Is Med­i­caid spend­ing de­vour­ing Colorado’s bud­get?

The Denver Post - - FRONT PAGE - By John In­gold

Among Repub­li­can can­di­dates to be Colorado’s next gover­nor, a com­mon ar­gu­ment has emerged: Med­i­caid spend­ing in Colorado, driven up­ward by the Af­ford­able Care Act, is un­sus­tain­able.

Vic­tor Mitchell talks about it in a cam­paign video. Doug Robin­son ref­er­ences the con­cern on his web­site. Ge­orge Brauch­ler spoke of it at the Western Con­ser­va­tive Sum­mit last month: “We have lost the abil­ity to pri­or­i­tize any spend­ing in our bud­get for roads, for ed­u­ca­tion in ru­ral ar­eas be­cause of what we’ve done with Oba­macare,” Brauch­ler said. “It has gob­bled up so much of our bud­get.”

Is Med­i­caid re­ally eat­ing the rest of the state bud­get alive? And could the state move large sums of money to other pri­or­i­ties by slash­ing Med­i­caid spend­ing?

The an­swers are com­pli­cated — some yes and some no. Let’s dig in.

Is Med­i­caid spend­ing grow­ing rel­a­tive to other items in the bud­get?

Yes.

In the 1999-2000 fis­cal year, the bud­get for the state depart­ment that over­sees Med­i­caid in Colorado was just shy of $2 bil­lion and made up about 17 per­cent of the to­tal state bud­get that year, ac­cord­ing to fig­ures from the Colorado Health In­sti­tute. For the cur­rent fis­cal year, the Med­i­caid depart­ment’s bud­get is $9.4 bil­lion and makes up a third of to­tal state spend­ing.

But that’s re­ally the wrong bud­get to look at. In ad­di­tion to be­ing a huge cost to the state, Med­i­caid is also a huge rev­enue source — the single largest source of fed­eral funds that Colorado re­ceives ev­ery year.

To look at how Med­i­caid im­pacts state dol­lars that could be spent on other things, you have to look at the smaller gen­eral fund bud­get. In 1999-2000, Med­i­caid also made up about 17 per­cent of the gen­eral fund bud­get, ac­cord­ing to the Colorado Health In­sti­tute. Cur­rently, it makes up a lit­tle over 26 per­cent.

Is the Af­ford­able Care Act to blame?

No. At least not di­rectly. The Af­ford­able Care Act, of­ten called Oba­macare, swelled Colorado’s Med­i­caid rolls dra­mat­i­cally by ex­pand­ing el­i­gi­bil­ity to peo­ple slightly above the poverty line. More than 400,000 peo­ple have signed up through the ex­pan­sion, and that group now makes up nearly 27 per­cent of Colorado’s Med­i­caid pop­u­la­tion, ac­cord­ing to the gover­nor’s Of­fice of State Plan­ning and Bud­get­ing.

But Med­i­caid’s costs are shared be­tween the state and fed­eral gov­ern­ments. And, for the ex­pan­sion, the feds of­fer states a sweet­heart deal: They cur­rently cover 95 per­cent of the

costs. In the com­ing years, that share will drop to 90 per­cent, mean­ing Colorado will have to cover 10 per­cent of costs for the ex­pan­sion folks.

Colorado pays its share with money from the hos­pi­tal provider fee, a com­pli­cated mech­a­nism by which hos­pi­tals pay a fee to the state and the state uses that money to get match­ing funds from the fed­eral gov­ern­ment. But Henry Sobanet, Gov. John Hick­en­looper’s bud­get di­rec­tor, said fed­eral rules pro­hibit us­ing money from the hos­pi­tal provider fee to pay for non-Med­i­caid ex­penses within the bud­get — on things such as roads or schools. The state also can’t use provider fee money to pay reg­u­lar Med­i­caid ex­penses for peo­ple out­side the ex­pan­sion group.

“We could can­cel the ex­pan­sion, and we wouldn’t save a dol­lar in the gen­eral fund,” Sobanet said.

But the Af­ford­able Care Act did im­pact Med­i­caid en­roll­ment in­di­rectly.

Af­ter the law re­quired ev­ery­one to have health in­surance, many dis­cov­ered that they had been el­i­gi­ble for Med­i­caid all along and signed up. So, the state’s tra­di­tional Med­i­caid pop­u­la­tion has grown since the Af­ford­able Care Act’s im­ple­men­ta­tion, in part from what Colorado Med­i­caid spokesman Marc Wil­liams calls “the wood­work ef­fect.”

What is to blame for in­creased spend­ing?

More peo­ple and ris­ing health costs.

When the non­par­ti­san staff at the Colorado Leg­isla­tive Coun­cil looked at this ques­tion last year, they iden­ti­fied sev­eral fac­tors. One was ris­ing health care costs — prices that con­sumers pay for med­i­cal care na­tion­wide rose by a third be­tween 2006 and 2015, ac­cord­ing to the re­port.

An­other was what the state is will­ing to pay for. In 2014, for in­stance, Colorado added a new den­tal ben­e­fit for adults on Med­i­caid worth up to $1,000 per per­son per year.

Per­haps the big­gest fac­tor, though, was ris­ing en­roll­ment and chang­ing de­mo­graph­ics. Colorado’s pop­u­la­tion has boomed, and Med­i­caid rolls es­pe­cially grew dur­ing the Great Re­ces­sion, the re­sult of de­clin­ing in­comes for peo­ple al­ready near poverty. But Med­i­caid — which cov­ers 61 per­cent of el­derly peo­ple in nurs­ing homes in Colorado — is also grap­pling with an ag­ing pop­u­la­tion.

“This pop­u­la­tion has sig­nif­i­cantly higher av­er­age med­i­cal costs rel­a­tive to most other el­i­gi­ble pop­u­la­tions,” the leg­isla­tive coun­cil re­port states.

Can cuts to Med­i­caid free up money for other bud­get items?

Yes. But how much de­pends where you cut.

Con­ser­va­tives, for in­stance, have ar­gued that Med­i­caid shouldn’t cover able-bod­ied adults.

Non-dis­abled adults cur­rently make up about 45 per­cent of Colorado’s Med­i­caid pop­u­la­tion, ac­cord­ing to the state. Most of those peo­ple re­ceived cov­er­age through the Med­i­caid ex­pan­sion, and the re­main­ing peo­ple ac­count for about 12 per­cent of the state’s to­tal Med­i­caid spend­ing.

But the use of fed­eral funds and the hos­pi­tal provider fee in Med­i­caid spend­ing means that for ev­ery dol­lar cut, there isn’t a full dol­lar saved that can be used in other ar­eas of the state bud­get.

That means Colorado could re­move all non-dis­abled adults from the pro­gram — cut­ting its Med­i­caid pop­u­la­tion al­most in half — and the sav­ings to use else­where in the bud­get would be in the hun­dreds of mil­lions of dol­lars, not in the bil­lions of dol­lars. (The state’s to­tal gen­eral fund bud­get this year is $10.6 bil­lion.)

Tack­ling big­ger ar­eas of gen­eral-fund Med­i­caid spend­ing means fo­cus­ing on other groups. Peo­ple with dis­abil­i­ties and peo­ple in nurs­ing homes, for in­stance, make up 10 per­cent of the state’s Med­i­caid en­roll­ment — but ac­count for 42 per­cent of state Med­i­caid spend­ing.

These chal­lenges are not unique to Colorado — they ex­ist in ev­ery other state in the coun­try, said John Hicks, the ex­ec­u­tive di­rec­tor of the Na­tional As­so­ci­a­tion of State Bud­get Of­fi­cers.

“States,” he said, “will con­tin­u­ously try to de­ter­mine what they can do dif­fer­ently and bet­ter.”

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