Colorado’s Medicaid Changes Impact Mental Health Care
In Colorado, therapists providing services to Medicaid enrollees now need state approval if they want to conduct more than 24 sessions with individual patients in a year. This move aims to address concerns about budget overspending in the Medicaid program.
Governor Jared Polis directed the Colorado Department of Health Policy and Financing to reinstate prior authorization for outpatient mental health care. This decision came as part of a strategy to manage the funding gaps created by federal tax changes. The agency had pinpointed this requirement as a potential saving measure.
The recent changes follow the “big beautiful bill,” which left Colorado with a significant budget deficit of $783 million for this fiscal year. While some tax adjustments were made to help mitigate the loss, much of the burden to make cuts has fallen on the governor.
About a third of the $252 million in cuts proposed by Polis, as well as a sweep of unused funds, will come from the health department that oversees Medicaid. This includes rolling back planned rate increases for providers, reviewing questionable treatment claims for autistic children, and enforcing prior approval for outpatient therapy sessions exceeding 24 in a year.
The department estimates that this policy change will save approximately $6.1 million when it takes effect in January and runs until the end of the budget year in July.
Medicaid has always been responsible for covering medically necessary treatment. However, given current budget constraints, the department is under pressure to closely examine services that are driving up costs, according to Kristan Bates, the Deputy Medicaid Director. Without careful scrutiny, the alternative could mean cutting services for many individuals needing assistance.
Bates mentioned, “We’re reviewing all the programs under Medicaid.”
The 2022 legislation that allowed Medicaid to implement prior approval for outpatient psychotherapy has seen a rapid increase in the number of clients utilizing significant session counts. According to Bates, about 10% of Medicaid members received at least 26 sessions in the budget year that ended in June 2024, and the number of people having over 56 annual sessions rose after the law’s implementation.
While extended sessions might be medically essential for patients dealing with complex PTSD, they may not necessarily apply to those with more routine mental health challenges, she added.
The requirement for prior approval was rejected in only 2% to 3% of cases, so the expectation was that this change would primarily reduce paperwork. However, Bates noted that the earlier regulation seemed to influence treatment approaches among some providers.
Senator Judy Amabile, a Democratic representative from Boulder and a co-sponsor of the 2022 bill, expressed disappointment over the state’s reversion to requiring prior approval for outpatient psychotherapy.
The Joint Budget Committee has the option to re-evaluate the governor’s cuts and possibly address concerns about unfair treatment of mental health services. However, given the challenging budget climate, some sacrifices are likely unavoidable.
Amabile remarked, “Behavioral health often gets hit first when it comes to budget cuts. It’s shortsighted.” With a projected $840 million budget gap next year due to federal tax changes and rising Medicaid and education expenses, finding additional funding to reverse these cuts may prove difficult.
Some independent providers argue that outpatient therapy could ultimately save the state money. Dr. Lisa Griffith, a psychologist in Denver, voiced concerns that infrequent check-ins with patients might exacerbate their conditions, leading to more costly care in inpatient facilities. “We are the first line of defense and the most economical option for mental health treatment,” she emphasized.
Blair Skinner, Clinical Director at a Bloomfield child wellness center, acknowledged that more individuals seeking mental health care is a positive outcome after the stressors of the recent years. “It’s a real victory,” she stated, emphasizing the escalating demand for these services.
Skinner pointed out that requests for prior approvals soared to about 90% before the law change, and the associated paperwork can delay access to care. This situation can even necessitate hiring additional administrative staff instead of more clinicians, which complicates the process. “It’s more of a burden on us,” she observed.
