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Health insurance reform may benefit New Mexico economically

By Matthew Reichbach

The Medicaid expansion through the health care reform law will more than pay for itself in New Mexico according to analysts from New Mexico Voices for Children. Bill Jordan, Policy Director for New Mexico Voices for Children, and Kelly O’Donnell, an economist, gave a presentation to the Revenue Stabilization and Tax Policy interim committee Friday in Albuquerque explaining how New Mexico’s tax structure lends itself to taking advantage of the Patient Protection and Affordable Care Act (PPACA).

The two were questioned by the committee on how the tax structure would help and whether or not the health care act would actually help lower income residents receive health insurance.

There are two main revenue streams from the federal government that New Mexico will benefit from according to Jordan. One is the money coming in directly from Medicaid. The other money is the money that would come in the form of tax breaks for health insurance for low-income individuals.

“Those are the two main streams of funds and ways that people will get insurance,” Jordan told Clearly New Mexico following the hearing. “Both of those, Medicaid and the private insurance that is bought on the health care exchange, are taxed already and will be taxed with a 4 percent health insurance premium tax. And that plus our gross receipts tax and other minor taxes, like personal income tax, will generate enough tax revenue that we’ll have more than enough money to pay for our share of the Medicaid expansion that’s coming.”

HSD, advocacy groups at odds over Medicaid’s future

The hearing comes after the state’s Human Services Department has said a redesign of Medicaid is necessary because it is unsustainable as it is currently run. Many more people will be eligible for Medicaid in 2014 because of the PPACA. The federal government will cover the vast majority of the costs for the first few years, though this phases out and New Mexico will be on the hook for ten percent of the costs of the new Medicaid enrollees when it is completely phased out.

This summer, HSD Cabinet Secretary Sedonie Squire rejected a call for a public Medicaid Redesign Task Force. The call came from advocacy organizations, including New Mexico Voices for Children, which were not happy about the secrecy of the Medicaid redesign.

A study released today by New Mexico Voices for Children says the economic benefits of the PPACA will more than pay for this through direct, indirect and induced impacts to New Mexico’s economy. The August 2011 study by O’Donnell, a Ph.D. who served as Superintendent of the New Mexico Regulation and Licensing Department form 2007 to 2010, said there will be between a $578.3 million and $798.3 million direct benefit in tax revenue to the state from the federal funds in PPACA from 2014 to 2020. The study shows an additional $105.1 million to $143.5 million in indirect impacts and $204.2 million to $279.9 million in induced impacts to tax revenue to the state from the federal funds in the same time period.

The direct impacts is the money that comes directly from the federal government and is taxed by the state. The indirect impacts are those created when hospitals have more business and so need more benefits from outside vendors.  O’Donnell used the example of janitorial supplies and food. Induced impacts are the impacts on the businesses that feed into the janitorial supply companies and others that supply the hospitals.

O’Donnell likened it to dropping a stone in a pond. The initial impact “is the big one,” the first ripple is the indirect impact and the smaller, subsequent ripples are the induced impacts.

The extent of the new economic activity—including the number of jobs it is estimated to create—is laid out in the study, “The Economic Benefits of Health Care Reform in New Mexico,” which NM Voices released earlier this summer.

The study says that these effects will more than pay for the expansion of Medicaid.

“[From 2014 to 2020] we will have a cumulative general fund impact of a billion dollars,” O’Donnell told the committee. This comes from taxes that New Mexico will collect from the new federal funds coming in, including a 4.003 percent insurance premiums tax. When other taxes are added in, there will be an effective tax rate “of about ten percent” according to O’Donnell.

Dragging feet could cost state money, control

“To the extent that we are aggressive about implementing this law, we will benefit more and if we drag our feet, fight the law, if we’re slow to implement it, then fewer people are going to get covered and we’re going to receive fewer economic benefits from it,” Jordan told Clearly New Mexico.

One way that Gov. Susana Martinez has been unwilling to implement parts of the health care law is through implementing a health care exchange through which New Mexico residents will be able to purchase health insurance. Martinez vetoed a bill that would have created the health care exchange.

This action echoes Republican governors in other states. Texas Governor, and Republican presidential hopeful, Rick Perry said recently that he would veto a law that would set up a health care exchange in Texas. Perry said he would implement one through executive order if necessary.

The Wall Street Journal reported on the “dilemma” that Republican governors face by creating health care exchanges and notes that if states have not made substantial progress by 2013, the federal government will step in and create the exchanges for them.

“If we don’t design one that we want, the federal government will come in and set one up for us,” Jordan said.

Odds and ends
Republicans were noticeably not on board with the new health care reform law. For example:

  • Sen. Clint Harden said he believed “This seems like one of the deals were the rich get richer” and said the money would go to pharmaceutical companies and HMOs.
  • Sen. Steven Neville said he did not believe the non-partisan Congressional Budget Office’s estimate that PPACA would reduce the deficit. He said the CBO was instructed to look at it very narrowly and that other estimates would say the bill would instead increase the deficit.
  • Rep. Don Bratton said that “A lot of the people who are uninsured are uninsured by choice” and mentioned 28 year olds who would rather “roll the dice,” knowing that they have to be taken care of in a hospital by law.
  • “They would rather spend that $350 on a car payment on a new car,” Bratton said.
  • House Minority Leader Tom Taylor said that “I can’t see anything but a 20 year decline in New Mexico” because “everybody in the state is dependent on the federal government in one way or another.”

Other odds and ends:

  • O’Donnell said small businesses would benefit through tax credits to help workers get health insurance. She said that about 25,000 such businesses would qualify for the tax credits.
  • Much of the conversation was about how indigent health care funds would be affected by the new health care reform law. The indigent funds are completely paid for by state and local funds while the PPACA funds would be from both state and federal funds.The indigent health care funds are created by the gross receipts tax and property taxes and, in the case of Bernalillo County at least, mill levies.

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