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Colorado’s Medicaid Sustainability Framework

Background Medicaid Sustainability Framework H.R.1 Federal Impacts

How You Can Engage Resources Stay Informed

Background

The federal House Reconciliation bill (H.R.1), signed into law on July 4, 2025, generated a $1+ billion state budget shortfall this fiscal year. As a result, Governor Polis called the General Assembly back into session from August 21 to 26 to address this budget gap. They did so by increasing revenues, tapping into the state’s rainy day reserves, and implementing budget reductions. Through the Governor’s August 28 Executive Order, budget reductions across state departments total $252 million, with HCPF budget reductions representing approximately $79 million or 31% of that total.

The level of HCPF’s reductions reflect that our budget represents about one-third of the state’s budget, and that Medicaid cost trends are running at unsustainable levels in recent years due to:

  • Increases in medical inflation
  • Increases in our benefits
  • Expansion of our coverage programs
  • Outlier trends in certain areas
  • Outlier increases to our provider reimbursement rates over the last several years

Specifically, while the Medicaid General Fund cost trends from FY 2015-2016 to FY 2019-2020 averaged +5% annually (0% to 11% range), they averaged +19% from FY 2021-2022 to FY 2024-2025 (12% to 26% range).

At the 2025 Annual Stakeholder Webinar held August 12, HCPF shared emerging federal threats to Medicaid due to the passing of H.R.1 (One Big Beautiful Bill Act), state budget challenges, Medicaid cost trend drivers, and priorities for fiscal year 2025-2026.

Outlier budget growth over the last 4 years generally coincided with the allocated federal stimulus dollars intended to pull the nation out of the COVID-induced recession. Colorado leveraged a portion of these stimulus dollars to invest in Medicaid to help transform our behavioral health system, increase the workforce and supports that serve people with disabilities, raise the baseline of provider reimbursements, and more.

Medicaid General Fund Budget Growth

Fiscal YearYear End General Fund
(in millions)		% GrowthGeneral Fund Actuals Growth
(in millions)
FY2014-15$2,210.622%$404.1
FY2015-16$2,364.07%$153.4
FY2016-17$2,407.52%$43.5
FY2017-18$2,679.611%$272.1
FY2018-19$2,824.85%$145.2
FY2019-20$2,822.50%($2.3)
FY2020-21$2,556.6-9%($265.9)
FY2021-22$2,865.712%$309.1
FY2022-23$3,452.320%$586.6
FY2023-24$4,362.026%$909.7
FY2024-25TBD**16%** Based on forecast

We should be proud of this work, as it made a better tomorrow for so many. Still, it is important that we all realize that these federal stimulus dollars are behind us, and that the Medicaid increases afforded during this chapter were atypical.

Our more recent Medicaid cost trend increases were further propelled by higher than normal U.S. Medical inflation trends of about 8%, last year, this year, and projected again for calendar year 2026. Medical inflation is an underlying driver of Medicaid cost trends, commercial trends, and Medicare trends, too. When our Medicaid cost trends are running in the 5% range, as in the period noted above, the gap to state revenues is less challenging to navigate. But when the Taxpayer’s Bill of Rights (TABOR) limits state tax revenue growth to 3-4% annually and Medicaid cost trends are running at 19%, as they have averaged over the last several years, the state simply does not have the funds to close this expense to revenue gap, resulting in the need for significant reductions across our programs, benefits and provider reimbursements.

At our August webinar, we reviewed examples of outlier Medicaid benefit trends and provider trends and areas of flat or low trends as well. You can find these slides posted on our website. Several of the HCPF budget reductions shared on August 28 are intended to address areas of outlier and aggregate trends. We appreciate your partnership in helping us avoid draconian cuts to Medicaid by better managing Medicaid cost trends, now and going forward through the Medicaid Sustainability Framework.

Medicaid Sustainability Framework

The Medicaid Sustainability Framework helps us better manage Medicaid trends and avoid draconian cuts by targeting our trend management efforts in a thoughtful and reasonable way. In August 2025, 89% of our annual stakeholder webinar attendees responding to our poll agreed with this framework, and 78% said it should be HCPF’s top focus. The framework includes six pillars:

Address Drivers of Trend: Better address all the controllable factors that drive Medicaid cost trends.

Maximize Federal Funding: Leverage and maximize HCPF’s ability to draw down additional federal dollars.

Invest in Coloradans: Continue investing in initiatives to drive a Colorado economy and educational system to reduce the demand for Medicaid over the long term as Coloradans rise and thrive.

Make Reasonable Medicaid Cuts or Adjustments: Identify where programs, benefits, and reimbursements are comparative outliers or designed in such a way that we are seeing - or will experience - higher than intended trends or unintended consequences.

Reassess New Policies: Consider pausing or adjusting recently passed policies not yet implemented.

Exercise Caution in Crafting Increases to the Medicaid program going forward.

To further support our efforts to reduce Medicaid trends, HCPF has retained a third party consultant to compare our programs, reimbursements, cost management solutions and more to other Medicaid programs around the nation. Our trend management strategies will be refined and expanded based on these learnings as well as stakeholder engagement, using an external facilitator to invite broad-based stakeholder input. We should receive those consultant insights this winter and will conduct related stakeholder engagement to solicit further feedback at that time.

We are also focused on innovations and advances to help us better control Medicaid cost trends. The Accountable Care Collaborative (ACC) is a major lever in this quest, with ACC Phase III implemented July 1, 2025, including advances such as: case management and health improvement programs; Accountable Care Organization (ACO)-like primary care systems and supports (free to rural health clinics and independent rural PCPs); advances in technologies such as eConsults, Prescriber Tool, Value Based Payments and more.

HCPF is also advancing our fraud, waste and abuse processes. Many of our existing efforts satisfy requirements within H.R.1, but additional efforts are needed based on outlier provider behaviors in certain benefit areas and within certain provider types. According to webinar attendees, advancing fraud, waste, and abuse tools and techniques should be one of HCPF’s top five priorities. Learn more about our fraud, waste, and abuse efforts from this fact sheet.

H.R.1 Federal Impacts

The changes enacted through H.R.1 further constrained the State budget, causing the budget balancing actions taken by Governor Polis and the General Assembly in August 2025. H.R.1 shifted the cost for programs like Medicaid and SNAP that were previously paid for by the federal government, to the state.

Much of the impact of H.R.1 will be felt by the 375,000 Coloradans covered by Medicaid expansion. Medicaid expansion was a key provision of the Affordable Care Act (ACA) that allows states to cover more low-income individuals who may not have previously qualified for Medicaid.

Key changes:

  • Rewriting major eligibility, financing, and compliance rules over the next 2-8 years that will impact Coloradans’ ability to gain and retain Medicaid coverage. These changes are expected to increase the state’s uninsured rate, increase uncompensated care for health care providers, and put pressure on some providers to shift their rising uncompensated care costs to commercial coverage.
  • Reducing Medicaid and individual marketplace exchange enrollments, and increasing uninsured rates, with downstream impact to families (adverse health impacts, increasing medical debt and bankruptcies), employers (increased premium rates due to cost shifting) and the economy (biggest part of CO/US economy is healthcare).
  • Forcing states to make difficult decisions that influence how costly or disruptive these shifts become for enrollees, providers, and the state General Fund.
  • Providing very limited funding for states to implement changes that will drive higher administrative and Information Technology (IT) costs.

Ninety percent (90%) of HCPF’s August 12 Annual Webinar attendees were alarmed by the emerging health insurance coverage loss threats to Coloradans created through H.R.1. Loss of coverage also generates concerning downstreaming impacts, such as increased uninsured rates, poor health outcomes because of a lack of affordable access to care, medical debt or bankruptcies for those who lose coverage and seek care, increased provider uncompensated care, provider layoffs and reductions in services as their revenues fall, the cost shift of uncompensated care to commercial health insurance rates paid by Coloradans and employers, as well as an overall negative impact to our overall economy. For all of these reasons, our North Star focus is to mitigate inappropriate loss of Medicaid coverage from the impacts of H.R.1, which 92% of our webinar attendees agreed with. We thank our partners – providers, consumer advocates, counties, elected officials, Regional Accountable Entities, Case Management Agencies, contracted vendors and more for your collaborative efforts to help us achieve our North Star.

The passage of H.R.1 also created the Rural Health Transformation Program, which will provide $50 billion in federal grant funding across states to support rural providers from Federal Fiscal Year 2026 to 2030 ($5 billion/year). Colorado is leveraging HCPF’s expertise and our partner’s expertise to apply for this newly available federal funding. We invite you to visit our webpage to learn more about this opportunity. When asked how these funds should be invested in Colorado, webinar attendees ranked “recruiting and retaining clinical workforce talent in rural areas” as their top priority (65%).

How You Can Engage to Help

Clearly, H.R.1 creates new challenges for reigning in rising Medicaid costs. But we are Coloradans, and we know how to come together to tackle a challenge and help each other through that challenge. We are experts at climbing mountains to get to our destination, charting our path, and navigating through difficult terrains. 
We invite you to bookmark our Understanding the Impact of Federal Changes to Medicaid website where we will share key implementation information, post updated fact sheets and facilitate opportunities to engage with us all throughout this chapter. Everyone reading this message has a role to play in our quest to achieve our North Star - avoid inappropriate coverage loss, and we are doubling down on facilitating opportunities for you to engage in the coming months.

You can also send related questions to hcpf_HR1@state.co.us. And please stay informed by signing up to receive HCPF’s At a Glance Monthly Newsletter.

Thank you for your collaborative engagement as we work together to better manage Medicaid trends, avoid draconian cuts to Medicaid, and implement H.R.1 in a way that achieves our North Star of mitigating inappropriate coverage loss. We appreciate your partnership.

Resources

Federal and State Policy resources

Learn about Medicaid in Colorado

Stay informed

Contact

Submit a question or contact hcpf_HR1@state.co.us