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Colorado hospitals hate the plan to cap their prices. Here’s how they want to control health costs instead.

The Colorado Hospital Association has lined up behind a “total cost of care” model similar to what is used in Massachusetts

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As Democrats at the state Capitol near the introduction of the long-awaited and hugely controversial bill to create a public health insurance option, Colorado hospitals on Tuesday unveiled their counter offer.

Their proposal is a “total-cost-of-care” model — essentially a big health spending budget for the state. An independent commission would be charged with setting a target to limit how much health care spending in the state can grow each year.

“It is all providers, all payers, for all Coloradans,” said Chris Tholen, the CEO of the Colorado Hospital Association. “It really is a focus on a common shared goal.”

It is also, clearly, the hospitals’ attempt to steer lawmakers away from a public insurance option, which many hospitals despise because it will likely give regulators the ability to tell hospitals how much they can charge people covered by the public option.

While it is theoretically possible that the public option and the total-cost-of-care proposals could work together, supporters of both made clear this week that’s not what they have in mind.

So, this is now one of the fights that will define the remainder of the legislative session: Should the state use regulatory muscle or gentler collaboration to save Coloradans money in the future on health care?

Colorado state Sen. Bob Rankin, R-Carbondale, speaks on Feb. 1, 2019, at a town hall meeting in Frisco on the high cost of health care in Colorado’s mountain communities. (John Ingold, The Colorado Sun)

“This is the long-term, big-picture of how we get the parties to work together,” said Sen. Bob Rankin, a Republican from Carbondale who plans to sponsor the total-cost-of-care bill at the legislature. “I believe it’s the wrong approach to pick a fight between insurance and hospitals.”

But Gov. Jared Polis, who is actively pushing for the public option, came out deeply skeptical of the hospitals’ new plan.

“People are tired of getting ripped off on prescription drugs and health care,” Polis spokesman Conor Cahill said in a statement Tuesday. “… Any bill addressing the total cost of health care would have to actually move the needle on lowering health care costs for patients and hardworking families. We would review any bill that the legislature approves on total cost of care through that lens. The public option recommendation put forth by this administration is a Colorado solution to our health care challenges.”

How total cost of care works

The hospitals’ proposal is based on programs already running in Oregon and Massachusetts. In the Colorado version, the governor and lawmakers from both parties would appoint members of an independent commission, which would scoop up a whole bunch of data and come up with a calculation of how much everyone and everything in Colorado spends, in total, on health care in a year.

Then it would set the goal for how much health care spending can grow over the next year, a target that applies both to the state as a whole and every entity within the system. In Massachusetts, for example, the state set its growth target for 2018 at no more than 3.1%.

The emergency room entrance to Saint Joseph Hospital in Denver, photographed on Oct. 22, 2019. (John Ingold, The Colorado Sun)

Hospitals, insurance companies and other health care entities in Colorado that exceed the target would first have a discussion with the commission about why — and then could progress to being hit with public hearings and a formal improvement plan. But there’s no provision in the draft bill that would allow the state to, say, revoke a hospital’s license if it doesn’t rein in costs.

“The purpose of this is to improve the system, not straight-up penalize folks,” hospital association lobbyist Joshua Ewing said at a stakeholder meeting Tuesday attended by dozens of other health care advocates and lobbyists.

This gets to the big, philosophical distinction between the total-cost-of-care proposal and the public option.

Total cost of care is a plan to limit the growth of overall health care spending over time; the public option is a plan to reduce what people are paying for health insurance right now — but it will be available initially only to people who buy coverage on their own.

Tholen said Massachusetts’ program has so far saved that state more than $5 billion in health care spending compared to what it was projected to spend without the program. And Ewing said Massachusetts has never had to impose an improvement plan on any organization for failing to meet the target. The spending target has given everyone something to work toward.

“You can’t hit a goal if you don’t set one,” Ewing said.

Why skeptics say it’s not enough

For supporters of the public option, all of this sounds like weak sauce. They say a commission that restrains the growth in spending might not be a bad idea — except that, in their view, spending is already out of control.

“If we’re not starting off by trying to reduce cost before we set those structures in place, it effectively cements the very high cost that consumers are being charged,” said Adam Fox with the Colorado Consumer Health Initiative, a public option supporter. “And that is not sustainable.”

DENVER, CO – JANUARY 8: Rep. Chris Kennedy joins other members and guests in the house chambers as the second regular session of the 72nd Colorado General Assembly convenes at the Colorado State Capitol on January 8, 2020 in Denver, Colorado. (Photo By Kathryn Scott)

State House Assistant Majority Leader Chris Kennedy, D-Lakewood, echoed that.

“We can’t pretend that this is going to be the big fix for health care costs,” he said.

And, to make his point, Kennedy also pointed to Massachusetts.

The state hit its 3.1% target in 2018, according to a report by public radio station WBUR. But health insurance premiums and the out-of-pocket costs paid by patients increased by more than that, and rising prices for health care services and prescription drugs are mostly to blame.

“Even with this moderate overall growth rate, the burden of health care costs on Massachusetts employers and residents continues to grow,” David Seltz, the executive director of the Massachusetts Health Policy Commission, said in a statement last October. “These findings indicate that further action and policy reforms are needed.”

Next steps

Both the public option and the total-cost-of-care bills are still in the drafting stage.

Rep. Dylan Roberts, an Avon Democrat who will be one of the public option’s sponsors, said he hopes to have a close-to-final draft of that bill done by the end of this week, with formal introduction as early as the end of next week.

The total-cost-of-care bill’s path to the statehouse floor is a little less certain. Rather than just introducing it as his own bill, Rankin said he is hoping to win support from his colleagues on the legislature’s Joint Budget Committee to introduce the bill as an official JBC bill. Rankin said the idea has bipartisan support, but it needs unanimous backing at the JBC — which is controlled 4-2 by Democrats — to become a committee bill. If that falls short, he or others might need special approval from legislative leadership to introduce a new bill this deep into session.

But, on Tuesday, Rankin was undaunted.

“We have work to do,” he said. “But we have a solid starting point.”


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