The legislature’s Joint Budget Committee (JBC) recently held a hearing with the Department of Healthcare Policy and Financing (HCPF), the Governor’s office, and Manatt, a healthcare consulting firm, to address the unsustainable growth of Colorado’s Medicaid spending.
Here’s a look at some of the highlights from the hearing.
Runaway spending
According to HCPF and the Governor’s office, General Fund spending on Medicaid increased at an average rate of 6 percent from fiscal year 2015-16 to fiscal year 2018-19. However, after the federal government windfall from COVID, General Fund spending blew up, growing at an average rate of 19 percent from fiscal year 2021-22 to fiscal year 2024-25.
Health care is rapidly crowding out most other spending, and is the primary driver of the state’s budget challenges, as those federal funds have since expired.
HCPF now accounts for nearly one-third of the General Fund and is also the fastest-growing department.
Add to that, Manatt suggests that “25 percent of all U.S. healthcare spending may be wasteful, due to overtreatment, low-value care, poor care coordination, pricing failures, fraud and abuse, and undue administrative complexities.”
Governor Polis and HCPF engaged Manatt to analyze Colorado’s Medicaid and CHP+ programs, identify cost-saving solutions, and propose policy recommendations.
Based on Manatt’s analysis, the state should prioritize reductions in behavioral health, long-term services & supports (LTSS), pediatric behavioral therapy (PBT), and pharmacy, given their higher cost growth relative to other areas.
To address their healthcare priorities, states have three “levers” to curb healthcare costs: cutting program eligibility, reducing covered services, and lowering payment rates.
Manatt also presented a fourth lever: maximizing value—essentially a consultant’s way of saying that they should use a scalpel instead of a sledgehammer when pulling the three real levers.
What this ultimately means is that legislators cannot outrun the mathematical reality of the Medicaid situation, although not for lack of trying.
Since last October, Colorado’s generous taxpayers have paid Manatt just over $600,000.
Given the high cost, one would hope the legislature now has sufficient information to implement effective changes that improve the sustainability of the state’s budget.
However, while Manatt can lead lawmakers to water, it cannot make them drink.
For example, at the hearing, Representative Kyle Brown expressed disappointment that, “with decades of experience of running Medicaid programs in all of the various states, that we still basically just have… three levers, and I know that you’re saying that there’s this fourth lever about maximizing value… the question that I would have is: in several cases, the state of Colorado has already implemented things that I would believe actually fit into the first three buckets…”
It’s almost like asking why two plus two does not equal five, even though we would prefer it did.
The blame TABOR crowd
Manatt analysts also noted the unique constraints of Colorado’s Taxpayer’s Bill of Rights (TABOR) on the state’s budget (while, in the same breath, paradoxically stating that Colorado is not facing unique challenges relative to other states after the drying up of federal COVID dollars).
TABOR has apparently made Colorado too prosperous for legislators’ purposes by modestly limiting growth of portion of the state budget to a formula of population growth plus inflation, helping to keep the legislature’s insatiable appetite for spending in check.
Because of that prosperity, Colorado receives a significantly lower Federal Medical Assistance Percentage (FMAP) from the federal government than other states.
The average FMAP for the US is 60.1 percent; meanwhile, Colorado received 50 percent in 2025.
In other words, if Colorado wanted to draw down more federal matching dollars for healthcare spending, we would need to be poorer and less successful.
Does that mean Colorado should sacrifice the state’s economic success and fiscal responsibility just to sustain the welfare-industrial complex?
It will be interesting to see how legislators react during the 2026 session. In the end, they cannot outrun reality.
