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Medicaid: Boosting Our Economy and Keeping People Healthy

By Stephanie G

Congress is considering significant changes and cuts to safety-net programs like Medicaid. This blog series aims to highlight the critical role Medicaid plays in the lives of millions and provide insights into the policy decisions that could impact its accessibility.

As we highlighted in Understanding Medicaid: A Lifeline for Millions, cuts to Medicaid funding will directly harm the millions of Americans who rely on Medicaid to access lifesaving health care. Slashing Medicaid also endangers the stability of our broader health care system and the strength of our state economy. Medicaid helps hospitals stay afloat, lowers costs across the health insurance market, creates jobs, and produces countless other positive ripple effects in both state and local communities. Medicaid is not only essential to people’s lives, but a backbone to the health of our economy.

Medicaid is jointly funded by the state and federal government. The federal matching rate is based on a formula that considers each state’s per capita income relative to the national average. The matching rate varies based on certain populations and services. But, on average, about 58% of Medicaid funding comes in the form of federal matching funds, while 42% comes from state funding sources. This means that cuts to federal Medicaid funds would leave the state to backfill potentially hundreds of millions of dollars, which is a near impossibility in Colorado where we already have a challenging budget environment and constitutional restrictions on the ability to raise funds.

Medicaid helps hospitals and reduces uncompensated care.

In 2024, Medicaid made up 21% of payments to Colorado hospitals. Hospitals across the state – particularly in rural areas – depend on Medicaid funding to deliver care and stay open. A drop in insured patients as the result of Medicaid cuts would increase uncompensated care for hospitals, also called “charity care.” This shift would drive up costs elsewhere and put strain on the entire health care system.  Many hospitals across the state rely on Medicaid as a significant source of revenue and are not able to withstand major fluctuations. In the event of major Medicaid cuts, these hospitals would face difficult cost-cutting decisions such as laying off staff, reducing services, or possibly closing their doors altogether.

The stakes are high. Protecting Medicaid is essential to ensuring access to care for people across the state.

Community-based providers rely on Medicaid.

Currently, 65% of Colorado community health centers (CHCs) operate with negative margins due, in part, to already rising rates of uninsured patients. Several have already begun consolidating clinic sites, closing school-based health centers, and making layoffs. Almost 50% of CHC patients in Colorado have Medicaid, making these clinics particularly vulnerable to funding cuts.

The outlook is equally urgent for Colorado’s community mental health centers (CMHCs), where Medicaid accounts for approximately 50% of funding. Cutting Medicaid funding would result in clinic closures and make it more difficult for Coloradans to access necessary mental health care. These clinics serve as a critical lifeline for people with mental health and substance use needs, especially in rural areas, where a CMHC may be the only accessible source of care.

Cuts to Medicaid would jeopardize these vital providers, leading to clinic closures, longer wait times, and fewer care options for Coloradans. Without Medicaid, the health care safety net begins to unravel — right when communities need it most.

Medicaid cuts would impact statewide population health and increase costs for people with private insurance.

If enacted, Medicaid cuts could leave many Coloradans without access to affordable health coverage. Health insurance is linked to better health outcomes, in part, because it allows people to access early and preventive care. Without coverage, people are more likely to delay care until their health issues become emergencies — when treatment is more complex, costly, and potentially less effective.

These delays can lead to serious, long-term health consequences — not just for individuals, but for entire communities. They also place tremendous strain on hospitals and safety-net providers, which may be forced to absorb the costs of expensive uncompensated care. In turn, those costs could be passed on to the private insurance market, driving up premiums for employers and families across the state.

Medicaid creates jobs and boosts our economy.

Severe cuts to Medicaid funding wouldn’t just hurt patients, they’d also hit our workforce. A recent analysis from the Colorado Health Foundation finds that for every $1 million lost from the federal government for Medicaid, Colorado loses $2.25 million in economic activity and $825,000 in added household earnings. Other estimates find that steep cuts to Medicaid could result in the loss of approximately 6,400 direct health care jobs, and possibly 12,000 jobs throughout the state due to the ripple effects of cuts to funding. This translates to a loss of over $80 million in state tax revenue as well, at a time when Colorado is already facing a challenging state budget.

Medicaid supports our workforce, strengthens local economies, and helps keep Colorado communities healthy and thriving.

Medicaid is efficient: costs per member are substantially lower than for private insurance.

Medicaid is the most efficiently run health plan in Colorado – 96% of the budget goes directly to care providers, with only 4% allocated to administration. Cutting Medicaid could mean a loss of $980 million in federal funding – again, at a time when the state needs federal matching funds to balance the budget and keep people covered.

To add it all up: Medicaid is critically important to our state economy, the overall health care system, and the individuals and families who rely on it for health coverage. It’s an efficient program that makes good use of state and federal funds. Medicaid supports the state of Colorado: our families and communities, our workforce, and our economy as a whole. Protecting it is both a moral and economic imperative.