by Nick Estes
October 4, 2012

Bill Jordan and I testified recently in Las Cruces about the health and economic benefits to the state from fully implementing the Affordable Care Act (ACA). The audience was the Legislative Revenue Stabilization and Tax Policy Committee. Bill explained that $8 to $11 billion of new federal funds for health care will enter the state economy as a result of the ACA if the state chooses to insure all lower income adults through Medicaid. The expense will be completely covered by the federal government from 2014 through 2016, and then phase down to 90 percent in 2020, where it will remain indefinitely. The state’s Human Services Department (HSD) has estimated that the state costs over the first seven years will be between $320 and $500 million.

Bill pointed out a study by economist Kelly O’Donnell, PhD, commissioned by NM Voices, that shows the state will take in twice that amount–between $693 and $953 million–in new state revenues during those first seven years. This revenue will come in thanks to existing state tax laws.

Most of the federal ACA funds–including both Medicaid and the tax subsidies to help middle-income families buy health insurance on the new Exchange–will be paid initially to insurance carriers and therefore will be subject to the state’s Insurance Premium Tax. Portions of the spending will also be subject to the gross receipts tax (which also generates revenues for local governments, which won’t have to spend any money on the ACA).

Bill explained that there is no significant up-front cost to the state. The state costs will ramp up very gradually starting in 2017 and will always be less than the state tax revenue generated by the much larger federal spending, as show below.

I reminded the Committee that, for uninsured New Mexicans, this is literally a matter of life and death. It is estimated that more than 300 New Mexicans die every year because they don’t get the kind of medical treatment they need due to not having health insurance. Having health insurance means people can get the kind of preventive and follow-up care that saves lives (and saves money).

I also pointed out that the Hilltop Institute report commissioned by HSD estimates that the state’s hospitals will save more than $2 billion in “uncompensated care” costs during the 2014-2020 period. These are the costs incurred by our hospitals when treating uninsured patients, mostly in the emergency room. These costs get passed along to all of us as higher local taxes and higher insurance premiums. Getting many more New Mexicans covered by health insurance will help lower these pass-along costs.

Link to the Las Cruces Sun-News coverage of the hearing here.

Link to the Albuquerque Journal’s editorial in favor of expanding Medicaid here.

Nick Estes is a Deputy Policy Director at NM Voices.