State aims to keep residents covered, support rural providers, and adapt Medicaid programs as sweeping federal changes loom.
Colorado health officials are beginning to chart a path forward as they face major federal Medicaid changes under congressional Republicans’ and President Donald Trump’s newly enacted “big, beautiful bill.”
On Tuesday, the Colorado Department of Health Care Policy and Financing — which oversees the state’s Medicaid program — held a virtual roundtable to discuss the law’s impacts and potential state responses.
Federal Law Slashes Medicaid Spending
The 800-plus-page budget law overhauls the federal tax code and safety net programs, cutting Medicaid spending by about $1 trillion through 2034. It shifts more costs to states, tightens eligibility rules, and imposes new administrative requirements.
Most provisions take effect in January 2027, including:
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Work requirements — “Able-bodied adults” must work, attend school, or volunteer at least 80 hours per month to qualify.
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More frequent renewals — States must reauthorize eligibility every six months instead of annually.
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Immigration restrictions — Asylees, refugees, and certain other immigration statuses will no longer be eligible.
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Provider tax caps — Limits on provider fees that states use to secure more federal matching funds.
State Leaders Seek to Limit Coverage Loss
Executive Director Kim Bimestefer pledged to “mitigate the loss of coverage” and “avoid draconian cuts” despite growing demand for Medicaid services and ongoing budget pressures.
She warned the new requirements could lead to significant coverage losses, with hundreds of thousands of Coloradans at risk. Medicaid currently serves nearly 1.3 million people — about 22% of the state’s population.
Rachel Reiter, who heads policy, communications, and administration for the department, stressed the need to support counties, which administer Medicaid in Colorado. The state has already increased automation in renewals from 50% to 75% in two years and plans to expand it further.
Officials also plan to apply lessons learned from the Medicaid Unwind in 2023, when automatic renewals ended after the COVID-19 public health emergency. That effort will include early, urgent outreach to help residents understand new eligibility rules.
Rural Providers to Get Limited Federal Aid
The law allocates $50 billion over five years to help rural hospitals and providers cope with funding cuts, particularly from reduced provider fees. Colorado could receive up to $100 million annually through 2030, but state officials say that won’t fully offset losses.
A June study by the Urban Institute and Robert Wood Johnson Foundation projects Colorado hospitals will lose $4.6 billion in revenue while absorbing $1.6 billion more in uncompensated care due to the law’s health care provisions.
Medicaid’s Rising Costs Put Pressure on State Budget
Medicaid now consumes about one-third of Colorado’s budget, with costs driven by:
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Growth in older patients needing long-term care
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Expanded mental health and other benefits
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Increased provider rates
Department spending rose 26% in FY 2022–23 and is projected to grow another 16% in FY 2023–24.
Bimestefer said the Taxpayer’s Bill of Rights (TABOR) — which caps state spending growth at 3–4% annually — compounds the challenge, given medical inflation of around 8%.
Special Session to Address $750M Shortfall
The new federal law also blows a $750 million hole in Colorado’s current fiscal year budget. Lawmakers will return for a special session on Aug. 21 to address the gap.
Deputy Medicaid Director Cristen Bates acknowledged that “difficult decisions” are ahead, including possible service limitations and provider rate cuts.
Still, officials stressed they will focus on improving efficiency and avoiding full program or population cuts.
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Katie is a senior who has been on staff for three years. Her favorite type of stories to write is reviews and features. Katie’s favorite ice cream flavor is strawberry.
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