Healthcare Freefall: Finger‑pointing intensifies as Colorado's healthcare system strains under rising costs, shrinking coverage

Editor's Note: Colorado's healthcare system is entering a period of accelerating instability — a "tsunami," as multiple leaders describe it — driven by collapsing hospital finances, shrinking Medicaid reimbursements, disappearing services and a political fight over who is responsible for this unraveling. Healthcare Freefall is a multipart series examining how Colorado arrived at this moment, what H.R. 1 will do next and why communities across the state are bracing for deeper shocks.

Healthcare FreefallHealthcare Freefall

Colorado's — and the nation's — healthcare woes have devolved into a cycle of finger‑pointing, with every sector blaming someone else for the system's failures, while many lament that no workable solution exists and no serious plan is likely to emerge anytime soon.

Meanwhile, families are absorbing sharply higher insurance premiums and patients are being billed steep prices for even basic items, such as Tylenol, in the ER. At the same time, hospitals are carrying the weight of charity care, uninsured patients and treatment for immigrants in the country illegally, intensifying the finger‑pointing across the system.

The state blames the federal government. Federal officials cite state mismanagement. Healthcare providers say they're being squeezed out, with reimbursement rates well below what they need to thrive, while some government officials counter that hospital profits are high. Meanwhile, providers are cutting services to stay afloat.

After years of operating in hurricane‑level conditions, some warn the healthcare freefall is accelerating. A tsunami, they say, is coming.

Gabe Evans gives a victory speech after winning Colorado's 8th Congressional District Republican primary while at a watch party in Thornton, Colo. on Tuesday, June 25, 2024. (Tom Hellauer, The Denver Gazette)Gabe Evans gives a victory speech after winning Colorado's 8th Congressional District Republican primary while at a watch party in Thornton, Colo. on Tuesday, June 25, 2024. (Tom Hellauer, The Denver Gazette)

H.R. 1 takes center stage

From healthcare administrators to Democratic officials at both the state and federal levels, many argue that the timing of H.R. 1 — the federal budget passed by the Republican‑led Congress in 2025 — could not have been more consequential.

Healthcare leaders warned that H.R.1 will intensify the financial pressure already building across the healthcare system. They described the Medicaid and broader healthcare cuts as devastating, noting that while some effects are beginning to surface now, the full impact is yet to land in 2027.

Critics also said the $900 billion in Medicaid cuts over the next decade could threaten the viability of more than 400 hospitals nationwide, including at least nine in Colorado.

On the other hand, supporters said the changes are long overdue — that the federal savings is needed to curb the national debt; that states would no longer be able to game the system by artificially inflating federal matching funds; that the reductions, rather than harm people, preserve the program for those who actually need them; and that restoring personal responsibility on the part of able-bodied enrollees would reduce government dependency and lead to upward mobility.

The bulk of the Medicaid cuts comes in the form of work requirements. The federal law requires states to ensure recipients are working by 2027, but gives them the option to do so sooner. The law mandates that people ages 19 to 64 who have Medicaid coverage work or perform community service at least 80 hours a month or be enrolled in school at least half-time to receive and keep coverage.

It applies only to people who receive Medicaid coverage through an expansion that covers a population with a higher income limit.

Some people would be exempted from the requirements, including disabled veterans, pregnant women, parents and guardians of dependent children under 14 or disabled individuals, people who were recently released from incarceration and people getting addiction treatment.

The nonpartisan Congressional Budget Office has estimated that the requirement will reduce Medicaid costs by $326 billion over a decade — and that it will result in 7.5 million people losing coverage through 2034. Currently, about 77 million Americans are covered by Medicaid.

Colorado's potentially affected hospitals span the Front Range and rural communities, from Denver Health — the region's primary safety-net provider — to smaller hospitals in places like Leadville, Lamar and Fort Morgan, reflecting the mounting pressure across both urban and rural health systems.

'Mismanaging and overregulating'

Republican U.S. Rep. Gabe Evans of Colorado's 8th Congressional District said the reaction to H.R.1 has become more of an easy political escape hatch, especially for Democrats: blame President Donald Trump and Republicans for the healthcare crisis and ignore that the system's problems long predate a single federal budget.

"Democrats have run the state of Colorado since the 2018 elections, with the trifecta majority in the House, Senate and the governorship," Evans said. "They have constitutional authority to fight back, but they continue to insist on mismanaging and overregulating these programs here."

By voting for H.R.1, Evans said he supported a budget focused on eliminating waste, fraud and mismanagement, not on cutting those who qualify for assistance from a program already in distress.

Evans pointed to data showing Colorado's Medicaid spending has doubled over the past decade, from $8 billion in 2015 to $16 billion in 2025, a 101% increase. However, the kicker is that the state's enrollees in the program saw a minimal increase of around 7%, back to 2015 levels, meaning, Evans stressed, most of the money is spent on administrative costs and additional staffing.

State‑approved regulations and expansion of services have also surged in recent years, driving many of the cost pressures now surfacing in the system. Evans pointed to a report from the Common Sense Institute noting that the state legislature has enacted 182 healthcare bills since 2019, adding an estimated $858 million in annual costs.

The report's authors argued that the growth is largely the result of increasingly expansive regulatory and policy mandates, rather than enrollment trends or medical inflation alone.

While not commenting on the impact of increased costs to implement state-level regulations, Denver Health CEO Donna Lynne said during a June roundtable discussion that H.R.1 would saddle hospitals with new regulatory and administrative demands. Nearly half of Denver Health's patients are on Medicaid, and the hospital has already hired 15 additional staff just to manage the paperwork required to come into compliance with the first phase of H.R. 1, she said.

Lynne called the administrative requirements "wasted" money and time.

Medicaid dataMedicaid data provided by Colorado Hospital Association

Hospital executives: Colorado lost out on federal dollars

Others also pointed to hundreds of millions of dollars they said Colorado deliberately chose not to take advantage of.

After years of losing out on those federal dollars, the state has been approved to tap a well-known Medicaid financing tool called state-directed payments, which is expected to bring more than $450 million to hospitals.

Colorado did not pursue the financing tool until more recently, with hospital system executives earlier saying that decision had "set Colorado back."

Colorado was relatively late to adopt the financing strategy, in part because the state had already built a hospital financing system through the Colorado Healthcare Affordability and Sustainability Enterprise or CHASE.

The program generates, on average, $450 million annually and has helped increase Medicaid hospital reimbursement from 54 cents to 79 cents for every dollar of care provided, according to a state report.

Adding state-directed payments required Colorado to rework parts of its system, including how hospitals are assessed fees and how supplemental payments are distributed.

Scrutiny from the Trump administration and Congress made it "vital" for Colorado to pursue the state-directed payment program "with all possible speed," the report said.

Speaker of the House Rep. Alec Garnett gives a speech during the first day of Colorado's 2022 session at the Colorado state Capitol building on Wednesday, Jan. 12, 2022, in Denver, Colo. (Timothy Hurst, The Denver Gazette)Then-House Speaker Alec Garnett gives a speech during the first day of Colorado's 2022 session at the Colorado state Capitol building on Wednesday, Jan. 12, 2022, in Denver, Colo. (Timothy Hurst, The Denver Gazette)

In a forum earlier this year, Alec Garnett, a former state House speaker and now the vice president for government and regulatory affairs for UCHealth, sharply criticized the state for not immediately pursuing state-directed payments.

"There was a philosophical viewpoint that hospitals should not get that money," he said. "It has disproportionately set Colorado back from where we could have been."

Garnett added: "If we had done that, like all these other states have done … we would not be in the budget situation that we are now."

Medicaid drives system freefall

Colorado's hospital finances have been deteriorating for years, and the numbers show how quickly the ground has given way.

Nearly 75% of hospitals ended 2024 with margins the Colorado Hospital Association considers unsustainable, as operating costs rose faster than revenue. The same trend has continued in 2025 — and in 2026. With Medicare and Medicaid accounting for roughly 60% of the patient mix, Colorado hospitals say they are routinely reimbursed below the actual cost of care, a gap that has widened steadily over the last decade.

According to the Colorado Department of Health Care Policy and Financing, the state's Medicaid program currently provides care for 1.4 million, an average of one in four residents. In 2024, Medicaid paid for 34.9% of Colorado live births, according to the March of Dimes.

While hospitals may welcome a larger Medicaid population, critics have argued that Medicaid spending should not consume a bigger and bigger share of state and federal budgets — because that crowds out funding for other priorities, such as infrastructure or education. Additionally, they said expanding the program to able-bodied citizens means using finite fiscal and medical resources that should be reserved for the truly vulnerable beneficiaries, such as low-income children, the elderly and people with disabilities.

Hospitals receive about 67 cents for every dollar spent caring for Medicaid patients, down from 80 cents five years ago and 85 cents a decade ago. CHA estimates the Medicaid shortfall was about $1.2 billion in 2015; by 2025, it had grown to roughly $2 billion.

These financial strains were already in motion long before the federal budget fight.

After H.R.1 — the bill that Trump dubbed the One Big Beautiful Bill — passed, Democrats quickly settled on this narrative: people will lose coverage and services.

U.S. Sen. John Hickenlooper and Democratic colleagues have repeatedly cited one projection that an estimated 240,000 Colorado residents would lose medical coverage over the next decade, with major impacts starting in 2027.

"Coloradans are going to have a harder and harder time going to the doctor," Hickenlooper said. "People are going to lose market-based coverage. We can never restore a broken system if we don't restore the funding."

Evans countered that Colorado's own bureaucracy has long been a barrier, citing hundreds of thousands of people who were dropped from Medicaid due to state mismanagement. Much of that criticism centers on former HCPF director Kim Bimestefer, who resigned ahead of a state Senate vote accusing her of "mal-administration" that the legislators said had cost Colorado hundreds of millions of dollars and "shifted burdens of care to hospitals and other providers."

The federal budget adds new Medicaid requirements to qualify that supporters say will curb abuse and opponents argue will deepen financial strain:

Colorado Gov. Jared Polis noted that Medicaid is entirely a federal program, and while states administer it, it's federally regulated.

"Our flexibility is extremely limited," he said. "We drive efficiency where we can, but we don't control those programs from the ground up."

As lawmakers argue and point fingers, Delta Health COO Nicholas Colleran said the hospital serves a population of 32,000 and has been operating at a 9% negative margin, adding that changes to qualify for Medicaid assistance will compound the problems.

Colleran, however, said the area's population demographics are shifting toward older residents. Medicare pays slightly better at 72 cents per dollar, though Colorado's aging population adds pressure to that side of the ledger, as well.

In this illustration provided by the Colorado Hospital Association, 75% of Colorado hospitals are operating on unsustainable margins.

Rural health funds added

As hospitals brace for deeper Medicaid cuts, federal officials point to new rural‑health funding as one source of relief.

Evans said H.R.1 created grants aimed at the most vulnerable facilities, with Colorado's rural hospitals expected to receive about $200 million a year for the next decade under the Rural Health Transformation Program — roughly $160 million after administrative costs.

State officials began mapping out how to use the money late last month. Programs can apply for grants through November, with awards expected by year's end.

Cristen Bates, deputy Medicaid director, said the funding comes with strict limits — it can support only new operations or innovations and only rural‑designated providers qualify.

Hospital leaders said the money helps but won't solve the underlying financial pressures.

Joseph Theine, CEO of Southwest Health System in Cortez, said the grants will provide an "infusion of money back into communities," noting he is glad to have that support.

Still, a hospital's fixed costs are the immovable problem: they stay the same no matter how many patients show up. Whether the ER treats 60 people or half that, Theine said hospitals still have to keep full staffing, services and equipment ready. At Southwest Health System, that means a daily operating cost of $213,000 — even if no patients walk through the door or 100 do.

Southwest Health has stayed afloat partly because local voters made a sales‑tax increase permanent, helping the hospital post positive margins the past two years. But Theine said finances have already begun slipping in early 2026, with operating losses emerging.

Other rural leaders say the federal support is far from enough.

Lincoln Health Community Hospital CEO Kevin Stansbury said the $50 billion rural‑health fund falls well short of the roughly $150 billion in projected nationwide Medicaid‑related losses. He warned that the cuts will ripple through rural economies, where hospitals are often major employers.

Several providers at a June roundtable said they hope Congress revises H.R.1 or delays its implementation.

As hospitals warn of mounting strain, Polis argued they share responsibility for rising costs.

The governor pointed to cases where families receive bills of hundreds or thousands of dollars for minor ER visits or co-pays set by insurance companies, even charges of $2,000 for basic items like Tylenol and a Band‑Aid. Polis called the system "inefficient and costly" and said an overhaul is needed.

He noted Colorado has enacted transparency laws requiring itemized bills and has pursued lower drug prices, including partnerships with Canada.

In response, Theine said he welcomes Polis and other elected officials to visit rural hospitals and see firsthand how pricing is determined by the formulas they must use based on government program and insurance company repayment rates.

"This is going to be a cascading impact. It's absolutely essential that we start flashing red lights about what is happening. People already don't feel like the healthcare system is working for them, but it is going to get so much worse."

U.S. Rep. Brittany Pettersen

Colorado's healthcare woes predated federal changes

Colorado Democratic U.S. Rep. Brittany Pettersen argued that healthcare cuts in the federal budget are "deeply concerning" because the real impacts are going to show more in 2027, when she believes rural hospitals will suffer the brunt of the cuts due to added requirements to continue qualifying for government-assisted healthcare programs.

"This is going to be a cascading impact," she said. "It's absolutely essential that we start flashing red lights about what is happening. People already don't feel like the healthcare system is working for them, but it is going to get so much worse."

Theine said a third‑party analysis for Southwest Hospital in Cortez estimated the facility could lose just over $9 million a year over the next decade. He emphasized that the hospital will keep reviewing its operations, make adjustments as needed, continue serving the community and remain transparent with the residents it serves.

Josh Hannes, vice president of rural policy and strategy for the Colorado Hospital Association, said the warning signs are impossible to ignore — public payers are raising their rates far more slowly than the actual cost of care and the gap keeps widening as Medicare and Medicaid populations grow.

He described the situation as hurricane‑force headwinds forming into something more severe on the horizon — conditions that will only worsen, he insisted, under H.R.1. The federal budget is expected to trigger major reductions in Medicaid reimbursements to states, leaving state budgets with deep shortfalls.

In fact, Colorado entered the H.R.1 era already underwater.

The state's overall budget had logged back‑to‑back deficits exceeding $1 billion in 2025 and 2026, and fiscal analysts have warned that 2027 would not bring meaningful relief. These deficits required even further cuts to the state's healthcare system.

The result, Hannes warned, is that hospitals and medical providers will face increasingly painful decisions: closures, program cutbacks or the elimination of services altogether. His message is blunt — cutting provider rates will further weaken the very system needed to care for the patients those programs are supposed to cover.

Given the unknowns of 2027, Colleran said that at Delta hospitals can only plan and prepare as best they can.

"Hospitals right now are just trying to build up their finances, build up cash, because they know in 2027, it's really scary what could happen," he said. "They know that the Medicaid changes are a huge fear."

As part of the preparations, Delta has already eliminated its labor and delivery unit and invested in artificial intelligence technology to get ahead of a possible decline in payments from insurance companies due to incorrect paperwork or coding.

Southwest Healthcare SystemA hospital room at the Southwest Health System in Cortez. (Photo courtesy of Southwest Hospital System)

Democratic socialist presses for 'healthcare for all'

After defeating 15-term incumbent Diana DeGette in Colorado's 1st Congressional District primary, Democratic socialist Melat Kiros said fixing healthcare is a major priority.

A fan of "healthcare for all," Kiros said neither Republicans nor Democrats are doing what's needed to fix a broken system that is expected to get worse in the coming months and years.

Kiros pointed to the Democrats' favorite point of accomplishment — Obamacare, meant to provide medical insurance to more Americans. Also known as the Affordable Care Act, Democrats view the law passed in 2010 as a transformative step toward universal, high-quality and affordable health care.

Melat said Obamacare had become nothing more than a Band-Aid that no longer sticks.

"Democrats have to recognize that we haven't delivered for working families since Obamacare," she said. "And Obamacare was a monumental achievement — millions gained health insurance — but it was also a Band-Aid. It was a Band-Aid when we barely gave people what they needed to survive during COVID and still lost millions of Americans. All of these things have compounded to show that our government has become ineffectual in protecting working families."

In fact, premiums on Affordable Care Act plans have been rising and they are expected to climb again. A KFF analysis shows insurers have proposed a median increase of about 14% for 2027, on top of more than a 20% jump in 2026. Insurers cite rising medical costs, higher spending on specialty drugs and the phase‑out of enhanced premium subsidies as the main drivers.

Democrats had pitched Obamacare as the antidote to many of America's healthcare woes. They said it would insure large swaths of people and bring healthcare costs down — "bend the cost curve down," as President Barack Obama once put it. The former president also said Obamacare would cut premiums by thousands of dollars.

Instead, critics said, premiums kept rising, options on the ACA marketplace dwindled and the cost curve hasn't bent down.

In Colorado, Connect for Health Colorado, the state's ACA marketplace, had just over 282,000 enrolled in 2025, a 19% increase from 2024. In 2026, enrollment saw a 2% decrease at 277,000.

According to the Colorado Health Access Survey, the state's uninsured rate is around 5.9%.

Colorado Democratic state Rep. Manny Rutinel said the cost of enrolling in the ACA "is getting out of control," noting that a Colorado family of four that once paid roughly $500 a month over a year ago is now facing premiums exceeding $2,000 for the state's insurance marketplace options.

As more people lose Medicaid in 2027, Rutinel said, they will also be unable to afford the rising costs of Obamacare, leaving them with very few options for care.

Rutinel, who is challenging incumbent Evans for the competitive 8th Congressional District seat in November, said ongoing cuts to services and tax credits will only deepen the strain on working‑class families.

Evans said finding real solutions that stick is hard because Democrats refuse to even come to the table to find answers and compromise.

Meanwhile, Polis said the end result for families in Colorado will be "no federal fix."

"Frankly, there's only chaos coming federally," he said.

Nico Brambila and The Associated Press contributed to this article.

Read more from the Healthcare freefall series

Healthcare freefall: Subsidy cuts, insurance gaps reshape how Coloradans will seek care

Healthcare freefall: Once built on federal investment, rural hospitals today fight to survive