SANTA FE, N.M. (AP) — New Mexico's costs of expanding Medicaid under the federal health care overhaul will be offset initially by additional tax revenues because of increased spending on medical services, according to a legislative committee analysis released Thursday.
The Legislative Finance Committee released its staff projections as lawmakers began to consider what will be one of the biggest issues confronting Gov. Susana Martinez and the Legislature next year.
Policymakers must decide whether the state can afford the long-term costs of expanding the eligibility of Medicaid to potentially cover nearly 170,000 low-income New Mexicans by 2020.
About a fourth of the state's population currently receives medical care through Medicaid, which covers uninsured children, the disabled and the poor. Medicaid is jointly financed by the state and federal government.
The Human Services Department estimates it will cost the state about $413 million from 2014 through 2020 to expand Medicaid as called for under federal law. An additional $6 billion in federal money should flow into the state to cover those medical services during the same time.
The LFC analysis assumes the state will collect additional money from income and sales taxes as well as taxes on insurance premiums if Medicaid is expanded. The health care industry — from doctors and hospitals to businesses providing medical supplies — is a major part of the state's economy.
There also should be savings for the state under the expansion. That's because some current Medicaid participants will generate more federal matching money in the future, reducing the state's costs.
Revenues from the Medicaid expansion are projected to exceed costs by about $32 million in 2014, with the net gain reaching $98 million in 2016 and then dropping to $22 million in 2019, according to the LFC analysis.
But that's reversed starting in in 2020. The LFC estimated the state's costs will exceed new revenues by $20 million in 2020.
Initially, the federal government will pick up the tab for 100 percent of the cost of the Medicaid expansion and that will gradually drop to 90 percent in 2020.
Several committee members expressed concern the state could face future budget problems if Medicaid costs continued to grow beyond 2020 or if the federal government cut spending to deal with its growing deficit.
"I am a little nervous about what we might be locking ourselves into," said Sen. Steven Neville, R-Aztec.
But Rep. Edward Sandoval, D-Albuquerque, said it's a "no brainer" to expand Medicaid if the projections of revenue and economic growth are reasonably accurate.
The Human Services Department projected the state would collect nearly $233 million from taxes on insurance premiums in 2014-2020 if Medicaid is expanded, but the agency said that won't offset the projected costs of $413 million. The department, unlike the LFC analysis, didn't attempt to estimate other potential tax revenue gains.
Staff of the committee and the agency will try to resolve their differences and provide lawmakers with a revised analysis of the Medicaid expansion at a later LFC meeting.
Sen. John Arthur Smith, a Deming Democrat and committee chairman, urged the Martinez administration and the Legislature to work together in deciding what to do about Medicaid.
"There are some people when they start looking at the costs are saying, 'We don't care what the future holds, look what we get right now.' Some people want to look way down the road and say, 'What if?' I think the challenge for the executive and legislative branch is to find something that is reasonable and responsible and something that we can afford," said Smith.
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