Medicaid Budget Concerns in Colorado
Mark Ferrandino, the budget director under Governor Jared Polis, shared some concerning news with state lawmakers on Thursday. He indicated that Medicaid could create a shortfall of up to $700 million in the current budget year, potentially rising to over $1 billion next year.
The primary factor behind this surge is long-term care for the elderly and individuals with disabilities. Although this group accounts for just 8% of the Medicaid population, they represent nearly half of the program’s costs.
Additionally, spending on behavioral health and pharmaceuticals is escalating rapidly. Ferrandino warned that if the situation isn’t addressed, Medicaid might consume nearly the entire General Fund within the next 14 years. Presently, it already takes up 40% of the General Fund.
Lawmakers were aware that a Medicaid crisis was on the horizon, so they established an interim committee to tackle expenditure control. However, the urgency and complexity of the task have increased. Ferrandino pointed out that Medicaid is growing at almost twice the speed of the General Fund, creating an unsustainable situation even if the state’s spending limits under the Taxpayer Bill of Rights were lifted.
“We need to think ahead. What’s the solution here? We got into this together, and we need to work on it collectively,” Ferrandino remarked.
Gretchen Hammer, recently appointed as the executive director of the Department of Health Care Policy and Financing, which oversees Medicaid, noted that an increase in enrollment, along with service utilization, is driving costs, especially in long-term care and behavioral health.
“We need to act this fiscal year to address these figures,” Hammer emphasized.
She acknowledged shortcomings in tracking expenditures for specific programs, such as a peer support initiative for individuals with substance use disorders. Initially estimated to cost $35,000 annually in 2021, it ballooned to $100 million in its first year and is now approaching $300 million.
“We rolled out this benefit, and it’s expanding dramatically. We should have recognized the warning signs much sooner,” stated state Senator Barb Kirkmeyer, a member of the Medicaid committee.
State Senator Kyle Mullica expressed concern that the Health Care Policy and Financing department should have anticipated these budget overruns.
“We need to establish guardrails. It’s crucial to ensure these funds are protected and used efficiently. It seems these safeguards come into play only after issues arise,” Mullica commented.
Advocates for long-term care services have urged lawmakers to implement budget reductions across the Medicaid system evenly.
“People are ready to share the burden, but they can’t be left in dire situations,” said Julie Reiskin, executive director of the Colorado Cross-Disability Coalition. “That’s what we’re aiming to avoid.”
Ferrandino warned that if the state does not intervene, expenditures for long-term care, behavioral health, and pharmaceuticals could double every five years. He noted that these three areas are responsible for $2.3 billion of the $2.7 billion General Fund spending increase on Medicaid last year.
While Medicaid spending is rising across the nation, Ferrandino highlighted that Colorado allocates more of its General Fund to Medicaid—particularly for long-term care—than nearly all but five other states.
Over the past eight years, the legislature and governor have approved 36 bills expanding Medicaid services, adding nearly $3 billion to overall spending.
