Hospitals Will Pay to Expand Colorado Medicaid

Published August 1, 2009

Colorado Gov. Bill Ritter (D) has signed into law a bill expanding Medicaid and other health care programs by imposing new fees on hospitals. The law, House Bill 1293, is currently awaiting federal approval.

Proponents say the fees will raise $600 million annually, allowing the state to increase the amount of federal matching funds it is eligible to receive.

If the federal Centers for Medicare and Medicaid Services approves the proposal, HB 1293 will expand eligibility for Medicaid, the federally subsidized health insurance program for low-income Americans, to women and children whose household income is between 205 and 250 percent of the federal poverty level. Single adults without children whose income is at the federal poverty level also will be newly eligible.

Constitutionality Questioned

The fee increase has caused some to question the constitutionality of the law.

“The bill arguably violates the Colorado constitution by raising taxes without a vote of the people,” said Linda Gorman, a senior fellow at the Independence Institute. “The legislature avoided this requirement by calling the tax a ‘fee.’ Given that the federal government, other states, and newspapers call this fee a ‘provider tax,’ this is misleading at best and may be illegal.”

Supporters say over time the new law will provide health insurance coverage for 100,000 uninsured Coloradans. Gorman disagreed with that approach, saying “Colorado needs to reform its dysfunctional government-run health care programs before it expands them.

“There are seriously ill people who depend on Medicaid for their very lives. The focus on expanding it to basically well populations reduces the support for those people,” Gorman added.

Questions About Who Pays

Gorman and others have questioned who will ultimately foot the $600 million annual bill.

“Supporters claim hospitals will pay the tax,” said Gorman. “But as supporters also claim hospitals are underfunded, these hospitals presumably don’t simply have pots of money lying around to hand over to the government.

“Therefore, either hospital patients will end up paying for the tax or hospitals will be forced to reduce the intensity of the care that they provide for the same money,” Gorman explained. “Either way, people who pay for their own health care are being penalized so the state can fund pet health care projects.”

More Taxpayer Money Promised

Under HB 1293, hospitals are legally forbidden from passing the increased costs resulting from the fee increase along to consumers. The law attempts to offset the tax increase by increasing reimbursement rates to hospitals treating Medicaid patients and by doubling government payments for indigent care.

“This policy is just another tax on people who provide for their own health care,” said Gorman. “It is part of a long-running plan to destroy private medical care and replace it with government-run care.

“People who need hospital services and who responsibly pay for their own care with cash or private insurance will see their cost burden increase by about $600 million a year so state government can expand its health coverage programs,” Gorman added.

Concern for Recipients

Gorman says people could be disappointed by enrolling in the program.

“The new tax funds the imposition of untested state programs on hospitals, and keeps expanding Medicaid in such a way as to encourage people to drop their private coverage in favor of taxpayer-funded insurance. What the government doesn’t tell the people it is encouraging to enroll in taxpayer-funded coverage, though, is that these state programs can and will be cut if hospitals don’t provide the government with the expected level of tax revenue,” Gorman said.

HB 1293 also provides for disabled adults with incomes up to $48,735 to have the cost of their care subsidized by taxpayers.

Administrators plan to phase in HB 1293’s provisions over two years, beginning with the creation of a board to determine the most effective way to impose the fee increase.

Sarah McIntosh ([email protected]) teaches constitutional law and American politics at Wichita State University in Kansas.

For more information …

Colorado House Bill 1293: