Colorado health officials are beginning to map out a plan for how to deal with federal changes to Medicaid under congressional Republicans’ and President Donald Trump’s recently enacted “big, beautiful bill.” 

Officials with the Colorado Department of Health Care Policy and Financing, the agency that oversees Medicaid in the state, held a virtual roundtable on Tuesday to discuss the impacts of the new budget law and how they’ll respond. 

At over 800 pages long, the “big, beautiful bill” makes sweeping changes to the federal tax code and safety net systems, including reducing Medicaid spending by roughly $1 trillion through 2034. It does so by shifting more costs to states and limiting Medicaid eligibility. 

Kim Bimestefer, the executive director of the Department of Health Care Policy and Financing, said Colorado’s Medicaid program also continues to be challenged by growing demand for services coupled with ongoing state budget woes. 

But she pledged that her department would do all it could to “mitigate the loss of coverage” and “avoid draconian cuts to Medicaid” as the state works to implement the new federal changes. 

Most of the changes won’t go into effect until January 2027. That includes requirements for “able-bodied adults” to be working, in school, or volunteering for at least 80 hours per month to be eligible for Medicaid. States will also need to reauthorize Medicaid eligibility on a six-month basis, rather than annually, as is the current policy. 

Other future changes include restricting people with certain immigration statuses, such as asylees, refugees and victims of trafficking and abuse, from receiving Medicaid. The federal law also limits how much states can levy in provider taxes, or fees, which are used to bring in more matching Medicaid funds from the federal government. 

“So, in general, federal spend(ing) and monies available to us are going down, while administrative obligations are going up, and our costs are going up, based on those administrative obligations,” Bimestefer said. 

Bimestefer said she’s particularly concerned about people losing care due to the new work and renewal requirements, which will require more paperwork and administrative hoops for people to jump through. 

Medicaid currently covers about 22% of Colorado’s population, nearly 1.3 million people. Officials say hundreds of thousands of Coloradans could be at risk of losing Medicaid as a result of the federal changes. 

Rachel Reiter, who oversees the policy, communications and administration office for the health care department, said it will be critical for the state to support local governments to ensure Coloradans don’t fall through the cracks when applying for and renewing Medicaid. 

In Colorado, Medicaid is administered by counties, and the state has already invested in automation to help limit the workload burden on county staff. 

Over the past two years, the state has gone from using automation in 50% of Medicaid renewals to about 75%. Reiter said continuing that investment will be needed as counties take on the brunt of administering the federal changes. 

Reiter said the state will also employ lessons it learned from the Medicaid Unwind period, during which Congress ended automatic Medicaid renewal in 2023, which had been part of its COVID-19 response. 

That includes better and more urgent messaging to communities about what the federal changes will be before they hit. Reiter said it’s imperative that Coloradans understand what they’ll need to do to qualify for Medicaid in the future. 

While the work requirements and renewal changes don’t start until January 2027, the state will need to build out its systems and get staffing in place months before that to begin handling applications. 

“There is a lot of work to do, together, over a very short period of time,” Reiter said. 

The federal budget law does provide $50 billion over the next five years to help rural hospitals and health care providers weather some of the impacts of the Medicaid changes, especially the reduction in provider fee funding. 

Officials plan to apply for funding to the federal government this fall and believe they could receive up to $100 million in additional funds each year through 2030. That money isn’t expected to fully offset hospitals’ losses under the federal law, however. 

A study released in June by the Urban Institute, a Washington-based think tank, and the Robert Wood Johnson Foundation found that Colorado hospitals could face $4.6 billion less in revenue while shouldering $1.6 billion more in uncompensated care as a result of the federal law’s health care provisions. 

Along with Medicaid cuts, the law limits eligibility for health insurance plans under the Affordable Care Act. It also did not extend subsidies that have helped keep the cost of insurance premiums down. 

State officials will also look at ways to minimize spending as the cost of Medicaid and its associated programs has ballooned in recent years. 

Spending by the Department of Health Care Policy and Financing grew by 26% in fiscal year 2022-23 and is projected to have grown by 16% in 2023-24, according to Bimestefer. Medicaid now accounts for approximately one-third of the state’s budget. 

The main driver is an increase in older patients seeking long-term care. Benefit expansions, such as more investments in mental health care, have also caused spending to rise due to more enrollees and the need to increase and expand provider rates. 

Bimestefer said the state is uniquely challenged financially due to the Taxpayer’s Bill of Rights, a 1992 voter-approved amendment to the state constitution that limits government spending to the rate of population growth plus inflation. 

While that rate sits at around 3% to 4% in Colorado, the rate of medical inflation is higher at about 8%. Bimestefer said that no commercial or Medicaid health plan has been able to consistently keep its trends at or below the rate of inflation for the past 40 years. 

The “big, beautiful bill” is also exacerbating financial problems for the state, blowing a roughly $750 million hole in the current fiscal year’s budget. State lawmakers are set to reconvene at the Capitol for a special session starting on Aug. 21 to close the gap. 

Deputy Medicaid Director Cristen Bates said officials realize they will have to “make some difficult decisions” to adjust to their new budget reality. That could include placing new limitations on certain services and reducing provider rates. 

Officials said they will also work to ensure services are efficient and not duplicative, all to avoid having to cut entire programs or populations.