State considers cutting optional Medicaid services

RIO RANCHO — Thousands of low-income New Mexicans could lose medications, vision and dental services, hospice care and physical therapy because of a potential huge shortfall in Medicaid, Human Services Secretary Pam Hyde told state lawmakers Wednesday.

As of Jan. 1, 2011, New Mexico could face a $300 million gap in the budget for the state’s low-income health insurance program known as Medicaid. And officials are eyeing many previously off-the-table scenarios, including eliminating many, if not all, optional Medicaid services, because of the severity of the situation.

The potentially extreme measure is part of the mix this year because mandatory Medicaid services — such as hospital stays and physician services — are projected to grow to $550 million in early 2011. That’s compared to a projected $340 million for optional services, Hyde said.

If the state cuts $300 million to close the shortfall, very little money would be left for services that aren’t mandatory.

The implications of such deep cuts are potentially dire for New Mexico, where one in four residents gets health coverage in whole or part through some form of public assistance.

“It’s a lousy situation,” Hyde acknowledged Wednesday but said no final decisions had been made. “I am here to help give you information.”

But she made clear to state lawmakers that the decisions before them are not easy and reminded them how difficult it was a few years ago to cut Medicaid by $30 million.

“Remember all the calls you got,” she said.

The potential loss of optional services could have wide-ranging repercussions. The list of optional services covered in New Mexico is longer than the list of mandatory services and includes adult dental and vision services, inpatient psychiatric for individuals under 21, podiatric services and speech therapy.

Cutting optional services wasn’t the only cost-saving measure Hyde mentioned the state could implement to close the potential shortfall. Another measure being considered is the dismantling New Mexico’s State Coverage Insurance (SCI) program.

SCI helps pay premiums for thousands of low-income individuals, and small businesses take advantage of the program to insure employees, officials said.

Another cost-cutting option–and one generally considered to be one of the easiest to accomplish–is to reduce the rate of reimbursement to medical providers, such as physicians and nurse practitioners. Medicaid reimburses medical providers at various rates.

But reducing provider rates could lead to unintended consequences like decreased access to health care, said Laura Tobler of the National Conference of State Legislatures, who also presented Wednesday.

”There is documented evidence that that reimbursement rate reductions leads to reductions in provider participation,” Tobler said.

The size of the problem Hyde outlined Wednesday elicited concern and hand-wringing from many speakers.

“That is absolutely huge,” Dr. Lee Reynis, director of the University of New Mexico’s Bureau of Business and Economic Research, told lawmakers of the potential $300 million shortfall.

Advocates, meanwhile, argued that deep cuts to Medicaid would ripple across New Mexico, pushing up the number of uninsured New Mexicans at a time when the nation is trying to solve the uninsured problem.

“There are no good places to cut,” said Sireesha Manne, staff attorney for the New Mexico Center on Law and Poverty. “We already are the second highest rate of uninsured in the country. Let’s not make this any higher.”

Kim Posich, the center’s executive director, added that Medicaid cuts would hurt rural areas disproportionately.

“In New Mexico’s rural areas, poverty tends to be deeper and rates of health insurance coverage lower,” Posich said. “This has rural health care providers even more reliant on Medicaid reimbursement than the rest of the state.”

Advocates also called Medicaid cuts unfair because they would place a disproportionate burden of balancing the state’s budget on the state’s most fragile population. They recommended raising taxes instead.

“There are a lot of economists who are out there saying the worst thing to do during a recession is to raise taxes,” said Ruth Hoffman of the Lutheran Advocacy Ministry New Mexico. “I want you to know there are a lot of people who disagree with that. The worst thing you can do is to cut spending. Please don’t tie one hand behind your back by simply dismissing” raising taxes.

Rep. Dennis Kintigh, R-Roswell, however, disputed that line of thinking. On several occasions Kintigh said he was under the impression after talks with medical providers in his community that many Medicaid recipients were on the program because of life choices.

“I’ve been told people have come in who are obese, and that is a life choice,” Kintigh said.

Hyde’s presentation came as Gov. Bill Richardson and the New Mexico Legislature expect to go into special session next month to close a projected shortfall of $433 million for this year’s state budget.

But some legislators are already saying they believe the shortfall may approach $550 million before this fiscal year ends June 30, said House Minority Whip Keith Gardner, R-Roswell.

Richardson has said he opposes raising taxes and making any cuts to public education to balance this year’s budget. He and lawmakers disagree over how deeply to cut state agencies, with his administration demanding 3 percent cuts while some lawmakers say it will take deeper cuts, perhaps 5 or 6 percent.

As for cuts to Medicaid Richardson said Friday that “health care, Medicaid, we are waiting to see what happens with the national health care plan, what the Congress is doing. My hope is that the cuts in Medicaid will be minimal. But we are going to have to make some cuts there. I just don’t want to cut kids, and education, and public schools. I don’t want to raise taxes. I don’t want to have layoffs and furloughs. We don’t need to do that.”

Hyde said the Medicaid program, in addition to facing a huge shortfall in 2011, is already in the red this year. The program faces a $40 million shortfall this year that could grow to $60 million in coming months, Hyde said. That’s due in part to a growing number of New Mexicans who are enrolling in the program because of the sour economy.

Her agency has adopted some cost-cutting measures to close this year’s shortfall, including cutting outreach to potentially eligible Medicaid recipients, Hyde said. The thinking behind stopping outreach is that fewer people who enroll would mean a potential slowing of rising costs.