Colorado’s Coverage Coup

by Tim Foley

categories: Medicare and Medicaid, State and Local Efforts, The Uninsured and Underinsured

Published April 24, 2009 @ 11:25AM PT

With this week’s passage of the Colorado Healthcare Affordability Act, the Centennial State has increased coverage to 100,000 people during difficult economic times. More importantly, it’s another real-time test of the theory that increased investment in prevention and primary care quite literally can pay for itself over time.

As summed up by Colorado Gov. Bill Ritter during the bill’s signing, “At no increased cost to taxpayers, the Colorado Healthcare Affordability Act will allow us to provide critical health services to people who need those services the most. This historic legislation will significantly address the crisis of the uninsured while also reducing uncompensated care and cost-shifting in our healthcare system.” I know what you’re thinking – 100,000 new people on Medicaid and SCHIP with better reimbursement rates to hospitals with no cost to taxpayers? What's the catch?  Granted,  on paper, the funding looks a bit like a shell game: raise $600 million per year by charging an additional fee to health care providers at hospitals; match that with federal dollars via Medicaid funding to create a $1.2 billion per year pot; use that money to not only expand coverage but increase rates of reimbursement to hospitals providing care to Medicaid patients and Colorado Indigent Care Program.  But it's no accounting trick - it finds a way to maximize the federal Medicaid dollars the state is eligible for without raising state taxes or cutting something somewhere else in the budget.  Points for creativity!

Now normally, this is the part in our health care debate where doctors and hospitals would jump off the bandwagon. Why would they be OK with paying new fees and shouldering the burden alone? But actually, the Colorado Hospital Association has been the major booster of the bill. Sure, there’s pain in coming up with the $600 million in fees, but the money goes back to them at the end of the day anyway -- and then some. Those 100,000 people would have been uninsured, going to the emergency room when they were in their worst shape and resulting in uncompensated care (not to mention elongating waiting times in the ER for those with coverage). Now, they’re on Medicaid, where their care is paid for, and where they'll have access to a doctor for primary and preventative care rather than crowding the emergency room. Without the bill, the hospital gets nothing for expensive care and has to pass that on to taxpayers and insurance companies, driving everyone’s taxes and premiums up. With the bill, the hospital not just gets Medicaid compensation, but better Medicaid rates than they’re getting now, and doesn't have to pass anything on to anybody. Since the hospital is the only place to go for care for many of Colorado’s rural communities, they’re not likely to lose many patients to private practice doctors. With the federal matching funds for Medicaid, the proposition for them is put in $1, get $2 back – who wouldn’t take that deal?

There are two potential downfalls. The first is, as Colorado Republican opponents to the bill claimed, that hospitals will seek to double their money by finding a way to reimburse themselves for the fees by charging more to patients or insurance companies. The law expressly forbids this, but crafty, fraudulent businessmen – modern-day Richard Scotts, if you will – might be able to find a loophole over time. The other concern is that this measure can’t control costs on its own. You’re adding new people into the Medicaid mix, and the costs to treat them could well be exorbitant if they have multiple or seriously advanced chronic conditions – a sadly all-too-common state for those who have been without insurance for a long time. Although we should see savings from giving people regular primary care as opposed to getting treated in the ER – “The most expensive place to treat someone” according to Colorado Hospital Association CEO Steve Summer – those savings may take years to materialize. In short, there’s a real danger that escalating health care costs nationally will screw up this state-level innovation. We’ll see. Finally,  100,000 people is a good start, but it still leaves 700,000 Coloradans without insurance.

At an economically awful time when so many states are seeking to cut their budget by lowering their Medicaid eligibility and/or increasing taxes, the fact that Colorado is experimenting with increasing coverage, lowering costs and improving the experience of emergency care is inspiring. But it also acutely shows the limitations of what one state can do.

(Photo credit:  Scott Ingram Photography on Flickr.)