Colorado weighs Medicaid rate strategies

Colorado lawmakers are weighing two competing strategies for setting Medicaid provider rates, a decision that could shape funding levels, provider sustainability, and access to care across the state. Budget writers are reviewing proposals from both the governor’s administration and the state’s Medicaid Provider Rate Review Advisory Committee, each offering a different approach to reimbursement.

What is happening

The Medicaid Provider Rate Review Advisory Committee (MPRRAC), which evaluates payment adequacy within Health First Colorado, presented its annual recommendations to the Joint Budget Committee. The committee suggested targeted, service-specific rate adjustments. These include raising certain rates to at least 80 percent of Medicare benchmarks and increasing others up to 150 percent for services with higher complexity or workforce shortages.

At the same time, the Colorado Department of Health Care Policy and Financing outlined a simpler, across-the-board approach. The proposal would set all provider rates at 85 percent of Medicare, aligning with the governor’s budget plan.

Why it matters

The two strategies create very different outcomes for providers. A single statewide benchmark could lower reimbursement for specialized or labor-intensive services, tightening margins for programs already facing staffing shortages. Service-specific adjustments may better reflect the cost of delivering higher-need care but come with a higher price tag for the state.

Providers in pediatric behavioral health, long-term services, and supports for individuals with intellectual and developmental disabilities have warned that flat rate reductions could limit access and push programs to scale back or close. The debate is unfolding as Colorado confronts a recurring structural budget deficit of roughly one billion dollars each year, with Medicaid growth cited as one of the largest pressures.

Key numbers and tradeoffs

The governor’s plan would standardize Medicaid rates at 85 percent of Medicare, higher than the national average of 75 percent. MPRRAC’s plan sets a floor of 80 percent of Medicare and proposes higher rates for certain services with significant access issues.

The financial difference between the approaches is significant. MPRRAC’s recommendations would require approximately 26 million dollars in total funding, including about 9 million dollars from the state’s general fund. The administration’s plan is projected to save about 8 million dollars, including around 2.3 million dollars in general fund savings.

What to watch next

Lawmakers will decide in the coming months whether to adopt a uniform benchmark or a differentiated rate model. Their decision may influence future reimbursement strategy and the role of MPRRAC, whose recommendations lawmakers noted are frequently not adopted.

The outcome will also have major implications for IDD and behavioral health providers. If rates fall below the cost of care, agencies may struggle to maintain programs, deepen workforce shortages, or reduce service availability.

The broader budget outlook will shape the debate. If Medicaid continues to grow faster than state revenue, Colorado may face difficult tradeoffs in other parts of the budget, adding urgency to decisions about how to structure reimbursement.