 cents of every dollar spent on primary and specialty care, hospital services, counseling, treatment, case management, enrollment, outreach and administration.

Still, as the Medicaid rolls have swelled to 850,000 people in New Mexico — more than one-third of the state’s population — New Mexico has to spend more of its own money just to sustain the same level of services.

But state budget writers, constrained by bleak revenue projections due to sagging oil prices, have told state Human Services Secretary Brent Earnest that is no longer possible.

Unless state revenues bounce back — or there is an effort to increase taxes, which the governor opposes, officials who manage Medicaid for the state have been directed to cut spending. Under the slimmed-down state budget approved by the Legislature and the governor, the state has to reduce Medicaid spending by $86 million through June 30, 2017.

But because of the federal government match, that reduction equates to a much larger cut in services for patients and providers.

Many of those health care providers packed a meeting Friday afternoon in Santa Fe to hear an update on the Medicaid budget and get involved in the Medicaid Advisory Committee, which will make recommendations on how to proceed with changes that could close the shortfall.

The Advisory Committee, chaired by Larry Martinez of Presbyterian Medical Services, decided to form three working groups, each looking at a certain aspect of Medicaid: provider payments, benefit packages and eligibility and long-term sustainability.

The advocates also heard something surprising from Earnest, who reports directly to Gov. Martinez: Cutting that amount of spending from the program in such a short time is “an insurmountable task.”

He wants to look at a variety of remedies to bring down spending, but he will also go back to the Legislature when it convenes in January 2017 to ask for a supplemental appropriation to carry Medicaid through June 30, 2017.

The only problem with that approach, however, is that more money may not be available, a fact pointed out by David Abbey, director of the Legislative Finance Committee, the panel that oversees state budgeting.

“What if reserves aren’t available to make a supplemental in 2017?” Abbey asked Earnest at Friday’s meeting.

Lawmakers balanced the 2017 budget with one-time fund transfers of unspent money from dozens of accounts. The budget also spends down reserves to the lowest level in years, so there will be a challenge to pay for expected Medicaid growth in 2018 even without patching spending for 2017.

Under the Affordable Care Act, also known as “Obamacare,” the federal government pays 100 percent of the costs of those newly eligible for Medicaid from 2014 to 2016. Then that amount phases down to 90 percent by 2020.

The 2017 state budget calls for the Human Services Department to “implement changes in the Medicaid program to reduce projected spending.” It also instructed Earnest to reduce reimbursement rates and consider rescinding physician rate increases and reducing rates paid to hospitals.

But as Earnest told Abbey and others Friday, even if he pursued all of those options, it might be a year before any savings can be captured.

Most of what happens in Medicaid, named Centennial Care in New Mexico, must be subject to public comment and then get approval from the U.S. Centers for Medicare and Medicaid Services, the federal office that oversees the program.

Advocates on Friday also urged Earnest to look at all options before cutting reimbursements, which would affect physicians, or curtailing any services to vulnerable patients.

Cutbacks also would have an economic impact because health care has been the most robust growth sector in New Mexico for the past several years.

“You are about to make very serious decisions that will impact the health of the state and the economy of the state,” said Bill Jordan of New Mexico Voices for Children.

J.D. Bullington, a longtime New Mexico lobbyist who is representing Community Health Systems, which manages six hospitals in the state, said his clients would support a provider’s fee. New Mexico is one of the few states without the fee for hospitals or physicians that bill for Medicaid services. It can range from 1 percent to 5 percent on the dollar volume of services charged under Medicaid.

The fee is among the charges that can be matched by the federal government, so the money collected can be reinvested into health care services and used to offset possible service or reimbursement cuts.

After the meeting, Earnest said the state really needs to do it all.

“We have to deal with a lot right now, there’s a mix of things we need and, like everything else at this point, it’s a moving target.”

Copyright 2016, Santa Fe New Mexican (