SANTA FE — New Mexico lawmakers have poured hundreds of millions of dollars into the state’s behavioral health system over the past three years, authorizing rate increases, boosting per-member payments to managed care organizations (MCO) and growing recurring appropriations by nearly half. According to a new Legislative Finance Committee report, patients have little to show for it.
MCO spending on behavioral health jumped 47% — roughly $230 million — between 2023 and 2025, driven primarily by a surge in mental health treatment costs, substance use disorder services and community-based care. The per-member-per-month rate paid to insurers for behavioral health services is now 60% higher in fiscal year 26 than it was in fiscal year 24.
Yet a 2025 Medicaid Accountability Report cited in the LFC brief found that network adequacy, provider access and behavioral health outcomes have not meaningfully improved since 2023.
Provider shortages remain stubbornly entrenched. Between 2023 and 2024, the number of prescribing behavioral health providers grew in only eight of New Mexico’s 33 counties. Non-prescribing providers expanded in only 14. In the remaining counties, provider counts either declined or held flat — even as reimbursement rates for the state’s 20 most common behavioral health procedures now meet or exceed what neighboring states pay.
The LFC brief notes that New Mexico’s Medicaid reimbursement rates are “on par or substantially higher than neighboring states,” undercutting the argument that low pay is driving providers away.
Enrollment in the Medicaid managed care program, meanwhile, has been falling since its 2022 peak of roughly 815,000 average monthly members, shedding approximately 65,000 members per year since the pandemic-era unwinding. Despite that decline, total costs have climbed sharply — meaning the state is spending more to serve fewer people, and those remaining enrollees are using more services at higher per-unit cost.
The LFC also flagged a significant problem with unspent funds. Of nearly $425 million in nonrecurring behavioral health appropriations between fiscal year 2020 and fiscal year 2025, 73% had not been spent at the time of reporting.
Legislative Finance Committee staff noted that previous analysis has found “mixed outcomes” following Medicaid rate increases and suggested that tying provider reimbursement to performance metrics could drive better results.
The brief was prepared ahead of an April 27 behavioral health update hearing.
