It won't be cheap

New cost estimate puts near-universal health care coverage at $800 million over five years.

SANTA FE -- Expanding health coverage to uninsured children and adults who live in households that earn up to three times the federal poverty level would cost New Mexico about $830 million over five years.

 

That projected cost was given to state lawmakers this week and represents the best estimate of the cost for a large piece of Gov. Bill Richardson's proposed health care overhaul. 

For months, lawmakers have clamored for a firm idea of what it would take to cover a large segment of New Mexico's uninsured population, a Richardson priority. And while the number they received this week isn't set in stone, it's as close as the administration has come to giving them its best guess, some lawmakers acknowledged.

"We knew it was a pretty high number," Sen. John Arthur Smith, D-Deming, and chairman of the Legislative Finance Committee, said Thursday. "It builds some trust. But it still doesn't identify how we're going to pay for it."

 

State lawmakers' haziness on the amount of money needed to overhaul the state's health care system helped sink Richardson's proposal to expand coverage during this year's 30-day legislative session. It didn't help either that it got caught in the crossfire between lawmakers who questioned whether the state could afford the reform, whatever the cost, and lawmakers who preferred a single-payer system. Richardson's plan would reform certain aspects of the health care industry, but keep it as a primary provider of insurance.

The five-year costs were contained in documents Human Services Department Secretary Pamela Hyde handed out Tuesday to state lawmakers during a legislative hearing at the Capitol. Hyde was careful to stress that the figure is preliminary and could change depending on policy decisions, such as whether to cover all of the population identified or just a portion. She added that it wasn't a formal budget request. 

"This is based on certain assumptions," Hyde told lawmakers. "And if those assumptions change, the cost changes."

 

The scenario Hyde laid out for expanding coverage to a large portion of New Mexico's uninsured population is a strategy other states across the country have studied, and tried, as they struggle to contain the rising costs of health care.

 

Simply put, the state would spend money to unlock a greater amount of funding from the federal government that would be applied toward the public low-income health insurance program known as Medicaid. 

 

Under the scenario, New Mexico would spend about $165 million extra each year on average for five years to unlock more than $1.7 billion in federal dollars over that same period. The state and federal dollars would pay to cover all children up to 19 and adults who live in households that earn up to 300 percent of the federal poverty rate. A family of four living at three times the poverty rate earns $63,600, according to state documents.

The scenario calls for New Mexico to pay less at the start of the five-year period, and more by the end. For example, in the first year New Mexico would spend $134 million to unlock $327 million in federal dollars. By the fifth year New Mexico would leverage nearly $200 million of its money to unlock nearly three times that amount from the federal government. For every dollar New Mexico spends on Medicaid, the federal government throws in nearly $3.

 

"This is just one scenario," HSD spokesperson Betina Gonzales McCracken said.

The plan, if adopted wholesale, would provide health insurance for roughly half of the state's uninsured population of more than 400,000 individuals. If the state changes some of its rules, it could cover even more people, state officials said.

 

The five-year cost figure doesn't account for every expenditure that would be required to wipe out most of New Mexico's uninsured problem, state officials said. It doesn't factor into the equation other programs, such as state's ailing retiree health care authority, which provides health insurance to public-sector employees and their families.

 

But the idea of trying to leverage federal dollars with state spending likely would play a major role in Richardson's plan.

 

Hyde said the additional state spending to expand health insurance would lead to positive economic impacts, including more federal funding flowing through the state's economy.

 

There also would be a nominal increase in the amount of premium taxes collected by the state and the potential creation of about 2,400 new jobs, specifically in the retail trade, health care and social assistance industries, according to a powerpoint presentation Hyde gave to lawmakers.

Reducing the number of uninsured, Hyde said, also would address some long-standing problems in New Mexico like 'uncompensated care,' which is the amount of money that hospitals and other medical facilities never collect when they treat the uninsured.

The New Mexico Hospital Association has estimated that its 39 members lose nearly $400 million a year to uncompensated care.

"This could take away more than half of the uncompensated care," Hyde said.

Jeff Dye, CEO and president of the hospital association, agreed that expanding health insurance coverage would lessen the financial strain caused by uncompensated care. But he wondered how much of the problem would disappear, at least in the short term.

"There's no doubt that there would be less uncompensated care," Dye said. "But that cost would not go away overnight. We don't want lawmakers or policy makers to think that cost would go overnight. The temptation is to fund a new program with the savings."

He also said uncompensated care problem is a function of how much hospitals and other medical providers are reimbursed for their services by public programs.

"Uncompensated care doesn't go away, because public programs don't tend to pay the full cost for services rendered," Dye said. "That's another issue."

 

Register or log in to rate

Politics, Poverty