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Expert: Revenues looking better for New Mexico, but future Medicaid costs likely to sting

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ALBUQUERQUE, New Mexico — New Mexico survived a collapse of oil and natural gas revenues, but more budget problems are on the horizon because of the state's expansion of Medicaid coverage for low-income residents as part of the federal health care overhaul, a top legislative official warned Wednesday.

More than 216,000 people have been added to the Medicaid rolls in New Mexico, bringing the total to nearly 800,000.

David Abbey, director of the Legislative Finance Committee, told lawmakers during a meeting in Santa Fe that once the rate of federal cost-sharing for the expansion drops to 90 percent, New Mexico's share will balloon to about $120 million.

The federal government is currently covering 100 percent of the expansion. That percentage will gradually decrease starting in 2017.

There's no doubt, Abbey said, that Medicaid spending will be the driver of future budget negotiations in New Mexico.

"Other parts of the budget are going to have to shrink," he said. "If the Medicaid share is growing faster, something else has to grow more slowly. Public schools are a priority, public safety is a priority, and higher ed's share has gone down 2 or 3 percent over a decade so it's a lot to be concerned about."

New Mexico is one of 28 states to expand Medicaid coverage for low-income adults. In many states, enrollment already has exceeded original projections, leading to concerns that the eventual costs will be higher than originally estimated.

In New Mexico, enrollment has outpaced initial projections by more than 60 percent.

In what is one of the nation's poorest states, the expansion has benefited tens of thousands of people who were previously without care and it offered a source of revenue to pay for uncompensated care, which often has to be absorbed by others.

"We've made some important progress in improving access to health care throughout New Mexico — particularly for our most vulnerable," said Human Services Department spokesman Matt Kennicott. "We expanded and reformed Medicaid, making it more patient-centered and providing health care to more low-income New Mexicans."

By 2020, the state expects to have more than 895,000 people on the rolls, including 257,000 who will be covered as part of the expansion, Kennicott said.

Based on the department's current projections, total general fund dollars needed for the Medicaid program by the 2020 fiscal year are estimated to be $1.1 billion. That will include $268 million for the expansion.

Earlier this year, lower oil and gas prices left the state with less new money to spend on government programs. Lawmakers and Gov. Susana Martinez's administration were forced to tighten their belts, keeping many agency budgets relatively flat as they hammered out a $6.2 billion spending plan for the coming fiscal year.

Abbey said projections used to formulate the budget are proving to be correct as oil prices continue to hover around $60 a barrel. Oil production remains strong and state reserves are in good shape.

He acknowledged that he hadn't looked at prices in about a week.

"When I don't look so often, that's a good sign," he said. "That means we're in a safe zone."


Follow Susan Montoya Bryan on Twitter: http://twitter.com/susanmbryanNM

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