Colorado’s Medicaid program has faced significant issues, particularly regarding rising costs and fraud, largely due to reliance on an inaccurate analysis. Recently, it was reported that state officials recommended nearly tripling reimbursement rates to Congress based on this flawed assessment.
After three years, the state eventually decided to reduce those rates. By then, expenditures on vital transportation services had surged to over $300 million annually, a staggering increase from previous amounts before toll rises, according to legislative analysts. The program had also begun tackling fraud, as an influx of new providers contributed to problems—some were allegedly cramming cars full of patients to maximize mileage compensation.
In 2021, before the rate increase was sanctioned, a state advisory committee flagged that transportation companies were underpaid for ferrying Medicaid patients to regular medical visits. However, the analysis that justified the higher rates seemed to improperly juxtapose how Colorado compensates for mileage compared to federal guidelines and other states’ payment methods, especially for ambulance services.
This created a misleading equivalency that seemed to push state officials into treating standard vehicles like emergency transport.
The flawed analysis set a new standard for mileage reimbursement, gauging against what Medicare, another government-backed insurance scheme, and various states were disbursing. Yet, the Medicare billing codes scrutinized were mainly for ambulance transport. Interestingly, many states had better rates than Colorado did, even before the hikes. For instance, Ohio compensated $1 per mile for wheelchair transport, while Arizona’s rate was $1.53, and New Mexico reached $1.76 in 2023.
In stark contrast, Colorado’s fee jumped to $6.10 after adopting recommendations from state Medicaid officials, a nearly $4 surge that one transit agency labeled “shocking.”
“The core issue, which HCPF hasn’t fully acknowledged, is that the reimbursement rates were so enticing they led people to commit fraud,” said provider Ross Peterson in a recent discussion.
The Colorado Department of Health Care Policy and Financing (HCPF) manages Medicaid, which primarily serves low-income individuals. Peterson noted he had previously sent an extensive memo to HCPF’s leadership about these concerns.
In an initial response, HCPF spokesperson Mark Williams conceded that the more costly ambulance codes were mistakenly applied to regular transport rides. To crack down on the fraud issue, HCPF analyzed mileage rates and determined that Colorado’s rates could make it a target due to their comparatively high values.
“The adjustments to rates in 2022 came during a tumultuous period marked by pandemic-driven labor shortages, rising fuel costs, and access issues,” Williams explained in a follow-up statement. He added that the priority was to ensure ongoing access to essential healthcare for members. As usage and spending soared beyond what was expected, further scrutiny led to adjustments in the rate structure and heightened oversight to mitigate risks.
The financial impact of the rate changes was almost immediate. In the fiscal year 2022, the non-emergency medical transportation program cost $70.5 million. After the increase took effect, costs skyrocketed to $211.9 million, with projections estimating $303 million by fiscal year 2024.
Despite warnings about the risk of fraud, the issues persisted. A year after implementing new fees, state officials announced efforts to combat what they described as an international scam, which had already resulted in a loss of at least $25 million. Drivers exploited the system, transporting numerous patients across the state to enhance mileage reimbursements.
Some indicted drivers even billed for rides that never happened, including instances involving deceased patients.
Williams maintains that the mileage rates aren’t the core issue, attributing the problems to providers misusing billing codes and HCPF lacking robust safeguards against rampant abuse. However, recent reports indicate that HCPF staff directed providers to use ambulance codes for regular trips in multiple instances.
Two providers indicated that outpatient transport is similar to standard vehicle service, suggesting HCPF may be conflating terms. Jason Brabson, a trucking company owner in Fort Collins, stated that many providers in the Denver area utilize a broker, Transdev, to process their claims.
“So, let’s ask,” Brabson noted. “Who is responsible here? HCPF sets the rates, reviews them, processes invoices, and handles payments through Transdev.”
Transportation companies had foreseen fare increases, urging HCPF to consider inflation rates long before the hikes were implemented. Kelly Millan, who leads a transport firm in Grand Junction, indicated that their alliance raised alarms about excessive payments back in 2022 or 2023. “We aim to protect these programs because unnecessary spending can impact us negatively in the long term,” she highlighted.
Nevertheless, Peterson, who facilitates transport in Denver, stated that he had tried to alert HCPF about rate inefficiencies before the 2021 assessments led to complications. He and Millan reported receiving no responses from the agency.
Officials, including HCPF Executive Director Kim Bimestefer, pointed their fingers at fraud as the primary cause of soaring costs. According to Adela Flores-Brennan, Colorado’s Medicaid director, fraud had notably escalated the program’s growth over recent years. Yet, the losses to fraud, while significant, constitute only a fraction of mounting costs.
Williams emphasized that rising costs stem from multiple factors, including increased demand for services, challenges brought by the public health emergency, and ongoing program expansion. While fraud certainly played a role, he stated that improving program integrity remains a key focus for HCPF.
Recent feedback from legislative staff echoed existing issues, revealing that Medicaid made billing errors for five years. They determined that patients with larger wheelchairs benefited from more favorable rates, leading to costly discrepancies.
Lawmakers have called for major reforms in HCPF and Medicaid governance structures amidst rising budget deficits. Criticism over the identified billing missteps, especially regarding the wheelchair situation, has been strong. As discussions continue on additional funding for HCPF, some officials express concern over the impact of ineffectiveness within the transportation program.
“We cannot afford further shortcomings when it comes to caring for our state’s most vulnerable,” one senator remarked. “When cuts to care are on the table, we must ensure these failures do not happen again.”
