ColoradoCare would come close to breaking even in its first year while extending health care coverage to all Coloradans, but it would quickly slide into deficits amounting to billions of dollars in subsequent years unless benefits were cut, taxes raised and doctors were paid less.
What’s more, the revenues designated for ColoradoCare to pay for new universal coverage wouldn’t be able to tame rising health care costs, resulting in red ink each year of its first decade.
Consequently, the amendment would result in a deficit by 2028 of $7.8 billion.
Those were among the top findings of a financial analysis of more than 50 factors conducted by the nonpartisan Colorado Health Institute that found any savings in administrative costs would be overwhelmed by ever-increasing health care costs.
The institute noted that one of the biggest questions about ColoradoCare – a proposed constitutional amendment that would replace most private insurance – is “whether its financing plan would work. Would it be viable over time?”
Its study, while not advocating for or against ColoradoCare, was a clear signal that the financial assertions of supporters of the amendment are considerably off the mark.
Part of the problem, CHI suggested, is that any financial estimates – including its own — depend on a series of assumptions about how consumers, doctors, private insurers and the federal government would respond “to the very different set of incentives and systems that would exist under ColoradoCare.”
It also warned of unforeseen consequences, saying the proposed taxes could discourage some businesses from remaining in Colorado.
The costs of ColoradoCare would be covered in part by a new 10-percent tax on payroll and other income. Employers would pay 6.67 percent and employees 3.33 percent. The self-employed would pay the full 10 percent. These taxes would total $25 billion in 2019, the first year ColoradoCare could launch.
CHI noted in its report that supporters of ColoradoCare believe the amendment would generate a surplus of $1.6 billion in its first year. However, CHI projects a sea of red ink, it said, because it expects, among other differences:
• Lower federal funding.
• Fewer savings from administration, bulk purchasing and fraud reduction.
• Larger increases in the use of health services.
• Higher administrative expenses to operate ColoradoCare.
Although CHI noted it was unlikely, the worst-case scenario for ColoradoCare would see a first-year deficit of $6.5 billion. Also unlikely, it said, was a best-case scenario of a first-year surplus of $5.5 billion.
Click here to read the full report: ColoradoCare: An Independent Analysis – Finances.
T. Scott Kennedy, president and COO of CCIG, has more than 30 years of insurance and risk management experience.Back to Resources