The agency that runs Colorado’s Medicaid program has a plan to get out of the state budget crisis without making “draconian” cuts, but it likely will require decreasing payments to providers for a subset of health care services.
Colorado faces a roughly $783 million budget shortfall because of federal tax changes signed into law by President Donald Trump last month that cut into the state’s revenues. Lawmakers, who already made cuts to close a $1.2 billion gap this spring, will return to the statehouse next week to look for solutions.
Since Medicaid accounts for about one-third of the state’s budget, the odds of closing the hole without touching it are virtually nil, Kim Bimestefer, executive director of the Colorado Department of Health Care Policy and Financing, said Tuesday.
The department framed limits as bringing services in line with national norms, but some people, such as those who received therapy multiple times a week, could see cutbacks. Providers could also decide not to see Medicaid patients if rates drop, or if they think the state’s process for authorizing services is too difficult.
Medicaid covers about 1.3 million people in Colorado, with a budget of about $18.2 billion, including $5.5 billion in state general funds. About 4% of the budget goes toward administrative costs, Bimestefer said during a webinar.
Bimestefer said the department’s plan is to:
- Decrease spending on services whose costs have increased dramatically faster than the cost of health care in general
- Apply for any federal money available
- Ask the legislature to delay upcoming policies that would increase costs
- Encourage investments in education and workforce development, so fewer people have low incomes and need Medicaid
In some cases, the agency may decrease rates paid to providers or require them to seek permission before performing services, Bimestefer said.
“Our fiscal reality has changed, so we must change,” she said.
The cost of Medicaid has increased annually by an average of 8%, which isn’t sustainable when the state’s revenues can only increase by the rate of inflation, which is closer to 3% or 4%, because of the Taxpayer’s Bill of Rights, which requires the state to refund any revenue it collects above a capped rate, Bimestefer said.
Long-term services and supports to people with disabilities are driving the increase, while payments to physicians have risen at a more sustainable rate, and spending on labs not affiliated with hospitals has gone down, she said.
Spending on generic drugs has risen by about 2% per year, which is manageable, said Tom Leahey, the department’s pharmacy office director. Costs for specialty drugs used by relatively few people have risen much faster, and the state is exploring price negotiations and importing medication from Canada to bring that spending down, he said.
The cost of mental health services has risen dramatically, particularly since the state stopped requiring providers to seek prior authorization before giving psychotherapy, deputy Medicaid director Cristen Bates said. Some patients are receiving therapy multiple times a week and peer support services for eight hours a day, which suggests providers don’t understand the standards for appropriate care, she said.
“We have to move from an expansion mentality to sustainability,” she said.
In some cases, providers may be willfully taking advantage of the system, Medicaid director Adela Flores-Brennan said.
Lawmakers opted to cover applied behavior analysis, a process of teaching autistic children to perform tasks of daily living and to function in classroom settings, but some companies that bought clinics are charging for services by staff without credentials or even the time that their patients spend napping.
If the department determines providers are committing fraud, it will refer the cases to the Colorado Attorney General’s Office, Flores-Brennan said.
The cost of providing medical care will continue to rise faster than general inflation, so the state needs to make changes now to avoid severe rate cuts in the future, Bimestefer said.
“We need to keep our eye on the prize, on affordability overall,” she said.
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