A new study predicts ColoradoCare would fall short by $8 billion

ColoradoCare is likely to reduce total health care spending, but not by enough to actually pay for it.
4 min. read
ColoradoCare could cut costs if the state can find a way to fund it. (Pictures of Money/Flickr)

ColoradoCare could cut costs if the state can find a way to fund it. (<a href="https://www.cheapfullcoverageautoinsurance.com">CheapFullCoverageAutoInsurance.com</a>/Flickr/Creative Commons)

A proposal to increase payroll taxes 10 percent to pay for universal health care in Colorado would not raise enough money to cover the program's costs, according to a new analysis. The annual shortfall could be around $8 billion.

ColoradoCare, or Amendment 69, is a system of universal health care that would replace private health insurance and the insurance exchange established by the Affordable Care Act. The system would be overseen by an elected 21-member board of trustees and funded by additional payroll taxes on companies and individuals. According to the amendment, people can choose to keep private insurance but do not have the option of opting out of taxes. Those covered by Medicare, TRICARE and the VA would continue their current coverage.

The nonpartisan group conducting the study, Colorado Health Institute, emphasized that many decisions, including provider compensation, would be left up to the board of trustees. That gives the board flexibility to manage unforeseen circumstances but also makes precise predictions of financial effects difficult.

"We see ColoradoCare as achieving its short-term goals," Michele Lueck, the president and CEO of the Colorado Health Institute told the Denver Post. "Our doubts really come in in terms of the long-term viability."

The gist of the analysis: ColoradoCare would save money when compared to current health care trends -- roughly $2.7 billion in 2028 -- but it might not raise enough money to cover the overall cost. The Colorado Health Institute estimates the shortfall at $8 billion.

The other difference is that current health care spending is paid by a variety of private and public sources -- individuals paying deductibles, insurance companies and so on -- while ColoradoCare would obligate the state to take on those expenses. And it's easier for private insurance companies to raise your premium than it is for Colorado to get voters to approve another tax increase if revenues don't cover expenses.

Colorado Health Institute’s study concludes that ColoradoCare reduce total health care spending by billions of dollars. The savings would come from money usually spent on administrative costs and insurance company profits and could be allocated to cover the 6.7 million Coloradans who are currently uninsured.

But the study says that long-term, the plan isn’t viable. Even in the first year, it wouldn't quite break even. By the 10th year of implementation, the shortfall would grow to an estimated $8 billion, and the gap would continue to widen. Rising health care costs that could only be countered by raising taxes or cutting doctor benefits or wages. (Opponents of the measure have predicted a doctor exodus from Colorado if the measure passes for just that reason.)

The institute predicts ColoradoCare will need to raise approximately $63.9 billion by 2028 to cover expenses, causing the previously mentioned deficit. As written, ColoradoCare will bring in $56.1 billion by that year.

Without the initiative, health care spending could reach $66.8 billion by 2028.

“Health care expenses outpace growth of the general economy time and time again,” Lueck told the Denver Post. “And that challenge is a challenge for ColoradoCare as well as our current system.”

Anders Fremstad, an economist who consulted for ColoradoCare, told the Denver Post the institute’s analysis was pessimistic concerning ColoradoCare’s ability to cut back on rising health care costs.

And an earlier analysis by the Colorado Foundation for Universal Health Care determined that ColoradoCare would actually run a $1.5 billion surplus within the first year, according to the Post. The difference depends on what assumptions you use. The Colorado Health Institute’s analysis assumes a higher increase in use of healthcare and higher administrative costs.

The Colorado Health Institute is a nonpartisan group funded by four health foundations with ties to hospitals. The institute says the funding did not influence the study's findings.

Multimedia business & healthcare reporter Chloe Aiello can be reached via email at [email protected] or twitter.com/chlobo_ilo.

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