Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance
committees of the Legislature. LFC does not assume responsibility for the accuracy of these reports if they
are used for other purposes.
F I S C A L I M P A C T R E P O R T
SPONSOR Duncan/Dow/Armstrong
LAST UPDATED
ORIGINAL DATE 2/21/2025
SHORT TITLE Medicaid Health Provider Cost Studies
BILL
NUMBER House Bill 400
ANALYST Chenier
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT*
(dollars in thousands)
Agency/Program
FY25 FY26 FY27
3 Year
Total Cost
Recurring or
Nonrecurring
Fund
Affected FTE $48.7 $48.7 $97.4 Recurring General Fund
FTE $48.7 $48.7 $97.4 Recurring Federal Fund
Contract $1,250. 0 $1,250.0 $2,500.0 Recurring Federal Funds
Contract $1,250. 0 $1,250.0 $2,500.0 Recurring General Funds
MAD Program
Up to
$2,213,354.0
Up to
$2,213,354.0
Recurring Federal Funds
MAD Program Up to $617,000
Up to
$617,000.0
Recurring General Funds
Total $2,597.4
Up to
$2,832,951.4
Up to
$2,8325,548.8
Parentheses ( ) indicate expenditure decreases.
*Amounts reflect most recent analysis of this legislation.
Relates to appropriations included in House Bill 2
Sources of Information
LFC Files
Agency Analysis Received From
Health Care Authority (HCA)
SUMMARY
Synopsis of House Bill 400
House Bill 400 requires the Health Care Authority to conduct cost studies for every Medicaid-
reimbursed health care provider at least once every three years. The bill specifies that these
studies must determine the true cost of providing health care services, including compensation
for providers and changes in expenses due to inflation or wages. HCA must include a copy of the
most recent cost study for each provider type when submitting its budget request to the
Legislature. The studies may be scheduled over multiple years, as long as each type of provider
is reviewed at least once every three years.
This bill does not contain an effective date and, as a result, would go into effect 90 days after the
Legislature adjourns if enacted, or June 20, 2025. House Bill 400 – Page 2
FISCAL IMPLICATIONS
HCA provides the following:
The cost of a Medicaid rate study varies significantly depending on the scope of the
study, data collection needs, stakeholder involvement, and the consulting firm conducting
the study. For example, in FY 2023, Medicaid conducted a comprehensive rate review
that cost $1 million; the rate study of home and community-based services for the
community benefit program in FY 2024 cost $300 thousand and another rate study for the
community-based services for 1915(c) waivers cost $500 thousand. For a rate study with
a broad and thorough work scope as required by this bill, estimated cost is $2.5 million
per year; this cost is based on conducting a study covering one-third of the providers
receiving a Medicaid payment each year as permitted by Section C of the bill by at least
two vendors. The cost of the study will get federal match at 50 percent and it will cost the
general fund $1.25 million each year.
In addition, the Medicaid program would need additional staff to implement this bill for
oversight and collaboration with a vendor for cost-based rate studies. One (1) FTE at pay-
band 70 would cost $97.4 thousand with $48.7 thousand in general fund and $48.7
thousand in federal funds.
In addition, the current Medicaid reimbursement rates are benchmarked with the
Medicare fee schedule. Medicaid is currently paid between 100 percent to 150 percent of
the Medicare rates for equivalent services. In FY25, the general fund cost to pay for
increases in Medicaid reimbursement for maternal, behavioral health, and primary care
rates from 120 percent to 150 percent of Medicare and to maintain other rates at 100
percent of Medicare was $100 million in general fund. If the rate studies result in
reimbursing Medicaid providers an equivalent of 200% of the Medicare rates, excluding
hospitals and nursing facilities, it would cost the Medicaid program $2.8 billion with
$617 million general fund and $2.213 federal funds. Hospitals have been excluded from
this impact as they receive the average commercial rate through the Healthcare Delivery
and Access Act and the nursing facilities are paid through the healthcare quality
surcharge and cost rebasing.
SIGNIFICANT ISSUES
The Medicaid program has been using the Medicare fee schedule as the benchmark to raise
provider reimbursement rates for services that have Medicare equivalence and average rate
increase or targeted raise increase for services that Medicare does not cover. The provider
reimbursement rate increase is at 100 percent to 150 percent of the Medicare rate based on
legislative appropriations for FY 2024 and FY 2025. The requirement of this bill would be a new
reimbursement rate setting methodology for health care providers serving the Medicaid
population. This new reimbursement methodology will also require a revision to the State Plan
and New Mexico Administrative Code. The state plan amendment approval process takes at least
six months to obtain approval from the Centers for Medicare and Medicaid Services.
House Bill 400 – Page 3
ADMINISTRATIVE IMPLICATIONS
House Bill 395 of the 2023 regular legislative session amended Section 28-16A-16 NMSA 1978
requiring the Department of Health to conduct a biennial independent cost study for
recommending reimbursement rates for the 1915(c) waivers – Developmentally Disabled,
Medically Fragile, and Mi Via Waivers. The rate study required by House Bill 400 would be
duplicative.
Similarly, the Early Childhood Education and Care Department (ECECD) undergoes a separate
rate study process for the Family Infant Toddler program. This rate study is funded by ECECD.
Any inclusion of these providers in general Medicaid rate studies would be duplicative.
EC/rl/SL2