Impact Analysis of the 20% Reduction in VA Home-Care Reimbursement Rates in New Mexico: Rural-State Cost Drivers and Economic Pressures

by: Jahnelle Garcia, MSN, FNP-C Nurse Practitioner

Candidate for New Mexico House of Representatives – District 27

The 20% reduction in Veterans Affairs (VA) home-care reimbursement rates in New Mexico represents a destabilizing force within an already fragile healthcare ecosystem. New Mexico is the only state subjected to this reduction, other than an area in Texas to match the rest of the state, creating an inequitable and disproportionate burden that threatens agency viability, workforce stability, and Veteran health outcomes.  To fully understand the harm caused by this reduction, it is essential to recognize that New Mexico is not a typical operating environment. Its extreme rurality, combined with unique state-level mandates, high minimum wage requirements, intense inflationary pressures, and unusually high indirect operating costs, make home-care delivery far more expensive here than in other states. A 20% reduction in reimbursement is not simply a financial adjustment, it is an existential threat.

This analysis examines the economic, demographic, and systemic implications of the cut, emphasizing its impact on New Mexico’s most vulnerable Veterans.

I. New Mexico’s Rural Healthcare System Is Already in Crisis

New Mexico has one of the most challenging healthcare landscapes in the United States:

• Over 90% of New Mexico counties are federally designated Health Professional Shortage Areas (HPSAs).

• Large rural, Tribal, and Pueblo communities lack basic access to medical providers, hospitals, or home-care agencies.

• Worker shortages and burnout are chronic across home care, nursing, and allied health sectors.

In these areas, home-based care is often the only viable method of reaching Veterans. Agency staff routinely drive 50–100+ miles per visit. Veterans who live in remote areas cannot simply be sent to the nearest clinic or facility, because many have no such facility within reasonable distance.

Cutting reimbursement in a state this rural accelerates the collapse of an already strained system.

II. The Economic Realities of Doing Business in Rural New Mexico

New Mexico is uniquely expensive and uniquely rural, creating structural cost burdens not seen elsewhere.  This analysis focuses on the broader, systemic cost factors that make New Mexico fundamentally different.

1. Labor and Wage Pressures

New Mexico has one of the highest minimum wages in the country:

• State minimum wage: $12/hour (nearly 200% of the federal minimum).

• Santa Fe wage escalating to $17.50 by 2027, creating additional upward wage pressure across the state.

• Competition from retail, hospitality, cannabis, construction, and tourism sectors pulls workers away from caregiving roles.

This means agencies cannot simply “pay low wages”, they must maintain very high wages to keep a workforce at all, especially in rural counties where alternative industries are aggressively hiring.

Inflation compounds this pressure. Caregivers are leaving the field for marginal increases in hourly pay, and the 20% reduction will make wage competitiveness impossible.

2. Travel Burdens Unique to Rural New Mexico

New Mexico’s geography adds operational challenges that do not exist in most states:

• Caregivers often travel 50–100+ miles per shift, sometimes more time driving than providing care.  New Mexico requires that caregivers are paid for their driving time or miles.

• Fuel in rural areas is often significantly above national averages.

• Road conditions, weather, and lack of infrastructure increase time and vehicle wear.

Travel cannot be billed, reductions in payment directly eat into the funds that cover travel that is required under state law.

In a rural state, travel is not a fringe expense,it is one of the core costs of doing business.

3. Unique Regulatory and Business Costs in New Mexico

New Mexico agencies face several major cost drivers not present in many other states:

Healthy Workplaces Act (HWA)

Mandates paid sick leave statewide, an important protection, but one that adds substantial cost for employers in a low-margin industry.

New Mexico is one of the only state where home-care agencies must pay GRT on VA reimbursement, GRT is only not applicable if the patient is a Medicare recipient.

This means over 7% of our revenue goes straight to the state before a single operational expense is covered.

This alone reduces net operating revenue far below the national average.

Other Required Costs Include:

• Workers’ comp and liability insurance

• Electronic health records (EHR) systems

• Fingerprinting, background checks, onboarding

• Annual training and continuing education

• Payroll taxes and rising healthcare premiums (40% increase in most health plans in 2025), which the state requires employers pay 50% of health insurance costs. 

• Compliance with state and federal documentation standards

These are unavoidable statutory and regulatory obligations. A 20% reduction in reimbursement means agencies will operate at unsustainable negative margins.

4. Rising Cost of Living and Inflationary Pressure

The last five years have brought:

• 30%+ increase in housing costs statewide

• Surging rents in Albuquerque, Santa Fe, and Las Cruces

• Nationwide inflation disproportionately affecting rural communities

• Steep rises in food, utilities, and fuel

Caregivers, many earning close to the minimum wage, cannot absorb these increases. Agencies are already raising wages annually simply to maintain staffing. Even keeping reimbursement rates the same results in shrinking operating margins due to inflation.

A 20% decrease is financially catastrophic.

III. New Mexico Veterans: A High-Risk, High-Need Population

New Mexico’s Veteran population is uniquely vulnerable:

• 8.3% of adults are Veterans, above the national average.

• 36.5% live with a disability, one of the highest rates in the country.

• Over 20,000 Veterans face housing instability or cost burden.

Many Veterans rely on home care for:

• Wound care

• Mobility assistance

• Medication management

• Activities of daily living

• Chronic condition monitoring

Without these services, their health rapidly deteriorates.

IV. Healthcare and Economic Impacts of the 20% Reduction

1. Increased Institutionalization and Higher Federal Costs

Home care in NM typically costs $68,000–$75,000/year, while nursing home placement exceeds $100,000/year.

A reimbursement cut of this magnitude will:

• Force more Veterans into facilities

• Increase federal expenditures

• Increase hospitalizations

• Increase Veteran care delays

• Reduce quality of life

• Lead to greater functional decline and depression

Congress recently raised the VA’s spending threshold from 70% to 100% of Skilled Nursing Facility (SNF) rates, signaling a clear policy preference:

Invest more in home care, not less.

The rest of the entire United States home care rates in the VA fee schedule either stayed the same or receiving increases, which shows that there was not an overall budget cut. 

This reduction is the opposite of national policy direction.

2. Increased Medical Complications

Without consistent home care, Veterans are at higher risk for:

• Hospitalizations

• Emergency room visits

• Pressure injuries

• Infections

• Falls

• Worsening chronic diseases

• Premature mortality

These outcomes are preventable, and far more expensive.

3. Agency Closures and Loss of Rural Coverage

Many agencies report they cannot survive past January 1, 2026 under a 20% reimbursement cut because:

• Net margins become negative

• Wage competition becomes impossible

• Travel and regulatory costs cannot be covered

• GRT alone consumes much of the remaining revenue

Entire rural counties risk losing all home-care providers, leaving Veterans with no support.

V. Unified Agency Response:

A unified coalition, with aligned messaging and coordinated data

1. New Mexico’s extreme rurality and unique operational challenges

2. Unavoidable state-level cost drivers (Inflation, rising housing costs, GRT, HWA, high minimum wage)

3. The fact that simply maintaining current rates still results in shrinking operational margins

4. A 20% reduction is fatal, not just inconvenient

5. Home care saves federal money compared to institutional care 

   
   

Conclusion

The 20% VA home-care reimbursement reduction in New Mexico is uniquely destructive. In one of the most rural, most healthcare-underserved state in the nation, with high Veteran disability rates and unusually high operational costs, this reduction is unsustainable.

If allowed to stand, it will:

• Close agencies

• Eliminate home-care access for entire regions

• Force Veterans into facilities

• Increase federal spending

• Deteriorate health outcomes

• Remove the last remaining healthcare lifeline for thousands of rural Veterans 

Reversing the reduction is essential to preserving Veteran autonomy, protecting healthcare access, and preventing a statewide care crisis.

Over SIX YEARS.  There have only been 7 decreases.  Ever.  Every single other state and year, rates were increased or stayed the same.

This reduction will cause further delays to care, and leave Veterans at risk for hospitalization and death, as well as not receive necessary services in their home that they rely and depend on.