Colorado’s Medicaid caseload nearly doubled in the past two years after the state expanded coverage, surprising state budget officials and putting more pressure on state coffers.
And in 2017, the federal government will start decreasing the percentage of the expanded population it funds, raising concerns about a budget crunch caused by hospital provider fee income clashing with Taxpayer Bill of Rights limits.
Linda Gorman, who studies health care issues for the Independence Institute, said the Medicaid expansion has been a disaster for the budget and patients.
“It’s a really clunky program and turned into this behemoth,” she said.
But John Bartholomew, chief financial officer of the Colorado Department of Health Care Policy and Financing, said the state would have likely seen a flood of new people qualifying for Medicaid even without the state’s decision to expand.
“We’ve seen numerous other states that didn’t expand affected because of this (Affordable Care Act) mandate,” he said.
As part of the push for universal health coverage, the federal government agreed to pay to cover people who earned up to 133 percent of the federal poverty level until 2017, when the federal percentage will drop over subsequent years to 90 percent in 2020.
Colorado was one of more than 30 states that took the feds up on the offer.
But the publicity surrounding the ACA mandate brought in a substantial group of people who qualified for Medicaid under the old guidelines and the state had to carry as much as 50 percent of those costs.
These so-called “welcome mat” Medicaid recipients cost state taxpayers $29.7 million in 2014-15, while the federal government paid $40.3 million for them. The “welcome mat” caseload was estimated at 29,665 in 2014-15, growing to 39,818 in the next fiscal year, budget documents show.
Overall, including the federally covered expanded population, HCPF initially estimated about 160,000 participants would qualify for Medicaid in the first year but were surprised when that figure nearly doubled to more than 300,000.
The state concedes that early projections were way off.
The “caseload growth that is attributable to Medicaid expansion has been much greater than projected in February 2014,” HCPF officials wrote in a budget report to lawmakers.
Bartholomew said state planners had no idea the push to get people to sign up for insurance under the ACA would result in so many finding they were eligible for government-funded health care, but that happened because people signing up for insurance are first screened for Medicaid eligibility.
Since the initial underestimate, state projections have been right on the mark, Bartholomew said.
“Our forecasts have been to one thousandths of one percent,” he said.
Overall, Colorado had less than 700,000 people covered by Medicaid in 2012-13, but now about 1.29 million residents – nearly a quarter of the population – get their health care paid for by taxpayers, state budget figures show.
Projections show that caseload will increase to 1.4 million people by 2017-18, though year-over-year percentages will decrease to 4 or 5 percent a year after June 2016.
Between 2013 and this year, Medicaid figures show that Colorado had a 64 percent increase in Medicaid and related programs compared to 23.3 percent nationwide.
As the federal government ratchets down the percent it covers for the expanded population, Colorado has been collecting money to cover its extra costs with a hospital provider fee of 5.5 percent. The state spent about $4.3 million in 2014-15 from the fund, but budget planners expect that to skyrocket to $101 million by the 2017-18 fiscal year, according to figures Watchdog.org obtained.
That causes state budget problems because state revenue is limited by the Taxpayer Bill of Rights, which requires a refund to taxpayers if revenues exceed its limits. The hospital fee counts towards that ceiling.
“At the present time, both available forecasts show that the State will not be able to retain all of the revenue available, and the excess revenue is a refund liability in the General Fund,” Gov. John Hickenlooper wrote in his budget letter to the General Assembly. “However, the presence of refunds under the revenue limit established by the Taxpayer’s Bill of Rights (TABOR) is the result of cash fund revenue collected outside the General Fund, notably the hospital provider fee established in House Bill 09-1293.”
Hickenlooper, in the letter, proposed a reduction in the fee for next year’s budget, resulting in $100 million fewer collected, to take pressure off the budget.
Colorado Hospital Association spokeswoman Cara Welch said the group’s members support the fee because it helps provide coverage for all residents.
“The expansion has benefited Colorado by expanding access to care for previously uninsured populations, significantly reducing uncompensated care and lowering the under-reimbursement for Medicaid, which lowers costs for privately insured patients,” she wrote in an email exchange.
Last session, a bill would have exempted the hospital provider fee from state income limits, but it failed.
Gorman said the fee is a huge tax increase passed on to consumers and whether it is coming from the feds or the state, taxpayers are on the hook for billions of dollars because of the decision to expand Medicaid.
“It’s taking a lot of money out of the private sector,” she said.
Originally published at ColoradoWatchdog.org.