Colorado is hoping a just-under-the-wire application to the federal government will help soften the blow of Medicaid cuts in the One Big Beautiful Bill Act, the recently signed tax and spending measure.
The application is to create what is known as a state directed payments program. Such programs pull down extra federal Medicaid funding that can then be paid to health care providers with the goal of expanding access to care and improving the quality of the care.
Colorado submitted its application to federal health care authorities June 27. Seven days later, President Donald Trump signed the budget bill into law.
The timing is key because the bill puts limits on federal funding for new state directed payments, but “legacy” programs are exempt from those limits. Colorado believes that, by submitting its application prior to the bill being signed, its program will now be grouped in with the legacies.
In a briefing last month to the state legislature’s Executive Committee of the Legislative Council, Bettina Schneider, the chief financial officer for the Colorado Department of Health Care Policy and Financing, said if the program is approved it could mean up to $378 million in new federal funding per year.
Schneider said the money would “bolster payments for inpatient and outpatient services for urban and rural hospitals across Colorado, including psychiatric hospitals.”
That’s a lot of money, but it also wouldn’t come close to replacing what the state is expected to lose as a result of the bill. A change to a different funding mechanism known as the hospital provider fee could cut federal dollars coming to Colorado by $2.5 billion annually by 2032, Schneider said.
Meanwhile, the expected purge in the number of people covered by Medicaid in Colorado as a result of work requirements and new administrative rules would drop federal funding by another $3 billion, state budget director Mark Ferrandino said at last month’s hearing. All of this makes Medicaid funding a key issue to be addressed during the upcoming legislative special session, which starts next week.
“It’s significant and long term,” Ferrandino said of the bill’s impact on the state budget.
With fewer people covered by Medicaid, Colorado would also spend less on the program.
But the consequence is that hospitals are bracing for less money, too, as well as higher rates of patients not being able to pay. Hospitals are the largest beneficiary of Medicaid spending in the state, receiving approximately 22 cents of every dollar that Medicaid spends. When Medicaid rolls shed more than a half-million people following the end of the pandemic-era federal public health emergency, hospitals reported seeing a 40% increase in uninsured visits to their emergency rooms, according to the Colorado Hospital Association.
The One Big Beautiful Bill Act created a $50 billion fund to help support rural hospitals. Colorado is estimating it will receive at least $100 million a year from the fund for the next five years, Schneider said.
“This money will help our rural providers,” Schneider said, “but it will in no way make up for the total cuts that our rural providers will face.”