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F I S C A L I M P A C T R E P O R T

SPONSOR Moore

ORIGINAL DATE

LAST UPDATED

1-30-06

HB 304

SHORT TITLE Rural NM Health Care Worker Shortage

SB

ANALYST Collard

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

$5,000.0

Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to HB 259, SB 284, HB54, HB95, HB190, HB215, HB221, HJM4, HB203, HB264,

SB83, SB163, SB180, and SB192

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY06

FY07

FY08 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total

$70.0

$70.0

$140.0 Recurring General

Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Health (DOH)

Health Policy Commission (HPC)

SUMMARY

Synopsis of Bill

House Bill 304 appropriates $5 million from the general fund to DOH for the purpose of provid-

ing assistance in addressing the shortage of health care professionals in rural areas of New Mex-

ico.

FISCAL IMPLICATIONS

The appropriation of $5 million contained in this bill is a recurring expense to the general fund.

House Bill 304 – Page

2

Any unexpended or unencumbered balance remaining at the end of FY07 shall revert to the gen-

eral fund.

SIGNIFICANT ISSUES

DOH indicates the bill would provide additional funds to DOH to address health professional

shortage areas and to seek methods by which to improve the number of health professionals in

rural areas. The Office of Primary Care/Rural Health currently administers the New Mexico

Health Service Corps, funded through state general funds to provide stipends for loan repayment

in Medically Underserved Areas (MUAs).

Many rural areas of the state are considered Health Professional Shortage Areas (HPSAs), desig-

nated as such by the federal government. Currently 31 of New Mexico’s 33 counties are desig-

nated as HPSAs. This designation provides a prerequisite to apply for National Health Service

Corps. In addition to HPSA designation, many communities are considered Medically Under-

served Areas or MUAs. This designation is a prerequisite to federal grant awards, generally as-

sociated with community health centers.

HPC indicates the bill addresses a long standing, difficult problem in rural New Mexico with the

shortages and availability of health care professionals. Almost every health professional that is

licensed in New Mexico is in short supply in most rural locations of the state. This includes phy-

sicians, dentists, nurses, dental hygienists, physical therapists, pharmacists, radiological tech-

nologists, dieticians, optometrists, medical technologists, audiologists, occupational therapists,

mental health professionals, social workers, and EMT-Paramedics as well as others.

HPC further notes the state has placed limited resources within DOH and, on an absolute and

inflation adjusted basis, has decreased the budget going to New Mexico Health Resources, the

agency the state has contracted with for health professional recruitment, from $262 thousand in

1991 to $200 thousand this fiscal year. This bill dramatically increases state resources that DOH

would have to utilize in the recruitment and retention of health professionals statewide.

ADMINISTRATIVE IMPLICATIONS

DOH indicates funding would be distributed through contractual arrangements. One additional

FTE, averaging $60 thousand, and administrative support of $10 thousand for computers, space,

computer licenses, etc., would be required to manage an appropriation of this size.

RELATIONSHIP

House Bill 304 relates to House Bill 259 and Senate Bill 284 both of which would appropriate

$1,280 thousand from the general fund to the Higher Education Department to increase the loan

award amount per student from $12.5 up to $80 thousand from the Health Professional Loan Re-

payment Program. Additionally, House Bill 304 relates to House Bill 54, which expands nursing

programs, House Bills 95, 190, 203, 215, 221 which deal with nursing programs and joint de-

grees at various universities, and House Bill 264, to expand dental residency programs. House

Bill 304 relates to House Joint Memorial 4, which defines rural school and rural school districts.

Finally, House Bill 304 relates to Senate Bill 83 for dental hygiene programs, Senate Bills 163

and 192, which deal with nursing programs and joint degrees at various universities, and Senate

Bill 180 to increase dental education slots.

House Bill 304 – Page

3

TECHNICAL ISSUES

HPC indicates the bill does not define “rural,” nor does it define “provider.” A rural area such as

Los Alamos has few, if any, shortages of health care professionals except for maybe a few select

specialists. Would a rural area such as Los Alamos qualify for these funds. Under the bill as

written, Corrales may be defined as a rural area though it is in very close proximity to Albuquer-

que, a city with minimal shortages.

Additionally, would every provider or only licensed providers be eligible for funds. Who would

be considered a provider of health. The bill needs specificity in this area.

Finally, HPC notes there are existing definitions of “shortage” which could be incorporated into

the bill.

OTHER SUBSTANTIVE ISSUES

HPC indicates, in the coming decade, the need for health services will continue to rise, possibly

rapidly, as New Mexicans age and expectations for health care grow. The supply of health care

workers is unlikely to keep pace with this demand as the workforce itself ages and as career op-

portunities continue to expand for women, who make up the vast majority of workers in many

health professions. Shortages are already serious today and are contributing to decreased access,

decrease quality, and result in higher costs of care. The current shortages are a warning for the

future. The shortages are likely to worsen as the baby boom generation begins to reach age 65 in

2010 and more and more health professionals retire.

Historically, New Mexico has relied on the marketplace to produce enough health professionals

and on the education and health sectors to assure that the workforce has the appropriate knowl-

edge and skills. The state government has played several important roles related to the work-

force, such as supporting public higher education, financing services through Medicaid, and li-

censing many health professions. Yet the state government does little health workforce planning

and given the seriousness of the shortages has actually devoted fewer resources to recruitment

and retention activities. While there has been substantial emphasis on educating and training of

especially physicians and nurses, the return on the monies the state has invested in workforce

development is marginal at best because of the exodus of new graduates and existing providers.

This is particularly true for the rural areas of New Mexico.

HPC research indicates, depending upon what set of assumptions are utilized, the state is short

between 300 and 500 physicians today (Blue Ribbon Tax Reform Commission 2003). The na-

tional rate of total physicians per 1000 population is 2.42 (excluding residents)-2000 average

benchmark. The New Mexico rate is 1.69 (2002 data).

Only Bernalillo (2.91) and Los Alamos

(2.92) counties exceeded this rate with Santa Fe County next at 2.23. The rest of New Mexico’s

counties are below 1.7 physicians per 1,000 population (Source: Physician Supply in New Mex-

ico 2003, HPC).

According to the New Mexico Center for Nursing Excellence’s 2006 Nursing Fact Sheet, “as of

2005 there are 14,736 registered nurses (RNs) and 2,977 licensed practical nurses (LPNs) with

New Mexico residency. The New Mexico nursing workforce has increased by 13 percent since

2001. However, over 44 percent of RNs and LPNs are over age 50 (up from 41 percent for RNs

House Bill 304 – Page

4

and 43 percent for LPNs in 2004). This means 44 percent of the New Mexico workforce will

need to be replaced over the next 15 years. In comparison, the national average age of nurses is

46.2 years.”

Center data also show that it was predicted in 2000 that “40 percent of the national nurse work-

force would be over age 50 by 2010. New Mexico exceeded that mark. Additional nurses will be

needed for the increased demand of a growing population (35 percent growth between 2000 and

2020) and a higher percentage of elderly (population over age 65 increasing by 74 percent be-

tween 2000 and 2020). 94 percent of the New Mexico RN workforce and 93 percent of the LPN

workforce are currently employed in nursing full or part time (91 percent in 2004).”

The New Mexico Department of Labor predicts “the state will need an additional 4,520 RNs and

680 LPNs by 2012.”

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

HPC states the connection between an absence of health personnel and increases in health insur-

ance premiums may seem incongruent. However, hospitals and other providers have increased

charges to cover, in part, the cost of nursing and other personnel that are in short supply. The rate

changes get passed on eventually to health insurance premiums that are increasingly unafford-

able. If businesses drop health insurance because of the costs and let their employees become

Medicaid eligible, if they are eligible or become uninsured, then the state ultimately pays for the

increase in Medicaid beneficiaries or uninsured. Either way, this is a “pay now or pay later" sce-

nario for the state. It appears that paying now would be much less expensive in the long term.

KBC/mt