Money Crunch ImageTwo weeks ago New Mexico Human Services Secretary Pam Hyde delivered a sobering 27-page Power Point presentation to state lawmakers about a huge shortfall facing the state’s Medicaid program.

The thrust of Hyde’s message was summed up on page 8: “Unless We See A Positive Turnaround In Expenditures or Revenue for FY10, Significant Cost Containment Efforts Will Be Necessary Beginning This Fall.”

Because of a confluence of factors, New Mexico’s Medicaid program could face a $200 million to $300 million shortfall come Jan. 1, 2011, mostly due to the disappearance of federal stimulus Medicaid dollars at the end of 2010, Hyde said in an interview with the Independent last week.

Barring a big infusion of cash, the state will likely make some tough cost-cutting decisions that could affect the state’s low-income population, people with disabilities, as well as public schools and hospitals across the state.

Hyde said that no decisions had been made yet as to how to address the potential budget gap. But she acknowledged that the changes being contemplated are of a different magnitude than those considered in previous budget crunches.

“They are much more drastic than we’ve had to do in the past,” Hyde said.

Hyde’s presentation made an impression on lawmakers.

“I think it (the presentation) was designed to be scary and it was scary,” said state Sen. Dede Feldman, D-Albuquerque. “She was telling (the committee that proposes a state budget) what are the consequences if they put no new money into this budget or what the choices would be if they did not put any new money into the program.”

Cost-cutting suggestions in the presentation included reducing benefits, decreasing rates paid to medical providers, slowing enrollment into the program and making administrative changes.

Programs to be possibly cut, according to Hyde’s presentation to lawmakers, included vision benefits for adults; adult dental benefits, except in emergency; nursing services in schools; hospice services; hearing aids and hearing evaluations for adults; and physical, occupational and speech therapy for adults.

To hammer home the seriousness of the coming shortfall, the presentation included two options for fundamentally restructuring Medicaid: “Eliminate Whole Programs That Have High Costs;” and “Eliminate All But Mandatory Services for Mandatory Populations.”

The implications of the coming Medicaid shortfall are potentially dire for New Mexico, where one in four residents gets health coverage in whole or part through some form of public assistance.

The Medicaid budget is a microcosm of the state’s shaky finances. Earlier this month revenue estimates projected that the money New Mexico will take in through taxes and other revenue is more than $400 million short of what was anticipated this fiscal year, which ends June 30, 2010. The state is collecting less than it projected in income and sales taxes, officials said.

That makes the loss of federal stimulus dollars for Medicaid particularly alarming in 2011, when Hyde’s agency predicts it will lose roughly $115 million.

Many states around the country are concerned about similar revenue “cliffs” when federal stimulus money runs out at the end of calendar year 2010, Corina Eckl of the National Conference of State Legislatures said this weekend.

At the same time federal rules don’t allow states to make changes to who is eligible for Medicaid through Dec. 31, 2010. Determining who is eligible is one way states can save money, officials said.

Meanwhile, the bad economy is fueling Medicaid enrollment in New Mexico as more people find themselves out of jobs and struggling financially, which is driving up the program’s costs.

Also, state officials underestimated the popularity of a new program — Coordination of Long-Term Services – that has seen more people sign up and use its services than projected, Hyde said.

Shrinking revenues have additionally eaten away at a pot of money that Hyde’s agency had contributed to cushion state government through the bad economy.

More than $100 million from the Human Services Department budget was put in a special fund created by the Legislature this past session, Hyde said. The fund was created to capture unspent state dollars as a result of the infusion of federal Medicaid dollars as part of the federal stimulus program. But that money has been used to shore up other parts of the state’s general fund, Hyde said last week.

David Abbey, director of the Legislative Finance Committee, said last week that lawmakers understood the situation the Human Services Department faces in the near future.

“I believe the Legislature plans to replace the federal funds as best they can given the budget restraints,” Abbey said.