Colorado hospitals are worried that a new law to limit the state’s ability to raise fees and surcharges could eventually lead to provider cuts.
Voters signed off on Proposition 117, a ballot measure that would require voters to approve any new state enterprise likely to raise more than $100 million from fees and surcharges within its first five years. Anti-tax groups, including the Koch-backed Americans for Prosperity, claim it’s necessary to prevent state lawmakers from skirting a similar rule requiring voter approval for tax increases.
Some healthcare advocates and providers worried Proposition 117 could halt the state’s hospital provider fee and limit Colorado’s ability to drawn down federal Medicaid funds due to some “ambiguous” language in the ballot initiative, said Joshua Ewing, vice president of legislative affairs for the Colorado Hospital Association.
Experts said Prop 117 probably wouldn’t affect the hospital provider fee because Colorado created it in 2017, and supporters only meant for it to apply to new fees and surcharges. There would likely be bipartisan support to clarify the law, Ewing said.
But the law could still affect providers, especially during state budget shortfalls, because it limits the state’s ability to raise revenue. Colorado’s Taxpayer Bill of Rights, which the state adopted in 1992, pegs tax revenue increases to inflation and population growth and requires voters to approve more tax increases. State lawmakers have partially gotten around it by levying fees and surcharges to gain needed revenue, but Prop 117 could put an end to that. Voters also approved an income tax cut, which could further hamstring the state’s ability to raise money.
That might become a problem for providers because “in fiscally challenging times, we often see hospitals at the forefront of cuts when they need to balance the state budget,” Ewing said.
Colorado recently adopted a 1% across-the-board cut to Medicaid provider rates to deal with the financial fallout of the COVID-19 pandemic. Other states have taken or are considering similar measures because falling revenues and pandemic-induced expense growth are draining their coffers.
Prop 117 “could make it difficult for the state to support the Medicaid expansion going forward and threaten the stability of rural hospitals,” said Adam Fox, deputy director for the Colorado Consumer Health Initiative.