Colorado’s health officials on Tuesday unveiled a plan to tackle changes to Medicaid outlined in a Congressional budget — with the goal of avoiding “draconian” cuts to the health program.

Ultimately, a big part of that strategy is to reduce the demand for Medicaid in the long term, officials said.

Signed into law on July 4, H.R. 1 makes significant overhauls of the Medicaid program since the passage of the Affordable Care Act in 2010. Key changes include new work requirements for able-bodied enrollees ages 19-64, more frequent eligibility redeterminations and freezes provider tax programs and bars any new taxes.

Executive Director Kim Bimestefer, the health agency’s chief, said Colorado plans to maximize its federal funding by applying for additional grants, such as the newly-established Rural Health Transformation Fund, and invest in initiatives to drive the state’s economy forward and improve the education system to reduce demand for Medicaid over time.

The department will also look into what drives Medicaid cost trends, such as enrollment numbers and provider payment rates, Bimestefer said.

In addition, the agency has created a list of 10 priorities, which include the following:

• Mitigating coverage losses from H.R. 1
• Retaining staff
• Increasing long-term and support services, as well as continuing to transition patients housed in congregant settings, such as residential facilities to community care
• “Smoothing” the implementation of a new Medicaid pharmacy benefit management system (PBM) scheduled for February 2026
• “Smoothing” the transition into the third phase of its accountable care collaborative, which went into effect on July 1

The debate over Medicaid comes as costs continue to rise under the Affordable Care Act. Forty states, including Colorado, and Washington D.C. have expanded Medicaid eligibility.

While specific Medicaid reductions have not been detailed, critics have argued that reforms are needed to address rising costs and ensure long-term program sustainability. They said the federal government has paid for a bigger and bigger share of Medicaid expenses, with the “Obamacare” expansion responsible for much of that shift. Some also pointed to the nation’s $36 trillion debt, not to mention the federal government running a $1.8 trillion deficit last year.

Bimestefer noted that Colorado faces unique challenges resulting from the congressional modifications, as the Taxpayer’s Bill of Rights (TABOR) limits how much the state can retain and spend without expressed voter approval, regardless of cuts made at the federal level.

The state is expected to face a nearly $1 billion budget shortfall, primarily due to the passage of HR 1, according to state analysts. In addition, the bill reduces federal Medicaid funding for Colorado through tax provisions, cutting it by half a percentage point each year from 2028 to 2032. This change is expected to reduce state revenue by up to $2.5 billion over that period, analysts said.

Another major provision of HR 1 involves changes to the Affordable Care Act’s premium tax credits, effectively a subsidy to lower health plans. The bill eliminates the enhanced tax credits established through the American Rescue Plan and extended through the Inflation Reduction Act, which are set to expire at the end of this year. Bimestefer said about 100,000 Coloradans will no longer be able to afford health care coverage once the expansion expires.

The state’s reinsurance program is also expected to get cut by about 40%, increasing premiums for residents, especially those in rural parts of the state, state analysts.

Health officials said patients on the Western Slope could see their premiums rise by almost 40%, while those on the Eastern Plains could see a 35% increase. For comparison, the statewide average premium increase was 5.6%.

“HCPF recognizes that these new federally mandated changes will impact all Coloradans, not just those served by our safety net coverage programs,” Bimester said. “We will collaborate with other state departments and stakeholders to double down on efforts to mitigate the commercial health insurance price increases that will result from the provisions of this bill.”