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February 2009

Colorado Proposes Hospital Provider Fee to Fund Coverage Expansion

Colorado Governor Bill Ritter has worked together with the Colorado Hospital Association (CHA) and others in the state legislature and advocacy community to develop a proposal to fund an expansion of the state’s public coverage programs using a hospital provider fee.  The Colorado Healthcare Affordability Act will be sponsored by the Joint Budget Committee, a bi-partisan group of legislators who are responsible for setting the state budget. 

Assessed on hospital services, the fee will be used to fund Medicaid eligibility for parents and single adults up to 100 percent of the federal poverty level (FPL) and children and pregnant women up to 250 percent FPL.  Should the legislation pass, the fee may also enable disabled individuals with incomes up to 400 percent FPL to buy into the Medicaid program, and it will support implementation of a continuous eligibility policy for Medicaid children. The new revenue will allow the state to pay for increased reimbursement rates for hospitals in the Medicaid and Colorado Indigent Care Program.  The fee cannot be used to replace existing program funds—it must be used to pay for expanded services and payment levels.

The functions and implementation of the fee will be overseen by a Medical Services Board, which will look to hospitals in the state to advise the process. 

The agreement between Governor Ritter and the CHA represents a growing trend of hospital groups recognizing that accepting a small provider fee in exchange for coverage expansions can have a positive impact on their bottom line.  For more information on the potential of provider taxes for coverage expansion, see “Can a Sales Tax on Medical Services Help Fund State Coverage Expansions?