by Jeff Helton, PhD, CMA, CFE, FHFMA,

The Amendment 69 ballot initiative up for vote this November would represent a significant positive change to health care financing in the State of Colorado. However, the media have published numerous assertions made by the Colorado Health Institute (CHI) that are misleading. As a citizen of the state, a retired health executive, and a health economist, I am greatly concerned that the media is echoing misinformation about Amendment 69. It is important that Coloradans get the facts – pro and con – for an informed decision about voting on this issue.

My concerns with the CHI report include the following:

  1. The CHI analysis improperly excludes federal matching payments from its calculations, omitting approximately $2.25 billion from its 2019 projection. That assumption is unfounded since Colorado will continue to serve persons under Medicaid benefits and would be entitled to full federal funding under Title XIX of the Social Security Act. Correcting for this error alone puts ColoradoCare into a quarter billion surplus in its first year of operation, before any other concerns are addressed.
  2. CHI assumes that health care costs would escalate at 6 – 6.8% per year from 2019 to 2028, based on national averages. This economic dynamic would be greatly changed under ColoradoCare. Since the ColoradoCare authority would be able to negotiate payment rates to track cost increases with inflation, the impact would more likely be in the range of 3-3.5% as projected by the Bureau of Labor Statistics. Correcting for this assumption would result in ColoradoCare continuing to be financially viable in ten years, having never increased premium rates. Further, the Colorado Care board can establish rates that are budget neutral against tax revenues. No consideration of realistic rate setting action by ColoradoCare is made by CHI, but it is a realistic assumption in today’s health care market. This happens now between insurers and providers. Any objections stating that state level provider rate setting would fail would be unfounded, since such a program has existed since the 1980s with commercial insurance plans for hospitals in the State of Maryland. Hospitals have been profitable there for decades.
  3. CHI makes an argument that the utilization of health care will increase significantly when citizens have health insurance. While people with insurance do tend to use it, CHI fails to note its own data that suggests the majority of persons likely added to the state’s insurance rolls under Amendment 69 would be the “young invincibles” that remain uninsured, even under the Affordable Care Act today. These younger persons use health care resources at a significantly lower rate than people currently in the health care market. Again, the projections of cost escalation represented by CHI are not fully supported by its own demographic data.
  4. CHI fails to consider that ColoradoCare can and would act as an insurance plan itself and so can take actions to minimize catastrophic cost losses. Health plans routinely use reinsurance mechanisms to limit their risk if a patient has a catastrophic medical cost. As a concerned voter, I would expect the ColoradoCare administration would seize any such opportunity to limit its risk for high cost patients.
  5. It is unreasonable to expect providers to need three years to eliminate duplicative billing costs as argued by CHI. Once ColoradoCare is in place, cost reductions should happen almost immediately. Providers will have two years to prepare for that change and can realize windfall savings by implementing billing cost efficiencies in advance of 2019. As a former hospital administrator, I can assure you that is what prudent administrators will seek to do. This assumption results in an additional $500 million in unrealized savings in 2019 and about $900 million in savings in each of the next two years.
  6. The administrative expense assumption for insurers is understated. A cursory review of publicly available financial statements for commercial insurers indicates that the amount for administrative costs actually approximates 19%, not the 14% used by CHI. While there will be administrative costs to operate ColoradoCare, the savings will far exceed the 14% CHI estimate. CHI grossly underestimates the amount of administrative overhead that would be eliminated under Amendment 69.
  7. The assumption that CHI makes of no savings from group purchasing is flawed. CHI uses the rationale that Colorado is too small to reap savings from group buying. However, commercial insurers far smaller than Colorado reap discounts through contracting with Pharmacy Benefit Managers (“PBM”). Those PBM are separate entities from commercial insurers and would have a strong incentive to work with ColoradoCare, if only to earn administrative fees paid for those services. Thus, CHI grossly over estimates the costs of health care by omitting cost savings available just in prescription medicines. This overstatement is compounded in each subsequent year of their analysis.
  8. Assuming increased fraud under ColoradoCare is fundamentally flawed. As a Certified Fraud Examiner, I am well versed in many of the statistics regarding health care fraud and assert that the amount of fraud CHI believes will happen is already included in the cost number they project. National estimates from the National Health Care Anti-Fraud Association suggest health care fraud costs of 3-10% are incorporated in national health care spending, and so an estimated further increase is not reasonable. One would expect savings from a targeted fraud reduction program, not increases above that already in their estimate. The federal government is requiring all health care financing programs using federal funds to have robust fraud detection and recovery programs. ColoradoCare can leverage the cutting-edge fraud analytics available from the Centers for Medicare & Medicaid Services (CMS) Office of Inspector General (OIG) to gain savings from fraud loss recoveries. In its latest report to Congress, the OIG reports a 6-1 return on dollars spent for fraud recoveries. Thus the best-case scenario of $500 million in net recoveries would require a minimal investment by Colorado Care and is likely to result in further savings.

In summary, I strongly believe that the CHI analysis paints an inaccurate picture of the future of health costs under ColoradoCare.  The CHI report underestimates the financial performance of ColoradoCare by nearly $ 4 billion dollars in the first year alone. Future projections of losses and insolvency would similarly be reversed.

These differences are based on real-world experience not considered in the CHI analysis and must be a part of our public debate on the merits of Amendment 69.  Those who truly want to control health care spending in Colorado must vote YES on Amendment 69, ColoradoCare.

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