New Mexico considers Medicaid overhaul to cut costs because of looming budget shortfall

NM considers scaling back Medicaid coverage

SANTA FE, N.M. — Gov. Bill Richardson’s administration is proposing to overhaul Medicaid and scale back health care services to some lower-income New Mexicans to cope with a projected budget shortfall of $300 million next year in the state’s largest health care program.

Human Services Department officials told lawmakers on Thursday that Medicaid benefits and eligibility likely would be limited to minimum federal requirements, such as covering low-income pregnant woman and some children.

A package of health care services would be available to other needy individuals — currently covered by Medicaid because the state has expanded eligibility — but they would need to pay premiums and copays. Those fees would vary based on income.

The effort to trim Medicaid comes at a difficult financial time. The state faces a half billion budget shortfall next year.

Details of the restructuring proposal haven’t been completed, and the agency plans public hearings next month to gather comment on what it should do to control the rising costs of Medicaid, which provides health care to 500,000 New Mexicans. Half of those are children.

The program is expected to cost about $3.7 billion this year, with $650 million coming from the state and the federal government picking up the rest.

The department estimates it would need an additional $325 million in state money next year if current benefits and services remain in place. Much of the shortfall resulted from the state’s need to replace federal economic stimulus money that’s helping to pay for Medicaid. The demand for health care also has grown as the economy deteriorated.

“We know it’s not realistic that we’re going to get $300 million,” Acting Human Services Secretary Katie Falls said. “Something different has to be done with the program.”

New Mexico has expanded Medicaid over the years to provide health coverage to more uninsured children. Eligibility currently extends to children in families earning up to 235 percent of the federal poverty level, which is nearly $52,000 a year for a family of four.

However, the income standard for children to receive Medicaid benefits could drop by half if the state adopts minimum federal requirements. Federal law also mandates Medicaid for low-income pregnant women, families in the state’s welfare-to-work program and certain low-income disabled people.

Currently, the state offers a broad range of services that are not required by the federal government, including dental and vision care, physical therapy and hospice care.

The department also is trying to trim spending this year on Medicaid because if nothing is done, costs will exceed the current budget by up to $47 million. The state Legislative Finance Committee was told that a wide range of cost-cutting measures will be implemented, including a 3 percent reduction in reimbursements to hospitals, doctors and other health care providers.