Governor’s nasty letter costs NM $100,000,000 in health exchange funding; NMHIX staff scrambling to build a new exchange

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Did Gov Martinez just blow up the health exchange?

A sharply worded letter from Governor Susana Martinez to the Secretary of Health and Human Services cost New Mexico almost $100 million in funding to build out and run our state’s health exchange, and that has exchange staff scrambling to build a new exchange without any money.

Did Gov Martinez blow up the health exchange?

Did Gov Martinez blow up the health exchange?

Staff of the health exchange (NMHIX) say that there appears to be no process to appeal or reapply and New Mexico appears to be the only state in the country denied funding to complete the build out of the state’s insurance exchange, publicly known as Be Well NM.

New Mexico has already received $122.3 million from the federal government ($34.3M in 2011, $18.6M in 2013, $69.4 in 2014) to set up and run the exchange through the end of 2014.

In November 2014, states were permitted to apply for additional funds to build out the remaining parts of their state-based exchanges and operate for three full years, beginning in January 2015.


New Mexico is a hybrid Exchange through 2015 with the SHOP operated by the NMHIX and utilization of the federal platform for individual enrollments. NMHIX is in the process of developing its own individual platform to be complete for open enrollment beginning October 1, 2015. NMHIX is working with HSD to develop a CMS-compliant eligibility verification process.

Through this proposal, New Mexico seeks $97.9 million for continued implementation of the NMHIX for the period January 2015 – December 2017. Ongoing maintenance and operations of the SHOP, starting in 2015, and ongoing maintenance and operations of the Individual Exchange, starting in 2016, will not be covered by this grant.

In other words, New Mexico has spent all of its money so far to build the first half of a state-based system. That’s why users of the website are directed to the federal health exchange website when they try to sign up.

So the state initiated the process to apply for more funding, as the NMHIX board explained in it’s January 9th report:

fr. NMHIX board presentation, Jan, 2015

The funding sought in November 2014 was to be used to move to a fully independent state-based exchange, run by and for New Mexicans. The application goes on to explain how the new funding will be used to build New Mexico’s own website and exchange to help applicants determine if they are eligible for Medicaid, or eligible for subsidies, and find plans available to them.

The second phase build out is a 20-month process that was supposed to start in January 2015 and run through September 2017, when New Mexico’s system would be run entirely in-state. There’s even a nifty timeline of all the things to be done:

Timeline for implementation of NMHIX, fr. NMHIX board presentation, Jan, 2015

Timeline for implementation of NMHIX, fr. NMHIX board presentation, Jan, 2015

But when the state submitted it’s application to the federal government for funding, it included letters from state leaders, including Governor Martinez and then-Secretary of Human Services, Sidone Squier.

NMHIX staff told their board in January that the feds specifically cited those letters in their denial.

“Letters attached to the application indicated [the] state was questioning the benefit of the changes that were required,” staff wrote in a January presentation to the board.

   Screen Shot 2015-02-02 at 8.14.43 AM

A copy of the application obtained by public records request show that letters from Gov. Martinez, then-Sec. Squier, Insurance Superintendent John Franchini and NMHIX Chairman James Damron accompanied the application. Only the letters from Martinez and Squier were critical of the federal grantors. Both Martinez and Squier used the same language in their letters.

Read the letter from Gov Martinez to Secretary Burwell of the US Dept. of Health & Human Services:

Problems reading the snapshots?  Read the full letters from Martinez, Squier and others on our Scribd page

“I am concerned, however,” Governor Martinez wrote, “that New Mexico’s need to apply for this additional grant funding is due to your department’s decision to require changes in our state’s exchange design.” “The amount of funding represented in the application greatly exceeds that necessary to produce our vision for an exchange,” she continued.   She went on to blame the federal agency, saying it had “exacerbated” problems by requiring New Mexico follow federal guidelines in building a one-stop-shop system for all New Mexicans.

Sidebar: Sidone Squier was a controversial member of Governor Martinez’s first-term administration. As Secretary of Human Services, she was responsible for overseeing programs to help the poor and hungry obtain services.

Emails obtained by public records request showed her telling staff that “there is no evidence of hunger in New Mexico” (NM has the highest rate of child hunger in the country). In another email exchange with staff obtained by the Santa Fe Reporter: Squier now says the governor was “never for Obamacare—never. She was always opposed to it.”

The letters and response from the feds point to another source of conflict between the grantor (US Dept. of HHS, CMS) and grantee (NMHIX). Letters from Martinez and Squier indicate that New Mexico was moving forward to build their own system that federal grantors never approved. There are also indications that, “compared to other states, NM wasn’t as far along” as it “should be in their build after this time and amount spent-to-date.”

There is no word from NMHIX where the $122 million that was already granted to build phase 1 was spent and how far off the mark it is from goals set for states.

“Most grantwriters I know will tell you that you don’t start asking for money by criticizing the grantor,” says Patrick Davis of ProgressNowNM. “That’s fundraising 101.”

“The governor and Squier could have taken a page from Chairman Damron’s book,” Davis adds. “He has been an outspoken opponent of Obamacare, but he bit his tongue and said ‘here’s our application, please give us the money.’  Apparently the governor couldn’t do that and that just cost us one hundred million dollars.”

Now what?

According to New Mexico’s own application to the feds, the state needed more than $97 million and nearly two years to complete the design and rollout of our own state-based exchange. Now that anti-Obamacare officials cost the state the resources to build our own system, NMHIX staff tell us they were sent back to the drawing board by board members to develop alternatives that can be implemented at much lower costs.

NMHIX Board Presentation, Jan 9, 2015

NMHIX Board Presentation, Jan 9, 2015

The options presented thus far are to either cancel our own build out and lease access from the federal government (similar to what we use now where applicants are simply routed to the federal website) or start from scratch, designing a new (presumably smaller) system that uses what’s left of other federal funding.  The presentation says staff are looking at ways to “reallocate This second plan also requires the board to develop a plan to “close the delta between available funds and costs” (as in, seek more money from other sources like the legislature).

Staff are also scrambling to “reallocate federal funds for other activities (outreach, broker support, etc).”

If the NMHIX settles on the latter plan, a request for a taxpayer-funded bailout could suck up almost all of the state’s projected budget surplus for 2015.

Not in the news

Why hasn’t this issue been covered by the state’s press corps? For one, NMHIX hasn’t made it a point to tell anyone.

The NMHIX website includes months of press releases touting enrollment numbers and reminding people to sign up for insurance. Super Bowl watchers saw numerous commercials for signups on Sunday. But the NMHIX did not announce to the press that it had lost this funding nor that a total redesign or suspension of the exchange was on the table for discussion at the most recent board meeting.

ProgressNowNM obtained a copy of the application and letters by public records request after being alerted to the meeting after the fact.

There is no word how New Mexico will continue to operate basic enrollment or other services which are all tied to federal funding. As of Monday morning, the new House Health Committee had not scheduled any hearings on the matter.

The Senate Rules Committee, however, is expected to take up the nomination of Brent Earnest as Governor Martinez’s appointee to lead HSD.


Screen Shot 2015-02-02 at 4.43.28 PMView the entire NMHIX Board Powerpoint presentation on the grant denial and future of the exchange on Scribd here.

Below is the full 151-page application, including the letters from Gov. Martinez and HSD.