Colorado might not meet Medicaid provider pay targets “for the long-term future”

In the 2022 legislative session, Colorado lawmakers passed a measure to review Medicaid provider payments more frequently as part of a broader push to boost health care worker pay at a time of widespread staffing shortages.

The measure, Senate Bill 236, ramped up the review timeline for dozens of publicly funded health care services to every three years from five, a move meant to enable the state to respond more quickly to medical providers facing financial crises.


But in year two, Colorado budget writers worry they’re already in danger of falling so far behind they may never catch up.

Medicaid provider rates are tied to a share of what the federal government pays for Medicare services, and vary by medical specialty. And when the reimbursement rates for some services fall behind, the review calls for targeted increases to bring their pay back to competitive levels.

This year, Colorado’s Medicaid Provider Rate Review Advisory Committee, or MPRRAC, recommended a $585 million reimbursement rate bump for 19 categories of health services up for review this cycle, a group that includes home-based care workers, EMTs and private duty nurses. Much of that would come from matching federal dollars, with the state general fund on the hook for $287 million.

Gov. Jared Polis’ budget request calls for a fraction of that — just $140,000 in general fund money to increase payments to home and community-based services — and cuts to others, like autism treatment providers who got targeted pay bumps within the last year.

And that’s just for the specialties up for review. His budget also proposes no across-the-board rate increase, meaning Colorado’s Medicaid providers would actually see their reimbursement rates for low-income patients shrink next year relative to inflation.

Colorado budget writers fear the state’s Medicaid program is on a financial path to something akin to a new negative factor — the former name of the K-12 funding shortfall that persisted from the Great Recession until this school year.

“It’s like we’ve created a new negative factor for Medicaid,” Joint Budget Committee Chair Jeff Bridges said at a November hearing. “I’m not happy about it, but I think that’s the place we’re in for the long-term future.”

Technically, lawmakers wouldn’t have to create another negative factor (later renamed the budget stabilization factor) in state law. The legislature did so as a legal mechanism to justify spending less on K-12 schools than the state constitution requires. And unlike K-12 education, there’s no constitutional requirement to increase spending on Medicaid each year.

Nonetheless, the state’s Medicaid program may be headed down a similar path to what schools faced in 2009, with the governor and lawmakers under pressure to forgo regular inflationary increases to balance the budget. Each year that lawmakers don’t fund rate increases that the review committee says are needed, the financial toll will only compound when the next group of medical services gets reviewed in the following year.

“We’re in a situation now with our budget that it is unlikely, unless something significant changes, that we are going to be able to match the MPRRAC recommendations really ever, moving forward,” said Bridges, a Democrat from Greenwood Village.

“I’m glad that we look at all of them every three years so that we have correct data as we have these discussions,” he added. “But I don’t see a world where we hit those numbers.”

The state must cut around $1 billion in spending next year to balance the budget before the new fiscal year starts July 1 — a deficit that’s driven in part by Medicaid patients simply using more care than they have in years past.

At the same time that Medicaid costs are rising more quickly, the state revenue cap under the Taxpayer’s Bill of Rights is growing more slowly due to cooling inflation, limiting how much the state can increase its budget.

That combination led Polis to limit increases in health care costs in his proposal for the 2025-26 fiscal year budget. But his plan is drawing fierce scrutiny from the JBC, which worries that the state’s health safety net is nearing a financial crisis.

Federal stimulus dollars are drying up at the same time Medicaid enrollment has fallen below pre-pandemic levels. Many of those who drop off the Medicaid rolls wind up uninsured, leaving some hospitals and clinics with their highest levels of uncompensated care since before the state expanded Medicaid under the Affordable Care Act.

A spokesperson for the Polis administration did not respond Wednesday to questions about the provider pay proposal. 

In a budget hearing last month, Sen. Barbara Kirkmeyer, a Brighton Republican, said she would push for deeper cuts to other areas in the budget in order to increase Medicaid provider pay.

“Our health systems … they’re on the edge and they are closing, they’re cutting staff, they’re reducing services,” Kirkmeyer said. “So for us not to consider this our most urgent need in this budget I think would be irresponsible.”

Bridges, however, suggested he isn’t sure the state can afford to do much more for Medicaid under TABOR without sacrificing things many lawmakers value more, like K-12 education. General fund spending by the Department of Health Care Policy and Financing recently surpassed that of the Department of Education for the most of any state agency. And health care accounted for more than half of the state’s general fund growth in the current budget year, which ends June 30.