Study: ColoradoCare can't cover its costs

9NEWS at 5 p.m. 08/08/16.

KUSA - The 2016 ballot initiative to give every Coloradan healthcare won’t be able to cover its costs, according to a study released Monday by the Colorado Health Institute.

That’s despite the fact that the proposed amendment 69, known as ColoradoCare, would more than triple the amount of taxes collected by the state.

“Simply put, the revenue would not be sufficient,” the report stated. “CHI’s model projects that the revenue from taxes and federal funds would fall just short of paying ColoradoCare’s bills in the first year – with widening deficits in each subsequent year.”

The study suggests ColoradoCare would have to cut benefits, raise taxes or reduce payments to doctors and hospitals to achieve long-term financial solvency. The ballot language would empower the proposed 21-member board to make such decisions.

Amendment 69, the first measure to qualify for Colorado’s 2016 ballot, would replace most private health insurance with a single insurer called ColoradoCare.

In addition to raising an estimated $25 billion through an additional 10 percent income tax on Coloradans, the program would also raise money through co-payments for services and money from the state and federal governments.

The ColoradoCareYES campaign believes those three sources would bring in more than enough money. Its study showed a $1.6 billion surplus for 2019, the first year ColoradoCare could go into effect.

In contrast, CHI's “most probable” computer model showed a $253 million deficit for 2019.

“CHI projects a deficit because we expect, among other things: lower federal funding; fewer savings from administration, bulk purchasing and fraud reduction; larger increases in the use of health services; and higher administrative expenses to operate ColoradoCare,” according to the report.

RUNAWAY COSTS

The biggest obstacle to ColoradoCare's financial future, according to the CHI study, is the rising cost of healthcare.

“Historically, though, health care costs have grown faster than the economy,” the report stated. “CHI expects that over time there would be a widening gap between ColoradoCare’s tax revenue and how much money it would need in order to cover all of the health services used by members. This would cause ColoradoCare’s bottom line to worsen every year.”

By 2028, CHI's computer model projected ColoradoCare would face a budget shortfall of $7.8 billion.

“It shows that ColoradoCare is financially unsustainable and will bleed red ink virtually from day one,” No on 69 spokesman Sean Duffy said. “The only way they can stop the bleeding is to further limit the accessibility and quality of healthcare or increase their already sky-high taxes.”

Anders Fremstad, an assistant professor of economics at Colorado State University, disagreed.

“CHI assumes that ColoradoCare has no effect on cost increases going forward, and I think that's a bad assumption to make,” Fremstad said.

The United States spends about 17 percent of its gross domestic product on healthcare, but countries with single payer systems spend between 10 to 11 percent.

Fremstad believes the program would “bend the cost curve” downward, so the shortfall could be substantially less.

And he added that the board – unlike current healthcare providers – would lack the authority to raise premiums (i.e. taxes) without a vote.

“I think what I would stress is that's really a problem with the current system too,” Fremstad said. “It's something we are going to have to deal with in either case.”

FEDERAL FUNDS

ColoradoCare's board would get a significant portion of its funding by asking the federal government for waivers from the Affordable Care Act and Medicaid.

That basically means the federal government would pay Colorado for taking on the responsibilities of those programs.

CHI’s study estimated the federal government would give ColoradoCare a $6.8 billion in waivers for 2019. That’s a lot of money, but it's $4 billion less than the yes campaign projected.

The difference between the two projections comes down to something called hospital provider fees. It's money the federal government gives states to help hospitals cover some of the loses they incur from treating Medicaid patients.

“Because ColoradoCare intends to pay providers above Medicare payment rates, we assume that this federal funding would no longer exist,” according to the report.

No waivers could mean no program, ColoradoCareYES spokesman Owen Perkins said.

The initiative has a termination clause that states it would “shut down operations and return unused funds” or “notify the governor … of ColoradoCare's inability to function” if the waivers aren't “sufficient for its fiscally sound operation.”

That's a good thing in Perkins' opinion.

It's a "built in guardrail" that "guarantees we aren't going to pass something that's reckless and irresponsible," Perkins said.

ADMINISTRATIVE COSTS

ColoradoCare aims to simplify the billing process for medical offices and hospitals by giving them one set of forms and one insurance provider to deal with.

Both studies suggest this could save billions, but they differ on how much the new board would likely spend on its own administrative costs.

CHI's study estimated $1.5 billion for 2019 while proponents of the ballot initiative estimated $1 billion.

Copyright 2016 KUSA


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