In the face of soaring Medicaid costs and a cash-strapped budget, Colorado lawmakers will now have to determine the fate of Medicaid after the Supreme Court largely upheld President Barack Obama’s Affordable Care Act on June 28 but left a key provision to the states.
The court struck down the portion in the controversial bill that allowed the federal government to withhold all Medicaid money if states chose not to participate in that program’s expansion. That means states can refuse to participate in the expansion without losing all of their Medicaid allotment. But if the state accepts an increase in federal funding for Medicaid and chooses to expand the public insurance program, it will have to also find a way to increase spending in the state budget.
With little to no flexibility in Colorado’s General Fund for Medicaid expansion, one alternative could be to ask voters to help pay for the increase in health-care coverage.
State Rep. Cindy Acree, R-Aurora said dealing with the insurance mandate that nearly all Americans carry health insurance by 2015 leaves few options.
“Our choices will be quite simple,” she said. “We will have to cut government services, or we will have to raise taxes. That’s it. So, families who are currently having trouble buying groceries will have even more trouble buying groceries.”
State Sen. Morgan Carroll, D-Aurora, said asking voters to help pay for a full-fledged Medicaid expansion is unlikely because of the current economic climate and because there are so many other services that are currently underfunded, including education.
“I have not heard anyone talking about doing that yet,” she said. “There are so many other core functions of the state that aren’t funded that if we decided to go to the ballot for a tax increase I’m not 100 percent sure it would be for Medicaid.”
It’s possible that lawmakers could find money in the budget to expand Medicaid, but Carroll said it would be “modest” expansion.
Lawmakers would have to figure out a way to cut costs in the state budget to fund a modest Medicaid expansion, but it’s too early to tell what services would have to be cut for that to happen, Carroll said.
Under the Taxpayer Bill of Rights, or TABOR, any state tax increase for funding Medicaid would have to be voted on by taxpayers.
“Fully funding an expansion would likely require a vote of the people and right now, honestly, no one’s talking about that, it’s just not in the political mood or appetite of the state,” she said.
In Colorado, spending on Medicaid is eating up a large portion of the budget, and there’s no real end in sight, legislative analysts say.
“The costs in Medicaid have been rising faster than the overall budget for several years, and I expect that trend to continue into the future,” said Eric Kurtz, legislative analyst for the state’s Joint Budget Committee.
But that trend is not unique
Most states face that challenge, and that’s partly why the Affordable Care Act was introduced at the federal level, said Kurtz, a nonpartisan Legislative staff member.
Over the past 20 years, the cost of Medicaid’s caseload has increased much faster than the state’s General Fund revenue.
It’s because the economy has forced more people out of work, leaving them with no choice but to take advantage of public health programs if they want health insurance, experts say.
Between fiscal year 2000-01 and 2010-11, the Medicaid case-load increased by 93.9 percent, and General Fund revenue increased by 8.1 percent, said Natalie Mullis, chief economist for the Colorado Legislative Council.
“We had two recessions during that time period and when you have a recession, the Medicaid caseload surges,” Mullis said.
For the 2011-12 budget year, the total amount of money received from the federal government for spending on the state’s Department of Health Care, Policy and Financing — which oversees the Medicaid program as well as the Colorado Indigent Care Program and the health insurance program for poor children — was $2.58 billion, Mullis said. Spending increased to $2.78 billion for the 2012-13 budget year.
The state matched that, which brought total spending on Medicaid to about $5.17 billion for the 2011-12 budget year and $5.56 billion for the 2012-13 — or about a quarter of the state’s budget, Mullis said.
Since the Supreme Court ruled that the federal government can’t strong-arm states into expanding their Medicaid programs, states will have choices as to how far they’ll extend the public insurance program.
Policy analysts say it’s unclear where Colorado will go from here — whether it will choose to expand the Medicaid program or remain at the status quo.
In that decision, lawmakers will have to weigh economic implications, said Kelly Hupfeld, associate dean at the School of Public Affairs at the University of Colorado Denver.
“I would say economically, there’s not a lot of extra money lying around in the state to be able to expand our Medicaid system,” Hupfeld said.
The goal of the Affordable Care Act is to cover the more than 30 million Americans who are currently uninsured, including the estimated 1.5 million Coloradans who are uninsured, according to a 2011 Colorado Health Access Survey.
Under the Affordable Care Act, people who don’t purchase insurance by 2014 will be subject to an annual penalty, or according to the Supreme Court’s definition: a tax.
For individuals, that penalty would equal about $95 in 2014 and by 2016, it would increase to about $695, according to the Kaiser Family Foundation’s website.
The Congressional Budget Office estimated that by 2016 about 4 million people will be paying the penalty.
To close the gap between the insured and the uninsured, states would have to find a way to expand Medicaid and private insurance companies would have to offer affordable rates, or rates presumably lower than the penalties assessed for not having insurance. The cheapest monthly premium for a Kaiser Permanente HMO health insurance plan for an individual is about $124, according to its website. and that doesn’t include prescription drug coverage. There is little concern among state lawmakers right now about whether private insurance companies’ rates will skyrocket because of the federal law.
There are some provisions in the federal law that prevent insurance companies from raising rates “simply because they can,” Carroll said.
Ultimately the Supreme Court’s ruling allows the most vulnerable Coloradans — including those with preexisting conditions — to be insured, Carroll said. “It’s going to mean a lot better access and more predictable access to the people who need health care the most,” she said.
There’s much speculation about what states will do next, but she said one thing is for certain: Colorado already has begun implementing some provisions of the Affordable Care Act.
The Colorado Legislature passed a 2011 bill that will create a Colorado Health Insurance Exchange program by 2014.
The law will allow for the development of an online marketplace for individuals and business owners to shop for public and private health insurance options.
“It’s really making much smarter use of technology to make a better marketplace so that employees and employers trying to decide between a plan can have more digestible and meaningful information,” said Carroll, who helped sponsor the bipartisan bill.
Since Colorado has already passed that law, she said, it will have little else to do to implement the provisions of the Affordable Care Act other than rule making at the state’s executive branch level between now and 2015, when the federal government expects most people to carry health insurance.
There will be opportunities for the public to participate in those rule making hearings, she said.
Some local doctors say an increase in the number of insured as a result of President Barack Obama’s Affordable Care Act could have negative consequences for health care professionals in hospitals across Colorado in the short-term.
Adit Ginde, associate professor of Emergency Medicine at the University of Colorado School of Medicine, said the increased demand for health-care services could burden an already-strained health care system.
“Given the current shortage of health care providers — particularly primary care providers — the new influx of individuals with health insurance is expected to place increased strain on existing safety net systems such as hospital emergency departments, which is the only place where health care access is guaranteed,” he said in an e-mail.
Although he said there are provisions in the federal law that try to improve access to outpatient services, like increased funding for community health centers, it’s unclear whether those would help reduce the increasing demand for health services.
Other doctors say that in the long run, people won’t need to burden the health-care system with doctors’ visits because the Affordable Care Act places emphasis on preventative care.
Eventually, there will be a reduced demand on emergency departments and other acute care facilities like urgent care centers, said David Goff, Jr., dean of the Colorado School of Public Health.
“(The law) strikes a new balance between prevention and illness care and puts a new focus on the importance of prevention,” said Goff, who has been working in the medical field for more than 20 years.
Whatever the consequences, he said, the final implementation of the Affordable Care Act in 2014 — provided that a future Congress doesn’t repeal it — will be the biggest change in the nation’s health- care system since the Medicaid and Medicare programs were approved in 1965 during President Lyndon B. Johnson’s administration.
It’s easy for people to get caught up in the nuances, but what’s often overlooked is the fundamental change in preventative care and community health that will result from the law, he said.
“I think those things are going to prove to be extraordinarily beneficial to the health of the population, which also means the productivity of the population,” he said. “I think in the long run, that will be a very important legacy of the Affordable Care Act.”
Reach reporter Sara Castellanos at 720-449-9036 or [email protected]