Colorado faces $1.6 billion budget deficit due to Medicaid costs

Colorado faces a projected budget deficit of nearly $1.6 billion for the upcoming fiscal year, marking the third consecutive year of significant fiscal challenges. State economists informed the Joint Budget Committee that the primary driver of this shortfall is the rapid increase in Medicaid costs.

While Medicaid enrollment has decreased by 31% since 2023, the cost of services has risen by 92% during the same period. This surge is attributed to the increased volume and type of healthcare services utilized, particularly long-term care for the elderly, rather than a rise in the number of participants. The program ran approximately $158 million to $213 million over budget in the last fiscal year and is projected to exceed its current budget by an additional $443 million by next July.

Mark Ferrandino, head of the Governor’s Office of State Planning and Budgeting, noted that Medicaid spending is outstripping the growth allowed under the Taxpayer’s Bill of Rights (TABOR). To mitigate the deficit, officials suggested that restricting Medicaid growth to the 4% TABOR limit could save approximately $915 million, though this would likely necessitate cuts to services.