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Colorado Medicaid expansion would make 86,000 college students eligible

by Linda Gorman

Gov. John Hickenlooper wants yet another expansion of Colorado Medicaid. This one will cover the more than 86,000 college students in Colorado that the Census Bureau estimates have incomes below the federal poverty level. It also will cover the unknown number of otherwise healthy single students above the poverty level who have incomes up to $15,414 a year. (Income figures do not include additional subsidies received for things like housing, child care, energy assistance and food.)

As the Hickenlooper Administration claims the expansion would enroll an additional 160,000 people, it seems that college students will be its primary beneficiaries.

Many Colorado colleges already require students to buy health coverage. But Medicaid enrollment is free and it covers everything from unnecessary emergency room visits and major surgery to over-the-counter drugs with $5 copays and no deductible. Students and their parents know a good deal when they see one.

Under the Hickenlooper plan, rational observers expect droves of students to drop their private coverage in favor of Medicaid. Since Medicaid enrollment is also open to anyone who can produce a driver’s license, photo ID or other proof of residence in Colorado, the expansion offers equal opportunity for the state’s taxpayers to pay for the health care of both in-state and out-of-state students.

The plan will cost taxpayers a bundle. Medicaid medical services premiums for the program’s least expensive adults are $3,000 a year per enrollee, according to the legislature’s Joint Budget Committee. Capitated payments (one flat fee for everyone) to regional organizations that provide mental health care will add another $278 for each adult without dependent children.

Groups that have managed care contracts with the state Medicaid program receive these payments for each person enrolled, whether services are used or not. This arrangement creates a financial incentive to encourage the state to enroll people in Medicaid regardless of need.

This may explain why people hear so little about the Colorado Indigent Care Program, a state program that already underwrites needed medical care for people who cannot afford it and are ineligible for Medicaid. It also may explain why the state continues to try to herd Medicaid recipients into managed care, even though it has admitted that managed care increases Medicaid expenditures. The Robert Wood Johnson Foundation also has concluded that Medicaid managed care does not save money.

In addition to paying for the new costs arising from the Medicaid caseload increase, Colorado taxpayers will have to make up for the tax revenues lost when people stop making payments to private insurers and start receiving benefits from the government.

Assuming that the federal government picks up the entire cost of medical service premiums for the first few years of the expansion, the Hickenlooper Administration estimates that state taxpayers will be on the hook for an additional $1.4 billion over the next 10 years. That assumption may understate the cost, given the state of the federal budget and the fact the Obama Administration has already proposed reducing federal funds.

Since increasing Colorado taxes is likely to trigger an exodus to other states with lower taxes, spending is a zero sum game. An additional $1.4 billion for the healthy college students means $1.4 billion less for expenditures on schools, roads, law enforcement and other core functions of state government.

This article originally appeared in Health Policy Solutions, January 24, 2013.