Colorado's Medicaid costs exceed budget by $443 million

(The Center Square) - Medicaid expenses are expected to be $443 million over the budget in Colorado in 2026-27.

That's almost three times the previous fiscal year's budget gap.

For 2025-2026, the Medicaid program was over the budget by $157.9 million, which amounted to 2.7% of the state Department of Health Care Policy and Financing's appropriations.

The numbers mean Colorado's Medicaid spending is growing much faster than the state can afford, said Mark Ferrandino, director of the Governor's Office of State Planning and Budgeting. That spending dilemma is in addition to Colorado recently being accused of owing the Centers for Medicare and Medicaid $8 million for faulty and inaccurate payments.

Ferrandino recently discussed the budget gaps with legislators. He noted Medicaid services are costing much more than previously expected.

For the 2026-2027 fiscal year, Colorado lawmakers appropriated $5.775 billion, according to the Sept. 17 Medicaid Budget report. The forecast adjustment increased by $443 million, resulting in a new total of more than $6.218 billion for the adjusted budget.

While states across the country are experiencing problems with Medicaid funding, lawmakers such as state Rep. Kyle Brown, D-North Denver, claimed Colorado's budget is a unique dilemma.

Brown said Colorado's allocated Medicaid funding has grown at a larger and quicker pace than any other portion of the state’s budget. This is in large part due to more people utilizing the service and a substantial increase in insurance providers’ rates – including the cost of prescription drugs and behavioral health care.

Colorado has also witnessed a massive increase in those receiving Medicare and Medicaid coverage. Cara Welch, the Colorado Hospital Association’s communications director, sent The Center Square its quarterly financial update, which included a graph showing that the number of individuals covered by Medicare and Medicaid has grown by nearly 44% since 2024.

However, due to budget cuts to Medicare and Medicaid as part of the Republican-dominated Congress’s passage of the Big Beautiful Bill Act in 2025, federal dollars only pay about 70 cents to every dollar charged by hospitals. The legislation reflects President Donald Trump's priorities for domestic policies.

According to a new report by the Colorado Hospital Association, the federal law will lower the amount of funds accessible through Medicare provider fees from 6% net patient revenue to 3.5% through 2032. The association said that will cause the state to risk losing more than $11 billion in federal money.

“Medicaid costs are rising nationally, even as enrollment remains flat or declines," said Marc Williams, the public information officer for the Colorado Department of Health Care and Policy Financing.

“HCPF is seeing similar trends reported by other state Medicaid agencies and national organizations, with cost growth driven by health care utilization, long-term care, pharmacy, behavioral health, and provider and managed care rate increases," Williams told The Center Square.

The Colorado Hospital Association noted the same issues in relation to limited funding for certain services and high utilization.

Costs per person have increased more significantly than the uptick in the number of Coloradans enrolled, according to Welch, the association's spokesperson.

On that matter, Williams referenced the KFF’s 2025 survey of state Medicaid officials. Williams said the survey by KFF, a nonprofit that studies health care, "found similar cost pressures, while Health Affairs [a news website] reported that Medicaid spending per enrollee increased 16.6% in 2024, compared with 6.5% in 2023.”

Ally Sullivan, Gov. Jared Polis’s deputy press secretary, said the Democratic governor shared similar concerns with the Department of Health Care and Policy Financing.

“The primary drivers of the FY 2025-26 over-expenditure are greater-than-expected costs in acute care; prescription drugs costs that were impacted by federal policies that resulted in fewer rebates from drug manufacturers; behavioral health and community-based long-term care," Sullivan told The Center Square.

During the health care department’s last meeting in July, officials discussed numbers in a presentation regarding a monumental Colorado bill called “Cover All Coloradans.” One of the slides expressly states, as part of Trump’s Big Beautiful Bill, it will “[d]isenroll certain members such as refugees and asylees.”

The Big Beautiful Bill Act does not mention refugees and asylees as being covered by general Medicaid dollars. However, prior sections of the bill, such as section 1903(v)(4), say coverage of some individuals in those categories would be preserved by the new law – meaning refugees and asylees would be eligible for qualifying emergency services.

The federal bill also placed stricter restrictions on not just residency, but nationality status, for those eligible to receive federal Medicaid dollars. The recent $8 million repayment bill Colorado received from the federal government was not explicitly related to Medicaid funding for noncitizens.

Colorado was under federal investigation in 2025 as part of crackdown to track down federal dollars being spent on noncitizens for healthcare. The state was warned by the Centers for Medicare and Medicaid that if Colorado did not hand over documents relating to patients’ personal information – which allegedly included some noncitizens – the Trump administration would withhold nearly $18 million in federal funding. That's a different matter than the $8 million overpayment.

"In the face of federal cutbacks, ensuring eligible Coloradans have access to Medicaid is a top priority,” Sullivan told The Center Square. “The governor supports data-driven strategies to put Medicaid on a more sustainable path to ensure that Coloradans who are eligible can continue to receive healthcare coverage. The state and the Legislature have been working for over two years to create a sustainable funding model that slows the growth of Medicaid.”

Colorado has failed to stay within budget for the last two years for health care spending. It is now entering its third year with significant budget deficits.