New Mexico has proposed a novel approach to health insurance coverage – the New Mexico Medicaid Forward Plan. The plan is a big step toward offering Medicaid for all New Mexico residents. Learn what it is, how it works, and the impact it may have on health insurance in New Mexico.
What is New Mexico’s Medicaid Forward Plan?
The New Mexico Medicaid Forward plan aims to expand healthcare coverage to more New Mexico residents. The plan proposes to extend Medicaid eligibility to most New Mexicans under the age of 65 who are not already eligible for the existing Medicaid program.
Here are some key aspects of the proposed plan:
Expanded Eligibility
The plan would remove income requirements. Those individuals whose incomes exceed the current Medicaid thresholds could buy into the program on a sliding scale. Specifically, it would target residents under 65 with household incomes exceeding 133% of the federal poverty level (FPL) who are not otherwise eligible for Medicaid.
Sliding-Scale Premiums and Cost-Sharing
Enrollees above 200% of the FPL would pay premiums and out-of-pocket costs on a sliding scale. The combined premiums and out-of-pocket spending would not exceed 5% of a family’s income. Medicaid forward may offer financial assistance to individuals with household incomes below 400% of the FPL.
Medicaid Funding
Like the existing Medicaid program in New Mexico, federal dollars would fund the program. For most newly eligible individuals, Medicaid spending would qualify for federal matching funds at New Mexico’s standard Federal Medical Assistance Percentage (FMAP) of 73.26%.
Potential Benefits
Proponents of the plan suggest it could solve various healthcare-related issues and benefit patients, the economy, and the state. Projections show that the uninsured population will decrease in New Mexico by 48%. Additionally, the plan aims to provide affordable and predictable healthcare, regardless of income level.
Implementation
If passed, the program would begin to phase in coverage by January 1, 2028. The New Mexico Health Care Authority (HCA) would be responsible for amending the Medicaid State Plan to open Medicaid to residents over 133% FPL. The HCA would also establish an affordability scale for premiums and cost-sharing and coordinate enrollment processes with the Superintendent of Insurance and the Health Insurance Exchange.
Who wouldn’t be eligible for Medicaid Forward?
While the Medicaid Forward plan aims to expand coverage to many New Mexicans, some individuals would still not be eligible. Groups who would not enroll include:
Individuals over 65
The Medicaid Forward proposal primarily targets residents under the age of 65. Many of the 66,000 retirees participating in the New Mexico Retiree Health Care Authority (NMRHCA) are assumed to be over 65 and ineligible.
Individuals already eligible for Medicaid
The plan intends to expand Medicaid to New Mexicans under age 65, who are not otherwise eligible for and enrolled in Medicaid.
People with “unsatisfactory immigration status”
Individuals with “unsatisfactory immigration status” would be ineligible to enroll in Medicaid, except for the treatment of emergency medical conditions. Any initiative to provide broader coverage for this population would be fully state-funded.
Those who do not meet state residency requirements
Stakeholders suggested applying a stricter definition of state residency for Medicaid Forward eligibility. Any adult who wants Medicaid coverage, including those applying under Medicaid Forward, must apply and reapply annually.
Individuals eligible for Medicare
It is assumed the vast majority of those who participate in NMRHCA coverage would be ineligible to participate in Medicaid Forward as they would be 65 years of age and older.
It is important to note that even with Medicaid Forward, some eligible individuals may choose not to enroll. For example, undocumented immigrants may be hesitant to sign up for Medicaid Forward because it requires providing identifying information to the government.
Who would offer Medicaid Forward plans?
Though specifics still need to be completed, the HCA plans to administer the Medicaid Forward plan. The New Mexico legislature directed the HCA to study a plan to leverage Medicaid to create a state-administered healthcare coverage option called Medicaid Forward. Coverage options may include:
Managed Care Organizations (MCOs)
New Mexico’s Medicaid program uses a managed care delivery system. Called Turquoise Care, it covers physical health, behavioral health, and long-term services and supports. As of June 2024, 81% of all Medicaid members are enrolled in MCOs. The HCA uses federal Section 1115 demonstration authority for its managed care delivery system, which permits mandatory enrollment of Native American beneficiaries who are dual-eligible (for Medicare and Medicaid) or would be eligible for nursing facility care. Medicaid Forward would likely also utilize MCOs.
The secretary, the superintendent of insurance, and the New Mexico health insurance exchange may coordinate efforts to make the Medicaid Forward plan available for direct purchase through the New Mexico platform.
When could Medicaid Forward go live?
Medicaid Forward could begin phasing in coverage by January 1, 2028.
Other details about the implementation timeline include:
During the 2023 legislative session, New Mexico began designing its Medicaid Forward program by enacting HB 400.
A bill to initiate planning for Medicaid Forward is the first step and will allow the state to take critical steps to enact a Medicaid Forward option beginning by January 1, 2028. In the 2025 legislative session, New Mexico’s legislature introduced a bill that directed the HCA to move forward with plans to implement by January 2028.
How does eligibility expansion impact BeWell?
Here’s how the Medicaid Forward eligibility expansion could impact BeWell, New Mexico’s health insurance marketplace, according to the sources:
Enrollment Reduction
Increased Medicaid Forward enrollment could lead to corresponding reductions in BeWell enrollment. An HCA report noted that BeWell could see enrollment reductions of up to 89% if workers choose to waive insurance plans offered by their companies.
Specific Enrollment Shifts
One analysis estimates that if Medicaid Forward is implemented up to 400% of the FPL, 77.5% of individuals enrolled in a BeWell plan with an income below 400% of FPL (approximately 45,792 individuals based on July 2024 figures) would become ineligible for financial help through BeWell.
Estimates show that, depending on the design implemented, the number of individuals covered by BeWell and employer-sponsored insurance could decrease by between 43,000 and 225,000, or between 5% and 26%.
Long-Term Viability
Significant declines in BeWell enrollment due to Medicaid Forward could impact BeWell’s long-term viability. If implemented, Medicaid Forward could draw individuals away from BeWell. Coordination across entities, including state entities and state purchasers, will be necessary.
How would household health spending change under Medicaid Forward?
Under the proposed Medicaid Forward plan, household health spending in New Mexico is projected to change significantly.
Here’s a breakdown of the anticipated changes:
Overall Reduction
Household healthcare spending is estimated to fall by 28.3% to 37.9%. That translates to a reduction of $920 million to $1.2 billion in aggregate. This projection depends on the level of take-up of Medicaid Forward.
Decline in Premiums and Out-of-Pocket Costs
The report attributes household spending decreases to premium declines and out-of-pocket (OOP) expenses. Premiums are expected to decrease by 25.6% to 34.6%. Out-of-pocket spending is expected to decrease by 31.7% to 42.1%.
Families with incomes up to 138% of the federal poverty level (FPL) would experience the most significant reductions in healthcare spending, ranging from 39.6% to 49.2%. Even households with incomes above 400% of the FPL would see notable decreases in spending, with a projected reduction of 22.8% to 29.7%.
An Urban Institute (UI) study showed that with low enrollment, households would spend 28.3% less on acute health care, a reduction of $920 million. Medicaid Forward projects to decrease premium spending by 25.6%, and other healthcare spending by 32.7%. The UI study also showed that with high enrollment, total savings would be nearly $1.2 billion or a reduction of 37.9% for all.
How does Medicaid Forward affect employer insurance coverage?
Medicaid Forward could affect employer-sponsored insurance coverage (ESI) in New Mexico. Employees may choose to enroll in Medicaid Forward rather than their employer’s plan.
Here’s a breakdown of the potential impacts:
Enrollment Shifts
Many individuals currently covered by ESI may choose to enroll in Medicaid Forward. For example, one analysis suggests that with the implementation of Medicaid Forward, the number of individuals covered by ESI could decrease by between 43,000 and 225,000, or between 5% and 26%. Studies suggest Medicaid Forward will be less costly for enrollees than private coverage options due to the limit on member financial responsibility.
Impact on Employers
Employers could save money if employees opt-in to Medicaid Forward and direct funds elsewhere, such as employee salaries. Depending on Medicaid Forward take-up, employers could give workers savings on health insurance premium contributions as higher wages or other tax-preferred benefits. There is a risk that employers might stop offering health insurance due to unsustainable costs or because employees opt for Medicaid Forward. Some stakeholders voiced concerns that Medicaid Forward could drive businesses away from New Mexico. Or, it could dissuade new organizations from coming in.
Financial Implications for Employers
With Medicaid Forward, the Urban Institute study found that large firms could spend $498 million less. Small firms could spend $273 less in total premium contributions. About 90% of the net savings to employers would be passed back to workers as higher wages, $230 million in large firms and $206 million in small firms. Overall, large employers would save $20 million in total, while small employers would save $67 million.
What are some potential Medicaid Forward administrative costs?
Medicaid Forward in New Mexico could bring about several administrative costs, mainly concerning scaling state administrative capabilities to meet the demands of an expanded Medicaid program. These costs encompass various aspects, such as staffing, contracting, and information technology.
Here’s a detailed breakdown of potential administrative costs:
Potential Administrative Costs
Implementing Medicaid Forward may require the HCA to increase its staffing levels and engage in private contracts. This includes hiring additional state employees and contracting with external vendors for specialized services.
Development, implementation, and maintenance of IT systems will be crucial for managing the expanded Medicaid program. This may include:
- Medicaid Eligibility and Enrollment System Enhancements: Upgrading the existing systems to handle the increased volume of applications and enrollments.
- Medicaid Management Information System (MMIS) Replacement: New Mexico is already replacing its existing MMIS, with the project estimated to cost $418 million and be completed in 2027. Medicaid Forward could necessitate significant modifications to the MMIS, adding to the overall administrative expenses.
- Application Processing: Under federal law, a Medicaid agency must determine Medicaid and CHIP eligibility for those whose eligibility is based on Modified Adjusted Gross Income (MAGI) within 45 days of a submitted application.
- Management of Enrollee Financial Responsibility: Managing enrollee financial responsibility, including premiums and cost-sharing, requires administrative effort and expense.
- Medicaid MCOs: Additional Medicaid Managed Care Organizations may be needed to take on the increased enrollment.
- Federal Performance Requirements: Meeting federal performance requirements also adds to the administrative burden. As Medicaid enrollment grows, state operations must scale up to meet timely application and renewal processing standards. Failure to meet these requirements can result in corrective action plans and financial penalties.
- Categorization of Enrollees: Even with no income eligibility limits, a review of applicant income would still be necessary as federal matching funds vary by category. To properly claim federal matching funds, individuals must be categorized correctly. Improper classification can result in improper payments.
- State Procurements: Medicaid Forward could necessitate additional state procurements, including information technology systems like Medicaid premium billing software and Medicaid MCOs.
What are the next steps?
The next steps for the New Mexico Medicaid Forward plan involve legislative action, further analysis, and collaboration among various stakeholders. Here’s a breakdown:
Legislative Action
The legislature must pass a bill allowing the state to take critical steps to enact a Medicaid Forward option that residents can enroll in by January 1, 2028.
Detailed planning and analysis
The Health Care Authority (HCA) is expected to discuss the Medicaid Forward impact report with the Legislative Finance Committee and the Legislative Health & Human Services Committee.
The HCA could consider a further study that includes collecting and analyzing data from commercial employer plans. The study could estimate the changes in the risk profiles of individuals who remain in employer plans as compared to those who are more likely to elect Medicaid Forward.
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