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

SPONSOR Snyder

ORIGINAL DATE

LAST UPDATED

1/23/08

HB

SHORT TITLE Senior Citizen Prescription Drug Tax Credit

SB 113

ANALYST Francis

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

FY10

(25,822.3)

Recurring General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Health (DOH)

Human Services Department (HSD)

Response Requested by Not Received From

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

Senate Bill 113 creates a new personal income tax credit for NM residents who are 65 and older

for up to 75 percent of the taxpayer’s actual unreimbursed expenditures on prescription drugs.

The credit is refundable so if it exceeds the taxpayer’s liability the excess is refunded. The credit

cannot be taken if a federal credit or deduction was claimed. Taxpayers who were inmates of

public institutions for more than six months or who were not physically present in the state for

six or more months are ineligible for the credit.

The credit is effective for tax years beginning on or after January 1, 2008, and there is no sunset

or repeal date.

FISCAL IMPLICATIONS

TRD has not completed its analysis of SB113 and so the fiscal impact reported here may

change. The estimate below is based on the 2006 consumer expenditures on “Drugs" for 65 and

Senate Bill 113 – Page

2

older. The eligible population is determined by the population over 65 in NM adjusted for part

time residency and insurance participation (both no credible and estimated creditable coverage).

Insured are assumed to be ineligible even though many will likely have unreimbursed expenses

that would qualify for the credit. Since it is a credit on personal income tax, the full 2008 tax

year fiscal impact will be realized in FY09.

LFC Estimate of SB113

Spending on drugs for over 65

887.00

$

Number over 65

242,600

Full year resident

194,080

No credible coverage or uncertain coverage

20%

Eligible population

38,816

Total Expenditure on Drugs

34,429,792

$

Size of Credit

25,822,344

$

Source: Consumer Expenditure Survey, TRD 2005 Tax Facts, Kaiser Family Foundation

SIGNIFICANT ISSUES

HSD:

Most Medicaid recipients that are over 65 years of age are “dually-eligible" for both

Medicaid and Medicare and, as such, receive the majority of their prescription drug

benefit from Medicare Part D. Few, if any, full Medicaid recipients over age 65 would

have out of pocket expenses for prescription drugs. Recipients of some Medicaid

programs, such as Qualified Medicare Beneficiaries (QMB) and Low Income Medicare

Beneficiaries (SLIMBs, QI-1) may have out of pocket expenditures for prescription drugs

and could potentially be affected.

DOH:

People living with disabilities also often incur significantly large prescription drug costs.

Although some disabled people are eligible for Medicare, and therefore able to

Senate Bill 113 – Page

3

participate in Medicare Part D, many are not. For those that are on Medicare Part D,

people living with disabilities would benefit from this provision in the same way as

senior citizens would. For those not on Medicare Part D, who may or may not have

adequate health insurance with prescription drug coverage, it could be even more

important to extend the tax credit to them. The Aging and Long-Term Services

Department provides services and supports to all individuals in need of long-term

services and supports. We would recommend extending this tax credit to people living

with a disability as well as to those over the age of 65.

PERFORMANCE IMPLICATIONS

Cost is the issue with prescription drugs and while SB113 would relieve some of the cost to the

consumer the bill would do nothing to control the costs of prescription drugs. The credit would

be more efficient if it were combined with a state purchasing plan of prescription drugs or some

other method of controlling costs.

ADMINISTRATIVE IMPLICATIONS

TRD would face a significant administrative burden authenticating and validating receipts of

unreimbursed expenditures.

NF/bb