Colorado lawmakers say a plan to clamp down on the cost of hospital treatment would save the state an estimated $65 million dollars a year, but hospitals are pushing back.
The proposal, which is making its way through the Colorado General Assembly, would set limits on payments to hospitals for people enrolled in the state's health insurance plans. It would also apply to small businesses that buy insurance for their workers through the state.
Two states, Oregon and Montana, already have laws that limit how much their insurance plans will pay hospitals. The federal Medicaid program also caps hospital reimbursements.
Supporters of restricting hospital payments say Coloradans can pay up to three times more than Medicaid for the exact same care. So, setting boundaries on what hospitals can charge insurers will lower premiums and save tax dollars, at a time when the state faces a $1 billion budget gap.
"We need to consider if it is fair," said Emily Sirota, a Denver Democrat who's sponsoring the measure. "It is time to make sure that Colorado taxpayers and state employees ... are getting a good deal from our hospital systems."
Opposition has come from a variety of sources, including doctors and other providers. But at a hearing this week on the measure, House Bill 25-1174, hospitals were especially vocal.
They argue that they are still recovering from the pandemic, which has roiled their bottom lines and left many systems operating at deficits. Medicaid also faces the possibility of steep cuts, which would further hurt their finances.
Any savings for one group of patients, they say, would have to be offset by increased costs to others. Or hospitals would have to cut services. Small, rural hospitals are especially vulnerable, they say.
State lawmakers have responded by exempting nearly three dozen rural, critical-care hospitals from the spending limits. But Katherine Mulready, chief strategy officer for the Colorado Hospital Association, told legislators this week that nearly twice as many would have to abide by the caps. Many of those hospitals also have dire finances.
"Over half are operating in the red, and an additional 15% have low margins that are not sufficient to meet long-term sustainability," she said. "The past several years have been very hard for health care."
State finances being squeezed
The discussion comes against the backdrop of a tight budget that is expected to persist into the near future. Under the Taxpayer Bill of Rights, state spending increases can be no more than the rate of inflation plus population growth, and even after lawmakers have closed the $1 billion gap this year, they expect to face another one next year.
Polis' office has proposed the cap as a way to keep costs from continuing to rise. HB 1174 would do so through a series of formulas that peg payments to the rate paid by Medicaid. The limits would not go into effect until next summer. But controlling hospital spending is billed as one way lawmakers can be better stewards of taxpayer money.
"We're not trying to close hospitals. That certainly won't happen under this bill," said state Rep. Kyle Brown, a Boulder County Democrat who is also sponsoring the measure. "We haven’t negotiated a very good rate for our hospital services."
Support has also come from small business owners, who say lower premiums would help their finances and might even allow them to offer insurance to more employees. House Bill 1174 also calls for conducting a study into whether rate restrictions could be extended to local governments and school districts.
The plan was approved Wednesday by the Colorado House & Human Services Committee, an early step as it makes its way through the legislative process.
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