For years, lawmakers in Colorado have talked about fundamentally changing the state’s health care system. They’ve talked about creating more competition in the insurance industry or providing subsidies to make coverage more affordable. They’ve talked about tackling hospital prices and trimming profits.
And, now, after all that groundwork, the coronavirus pandemic has come along and flipped the table.
In the coming months, the state expects to add a half million people to its Medicaid rolls due to coronavirus-related job losses, bringing enrollment in the program to more than 1.8 million people. By December, nearly one out of every three Coloradans will be covered by Medicaid.
“This is unprecedented,” said Kim Bimestefer, the executive director of Colorado’s Department of Health Care Policy and Financing, which administers Medicaid in the state.
The surge is bigger than when Colorado expanded Medicaid under the Affordable Care Act — when the state added 400,000 people to the rolls over a 2-year period. It is larger than during any previous economic crisis. Combined with the roughly 14% of Coloradans who are on Medicare, it means that, for at least a brief period, nearly half of the state will be covered by a government-run health plan.
“It’s the biggest, fastest growth in Medicaid that we’ve seen in this state,” said Joe Hanel, a spokesman for the nonpartisan Colorado Health Institute. “And it’s a bigger step toward single payer than anything the state has contemplated through public policy.”
Part of the surge is expected to be short-lived. As a condition of receiving federal stimulus money, Colorado Medicaid officials aren’t allowed to disenroll anyone from the program until the official federal COVID-19 public health emergency declaration ends — expected sometime around the first of the year. When that happens, the state expects about 300,000 people who have since returned to work to drop off the Medicaid rolls, still leaving at least 200,000 added members in the program for months or years into the future.
And that long-term change will have wide-ranging impacts on the state’s health care system. Here’s a look at some of them.
Hospital profits will take a hit
Most of the people who are expected to join Colorado’s Medicaid ranks in the coming months are people who used to be covered by health insurance through their employers — until they lost their jobs in the coronavirus downturn. Because Medicaid pays less than private insurance, this massive “shift in payer mix,” to use the industry term, will result in a lot less money coming in.
When the Colorado Health Institute crunched the numbers, it estimated that hospitals can expect to see $500 million less in revenue over the next year.
Katherine Mulready, the Colorado Hospital Association’s chief strategy officer, said her organization’s own projections put the impact from increased Medicaid enrollment higher — around $700 million to $800 million less in revenue.
“That’s obviously a challenging financial fact of life right now, but we are immensely grateful that these people who are getting Medicaid can still access coverage,” she said. “That is a policy victory for the state of Colorado.
Overall, Mulready said hospitals expect to lose somewhere north of $4 billion in revenue this year, with much of those losses attributable to the 6-week total shutdown of elective surgical procedures and the ongoing wariness of patients worried about seeking care at a hospital during a deadly pandemic. Hospitals have also spent huge sums renovating entire floors or building wings to handle the tide of coronavirus patients.
The losses will be offset by about $1 billion in federal stimulus dollars. But Mulready said she does not expect any hospital in the state to see a profit from patient revenue this year. Whether a hospital makes any money at all, she said, may depend solely on the fortunes of their investment portfolios — which, for some bigger hospital systems, can be quite large.
In recent years, hospital profits in Colorado have exploded. One analysis found that Denver-area hospitals raked in more than $2 billion in profits in 2018.
“It’s a really different financial picture for hospitals right now,” Hanel said.
Hospitals will likely respond by raising prices
Hospitals have long argued that Medicare and Medicaid don’t pay enough to cover the actual costs of care and that they need to compensate for those lower rates by charging higher prices to people with private insurance.
(Colorado officials have long argued that hospitals take this business model of “cost-shifting” too far. A report from Bimestefer’s department earlier this year argued that hospitals achieved higher profits by shifting billions of extra dollars in costs onto privately insured patients.)
Now, with hundreds of thousands of people moving onto Medicaid, Mulready said hospitals will likely cost-shift even more — meaning people with private health insurance will be charged higher prices.
“If you assume that hospitals break even, every single dollar they are losing on Medicaid, they will have to recoup from privately insured patients,” she said.
But, with fewer people left in the privately insured market to make up the deficit, there might be a limit to how much hospitals can raise prices, Hanel said.
“That business model, is that even valid anymore?” he asked.
Mulready said no one really has an answer to that question.
“I think COVID fundamentally changed all of the assumptions and all of the realities of hospital finances,” she said. “They will never look the same. Utilization will never look the same. We don’t even know if (the) payer mix will look the same.”
Access to health care will become a much bigger issue
When the Colorado Health Institute asked people last year whether they’d had trouble finding a medical provider who would take their insurance, Medicaid recipients responded the loudest. Around 20% of people on Medicaid said that had been a struggle — compared with just over 7% of people who had private insurance through an employer.
As more people join the Medicaid rolls, Hanel said the focus in the health care debate in Colorado may shift from affordability to access.
“The big question, to me, is that access-to-care question,” he said. “If people need care, are they going to be able to get it?”
Bimestefer said she is committed to making sure people on Medicaid are able to receive high-quality care. Her department has launched a new initiative bluntly called, “We’re Here for YOU, Colorado!” to help people apply for Medicaid and connect them with resources and to help set up medical providers to accept the coverage.
“The state is prepared,” she said on a call with reporters earlier this month. “We had more than a 10% increase in providers in the last year.”
But Mulready said there is something else the government — namely, the federal government — could do to improve access for Medicaid while also reducing the cost-shift to the privately insured: It could put more money into the programs.
“One of the stark realities is that it is really important for public entities to pay their fair share,” she said. “Medicaid cannot continue to pay at a loss. Medicare cannot continue to pay at a loss.”
Calls to reform the system will grow louder
As Mulready’s proposal illustrates, there is an increasing sense in the world of health policy that the pandemic and all its impacts have strained the system beyond its limits. Something has to change.
Nationally, there’s been strengthened calls to create a universal, single-payer health care system. In Colorado, state Rep. Dylan Roberts said he fully intends next legislative session to bring back his plan for a version of a public health insurance option.
Roberts’ idea, which was backed by Gov. Jared Polis and legislative leaders, would have limited what hospitals could charge on services for people covered by the plan and then would have required certain insurance companies to offer the plan to consumers. The goal was to create affordable insurance that people could buy on their own — and that remains in place even if people lose their jobs.
“That shows me why the public option is needed now more than ever,” Roberts, D-Avon, said of the pandemic job losses. “We need a more affordable option that is not tied to somebody’s employment status.”
His bill this year cleared its first committee vote before being culled when legislative leaders sought to streamline for a pandemic-shortened session. Hospitals had vehemently opposed the plan — arguing it would be a huge hit to their finances. Roberts said he’s willing to revisit how the proposal is structured to address hospitals’ post-pandemic financial concerns, but he doesn’t foresee any major changes to it.
“We don’t want to do anything that would ever put our health care system in a worse-off place as we try to respond to this pandemic,” he said.
Changing the system may become harder
But hospitals say any idea that cuts even deeper into their revenues is just not feasible anymore — which leads to one, final conclusion: If changing the system was hard before, it might be even harder now.
Insurance prices — despite massive efforts by Polis and his administration to drive them down — could be back on the rise. The state government has less money to implement big transformations. And hospitals may not have the fat profit margins that lawmakers previously targeted to pay for reform plans.
“Hospitals, just frankly, don’t have any more to give,” Mulready said. “There’s not anything more they can take, particularly as COVID is anticipated to be a prolonged crisis over a period of months and years.”
So where does Colorado’s health care system go from here? Hanel said it’s uncharted territory.
“It’s an unplanned experiment,” he said. “It’s going to be tough for everybody — hospitals, the state government, members of Medicaid, doctors. Just everybody is going to have a challenging year.”