Medicaid Matters

A vast amount of research demonstrates its positive impact on a wide range of health and economic outcomes.

• Eligibility expansions for pregnant women led to earlier initiation of prenatal care and reductions in low birthweight and infant mortality.
• Eligibility expansions for children were associated with significant increases in the probability that
  children have an annual “well child” physician visit and important preventive care, such as vaccinations.
• Medicaid eligibility for children has also been found to improve educational outcomes, which contributes to better health and higher employment and earnings as adults. This generates increased tax revenues and lowers future public assistance costs.
• The benefits of children growing up into healthier and more economically secure adults may extend to the next generation. Mothers enrolled in Medicaid during early childhood themselves were found to give birth to healthier children.

Many of the proposals in Congress specifically target the Medicaid expansion population by restricting eligibility or adding new requirements for this demographic. These changes could have significant consequences in terms of access to care, population health, and Colorado's network of health care providers.

• Medicaid expansion is associated with improvements in overall self-reported health among adults with low incomes. Among people with chronic disease, it is associated with improved access to care, better health outcomes and disease management, and decreased mortality
• Coverage through Medicaid expansion also led to reductions in unpaid bills and medical debt, which translated to improved credit scores and reduced rates of bankruptcy.
• States that expanded Medicaid saw reductions in uncompensated care costs for hospitals and clinics, and a growing number of studies show an association between expansion and gains in employment as well as growth in the labor market.

Proposals to cut Medicaid funds through reductions in the Federal Medical Assistance Percentage (FMAP), restrictions on provider fees, or work requirements would lead to people losing coverage, benefit cuts, and/or providers would have to reduce services or shut down.

• Cutting federal Medicaid funds would create a funding gap that Colorado would have to fill to maintain current health care services. To compensate, the state would likely face difficult choices: reducing Medicaid program benefits or provider rates, seeking approval from voters for a tax increase, or cutting funding for essential services like schools, roads, and public safety. Less funds for provider payments would exacerbate provider shortages, especially in rural communities, and make it even more difficult for Coloradans to access timely and quality care across the state.
• In 2023, Colorado spent $13.6 billion on Medicaid, with $8.6 billion (nearly 60%) funded by the federal government. The state budget alone cannot sustain the current scope of Medicaid coverage without substantial federal support.
  • More than 91% of federal Medicaid spending goes to paying for enrollees’ health care, not administrative overhead.
• The Congressional Budget Office estimates that long-term fiscal effects (higher income and tax revenues) of Medicaid spending on children can offset half or more of the initial Medicaid spending.

Health care is a critical sector of Colorado’s economy and one of the state’s largest employers, and Medicaid is a major component of this system. Threats to Medicaid could impact access to care throughout the state, not just for Medicaid members.

• Currently, 65% of Colorado community health centers (CHCs) operate with negative margins. Several CHCs have begun consolidating clinic sites, closing school-based health center locations, and making layoffs. Almost 50% of CHC patients in Colorado have Medicaid.
  • Cutting Medicaid funding will result in CHC closures and make it even more difficult for low-income Coloradans to access health care.
• Safety net behavioral health providers in Colorado also operate in a tenuous financial situation. Medicaid accounts for an average of 50% of community mental health center funding (CMHC) – more in some places, including many rural areas. Cuts to Medicaid could have dire consequences, as CMHCs are often the only mental health care provider in rural communities.
• Medicaid reduces the uncompensated care burdens of hospitals and improves their operating margins. Since expanding Medicaid, hospitals and other providers have seen improvements in their payer mix (a decline in uninsured patients and/or an increase in patients covered by Medicaid) and an increase in their overall revenue. Since its expansion, Medicaid is especially important to rural hospitals, whose operating margins are often so low that uncompensated care costs (higher when more people in the area lack insurance) can prove catastrophic.

Congress is considering a proposal to implement work requirements—referred to as community engagement requirements—for certain Medicaid members as part of broader efforts to reduce federal spending on the program. Under this proposal, eligibility would be tied to completing at least 80 hours per month of work or other qualifying activities.

• More than 75% of Medicaid adults in Colorado are working, and nearly all others have a qualifying exemption such as being a student, having a disability, or performing caregiving responsibilities. However, many of these members could face wrongful terminations due to new reporting requirements.
  • 120,000 Coloradans are expected to lose coverage as the result of work requirements, with many thousands more at risk if they are unable to regularly prove compliance or exemption status. This policy change would fundamentally threaten the health and stability of Colorado families.
• Colorado’s state systems are not designed to track employment hours. Implementing the infrastructure to monitor work requirements would cost the state upwards of $57 million—resources that would otherwise fund care for sick Coloradans, not red tape.

Critically, work requirements do not meet their stated goals. According to the Congressional Budget Office, these policies reduce federal spending while significantly increasing state costs and the number of uninsured, all without impacting employment status or hours worked.