DENVER — Colorado budget officials told lawmakers Thursday that Medicaid spending is surging and could create a budget hole of as much as $700 million this fiscal year and climb past $1 billion in the next year if trends continue. The projections, delivered by Gov. Jared Polis’ budget director, add urgency to an already scheduled legislative effort to rein in program expenditures.
What’s driving the increase
State leaders singled out three main cost drivers: long-term services and supports for the elderly and people with disabilities, rising use of behavioral health services and escalating prescription drug costs. Though long-term care recipients make up a small portion of the Medicaid population, they account for a disproportionate share of spending.
| Metric | Share |
|---|---|
| Portion of Medicaid population represented by long-term care recipients | 8% |
| Share of Medicaid costs consumed by that group | Nearly 50% |
| Share of Colorado General Fund currently taken by Medicaid | 40% |
Budget director Mark Ferrandino warned lawmakers that, at the current pace, Medicaid would crowd out most other spending from the General Fund within a generation unless changes are made.
"We need to look forward. How do we solve this? And you know, we got in this together, we need to solve this together,"
Gretchen Hammer, who recently became executive director of the Department of Health Care Policy and Financing — the state agency that administers Medicaid — echoed concern about utilization. She said enrollment has increased, but the larger cost pressures stem from greater use of services, especially long-term care, behavioral health and pharmaceuticals.
"We need to take action in this fiscal year to bend these numbers,"
Program growth and oversight gaps
Officials also acknowledged shortcomings in tracking and forecasting for some newer benefits. They pointed to a peer support program for people with substance use disorders that was initially projected in 2021 to cost about $35,000 annually. Instead, its first-year cost was roughly $100 million, and current spending has approached $300 million, according to the presentation to lawmakers.
- Urgency: An interim legislative committee created earlier this year will now face a sharper timeline to consider reforms.
- Policy choices: Lawmakers may consider benefit changes, eligibility rules, payment reforms or targeted cost-containment measures.
- Trade-offs: Any move to reduce costs will likely affect services used by seniors and people with disabilities.
The scale of the problem has raised questions about whether Colorado’s existing spending limits — including protections tied to the Taxpayer Bill of Rights — would have to be altered to respond to the fiscal pressure. Ferrandino said Medicaid is growing at almost twice the pace of the General Fund and called the trend unsustainable even if some fiscal constraints were removed.
Lawmakers face a choice between identifying savings in the program, shifting state priorities, or seeking new revenue to preserve services. The department and budget office have signaled they will present options to the legislature, but the coming months will require difficult policy decisions that directly affect access to care for many Coloradans.
As the state moves forward, local communities and providers that deliver long-term care and behavioral health services will be watching closely for changes that could affect capacity, reimbursement and patient access. The interim committee convened to address the issue will be tasked with translating these projections into concrete policy recommendations in time for next year’s budget deliberations.
