Medicaid spending balloons in Colorado by billions of dollars

Gov. Jared Polis' budget director Mark Ferrandino delivered grim news to state lawmakers on Thursday. He says Medicaid is on track to blow up a hole of up to $700 million in the current budget year. It could increase to more than $1 billion over the next year.

The biggest driver is long-term care for the elderly and people with disabilities. They represent just 8% of the Medicaid population but nearly 50% of the costs.

Spending on behavioral health care and pharmaceuticals is also growing exponentially. Ferrandino says if the state doesn't change course, Medicaid will consume almost the entire General Fund in 14 years. It's already 40% of the General Fund now.

The legislature knew a Medicaid reckoning was coming and created an interim committee to rein in expenditures. That task is now more difficult and urgent. Ferrandino warned Medicaid is growing at nearly twice the rate of the General Fund and is unsustainable even if the state's spending caps under the Taxpayer Bill of Rights are eliminated. 

"We need to look forward. How do we solve this? And you know, we got in this together, we need to solve this together," Ferrandino said.

 Gretchen Hammer recently took over as executive director of the Department of Health Care Policy and Financing, which administers Medicaid. She says while the program has seen an increase in enrollment, utilization of services is the biggest cost driver, especially with regard to long-term services, behavioral health care, and pharmaceuticals.

"We need to take action in this fiscal year to bend these numbers," Hammer said.

She admits the department also failed to track spending on certain programs like a peer support program for people with substance use disorders. It was projected to cost $35,000 a year in 2021. It cost $100 million the first year and is now nearly $300 million.

"We started this service, this benefit, and it's growing by leaps and bounds. Red flags should have been raising all over the place. We shouldn't be waiting two and three years," said state Sen. Barb Kirkmeyer, who sits on the Medicaid committee.

State Sen. Kyle Mullica says HCPF should have seen the cost overruns coming.

"We have to have guardrails. We have to make sure that these dollars are being protected, that they're being used to the best of their ability. And what I'm seeing is those guardrails come after the break, after the mess up," Mullica said.

People who benefit from long-term care services urged lawmakers to spread cuts throughout the Medicaid system.

"People are willing to do their share, but they can't be cut off at the knees," said Julie Reiskin, executive director of the Colorado Cross-Disability Coalition. "So that's what we're trying to prevent."

Ferrandino says if the state doesn't act, spending on long-term care, behavioral health, and pharmaceuticals is on track to double every five years. He says those three programs account for $2.3 billion of the $2.7 billion increase in General Fund spending on Medicaid in the last year.

While Medicaid expenditures are increasing across the country, Ferrandino says Colorado is spending more of its General Fund on Medicaid -- specifically long-term care -- than all but five other states.

The legislature and governor have passed 36 bills in the last eight years expanding Medicaid services to the tune of nearly $3 billion.