New Mexico is facing one of the most critical choices in the history of our state. We have an unprecedented opportunity to reduce poverty and save lives by providing healthcare coverage to over 170,000 uninsured New Mexicans. Starting in 2014, New Mexico can make Medicaid available to low-income adults. The ?Medicaid Opportunity? will improve health, reduce health disparities, create jobs, and strengthen our healthcare system and economy. It will save hundreds of millions of dollars for the state in the first seven years (2014-2020), and the state will continue to fully recover its costs after 2020. A recent poll by the state?s largest newspaper found that the majority of New Mexican voters support making Medicaid available to 170,000 more people. This brief explores the benefits of the Medicaid Opportunity, and why refusing it would be a costly mistake for New Mexico.
Who Would Become Eligible for Medicaid?
Many people think Medicaid already provides healthcare coverage to low-income people. But in fact, in New Mexico, most low-income adults do not qualify. Only children, pregnant women, people with disabilities, seniors, extremely low-income parents, women with breast or cervical cancer, or people in need of family planning services can get Medicaid.1 This leaves out most adults without children, including those living in poverty. It also leaves out low income parents: a single mother with one child making $5,000 a year likely has too much income to qualify for Medicaid.
The healthcare reform law gives New Mexico the opportunity to change that by making nearly all adults (ages 19-64) with incomes below 138% of the poverty line ? about $15,000 for a single adult or $32,000 for a family of 4 ? eligible for Medicaid.2 With the Medicaid Opportunity, over 170,000 uninsured New Mexico adults could gain access to health coverage, including parents, low wage workers, the homeless, veterans, and the recently jobless. While the U.S. Supreme court upheld most of the healthcare law, it left a critical decision in the hands of state lawmakers ?whether to say yes to the Medicaid Opportunity.
New Mexico Has More to Gain than Most Other States
Nearly one in three adults ages 19 to 64 in New Mexico is uninsured, leaving us with the second highest rate of uninsured people in the nation.3 This has taken a heavy toll on our families. People who are uninsured die younger, miss more work, and are burdened with medical debts they can?t pay. Health disparities persist because poor people and people of color are more likely to be uninsured.4
The lack of coverage impacts every New Mexican. Not only does it exacerbate poverty in our state, it is costly for everyone. Insured New Mexicans pay higher premiums because there are so many uninsured people driving up uncompensated care costs. Emergency rooms are overcrowded because people cannot access preventative or primary care. County charity care programs ? funded by local taxpayers ? cannot keep up with the need.
Medicaid provides stable healthcare coverage that would benefit all New Mexicans. If we refuse the Medicaid Opportunity, other states will move ahead, but New Mexico ? including our most vulnerable low-income residents ? will be left behind.
Medicaid Opportunity Will Cost the State a Maximum of $41.6 Million in First 7 Years
In the early days after the Supreme Court?s decision, lawmakers in New Mexico were primarily concerned about the costs of the Medicaid Opportunity. State officials had reported that the cost would be $500 million over seven years.5 Since then, the state?s Legislative Finance Committee and independent experts have found that the state will actually save money by expanding Medicaid.6
Analysts at the University of New Mexico?s Bureau of Business and Economic Research have projected state expenditures for the Medicaid Opportunity of $222 to $281 million, and net expenses will be even lower after accounting for savings from eliminating the State Coverage Insurance (SCI) program.7
SCI8 currently covers over 35,000 adults who would be eligible for the new Medicaid coverage. Transferring these adults from SCI to Medicaid would save the state an estimated $239 million through 2020. As a result, the true expenses for the Medicaid Opportunity range from a savings of $17.1 million to expenses of up to $41.6 million over seven years.9
Additional Revenues Result in Major Savings for New Mexico
New Mexico will also make money in the first seven years. This is because the federal government pays the bulk of the costs for the Medicaid Opportunity. The state will see an influx of new revenues and other savings that will more than offset the state?s share of costs.
The federal government will pay 100% of the costs in the first three years, 95% in 2017, 94% in 2018, 93% in 2019, and 90% in 2020 and beyond. New Mexico?s average share of costs for the Medicaid Opportunity would be just 4% over the years 2014 to 2020.10
But the state will not end up paying that 4%.This is because of the state?s Insurance Premium Tax (IPT). Medicaid will provide coverage for the newly eligible adults by enrolling them into managed care organizations (MCOs) and paying for premiums that cover the entire cost of care. These premiums are then subject to the state?s IPT, which is set at 4%. Thus, the state would pay 4% of costs for Medicaid coverage, but immediately get that 4% back from IPT revenues, leaving the state with no net costs for the years 2014-2020.
The state would also realize significant gains through other revenues. As federal dollars for Medicaid are spent on healthcare goods and services, they would be subject to the state?s Gross Receipts Tax (GRT). Those dollars would also be used to create between 6,000 and 8,400 new jobs,11 resulting in additional income tax revenue and even more GRT revenue as paychecks are spent in local businesses. Finally, New Mexico will save even more by phasing out the state?s high risk pool, moving those patients onto Medicaid and the Exchange.12
The University of New Mexico Bureau of Business and Economic Research recently added up all these revenues and projected the Medicaid Opportunity would create between $478 and $523 million in savings for New Mexico between 2014 and 2020 ? even after subtracting the state?s expenditures.13
A Great Deal Beyond 2020: Why New Mexico Can?t Afford to Wait
Even after 2020, the Medicaid Opportunity remains a great deal for the state. The federal government will pay 90% of the costs of care for the new Medicaid enrollees. And the state?s share is actually far less than the remaining 10% because of the IPT, GRT, and income tax revenues. In the end, even after 2020 ? the state?s expenditures for the Medicaid Opportunity are fully covered by the new revenues.14
Some states are considering adopting a ?wait and see? approach, but New Mexico would lose out by waiting. The federal government pays 100% of the costs in the first three years. These are the years that the state would see the most significant savings through new revenues. In addition, the newly insured may need to see the doctor more because of the ?pent-up demand? that results from going without insurance.15 Taking the Medicaid Opportunity beginning January 1, 2014, would give New Mexico the chance to stabilize the healthcare costs of the new Medicaid enrollees before the state has to pay anything.
Medicaid Saves Lives and Reduces Poverty
Over 135,000 uninsured adults in New Mexico have incomes below 138% of the poverty level.16 Another 39,000 adults with incomes at this level are currently covered through SCI.17Altogether, more than 170,000 uninsured New Mexicans could get coverage through the Medicaid Opportunity. They include over 100,000 people living below the federal poverty line,18 minimum and low wage workers, the recently unemployed, veterans, and the homeless.
Over 375 New Mexicans die each year because they are uninsured and are forced to go without medical care.19 And even when the uninsured do access healthcare, they suffer from much more serious conditions and diseases than those who have health insurance because of delayed or inconsistent treatment.20 This results in very expensive care and overcrowding of hospitals and emergency rooms.
Being uninsured also takes a personal financial toll. Medical debt is now the leading cause of bankruptcy in the country ? 62% of all personal bankruptcies in 2007 were due to medical bills.21 When uninsured people can?t pay their medical bills, they are sent to collections ? leading to financial problems that reverberate throughout their lives.
Medicaid saves lives and improves health and well-being. A study published in the New England Journal of Medicine found the death rate was 6% lower in states with more generous Medicaid eligibility rules for adults than the death rate in states with stricter rules such as New Mexico.22 And MIT researchers recently compared adults in Oregon who ?won? the state?s lottery system to get Medicaid to people who entered the lottery but ?lost? and remained uninsured. The new Medicaid enrollees had improved health status, less anxiety and depression, and fewer financial problems related to medical care.23
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