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Three Possibilities for Colorado’s Future Health Care Financing and Delivery

Author: Gerald Friedman, PhD
Published: February 13, 2013
Financed by: Colorado Foundation for Universal Health Care
Legislation analyzed: 1) repeal of the ACA, 2) implementation of the ACA, and 3) implementation of the Colorado Health Care Cooperative proposal.


Download the Report: from the Colorado Foundation for Universal Health Care, or from our backup files below.


Summary

What happens if the Cooperative is implemented in 2016?

  • In 2016, Colorado health expenditures would decrease from the ACA level of 14.5% of the GSP to 14% of the GSP, and by 2024, CHE would account for 14.5% of the GSP compared to 17.5% and 18.5% of GSP with the no-ACA and ACA respectively.
    Health care costs would decrease for 80% of Colorado families whose family annual income is currently less than $100,000, and increase for families whose income is currently more than $100,000.
  • Compared to no-ACA, the Cooperative decreases per capita spending on health care to $888 in 2016 and $2,427 in 2024.
  • Businesses will benefit on the average with the greatest benefit going to the businesses that have been paying the highest health insurance premiums. Currently employers and their employees pay on the average 11.8% of payroll for health insurance plus employers pay for workers’ compensation insurance, which includes medical expenses that would be covered by the Cooperative. These combined payments would be lowered to 9%, with the employer paying 6% and the employee paying 3%, and an option for the employer to pay the employee share.
  • Savings—the Cooperative creates a number of efficiencies in the financing of health care. Some begin soon after day one of operation, and others might take years to develop. Consequently, the savings from the Cooperative increase with time. The major savings come from the fastestgrowing areas of health care—administration and pharmaceutical prices. Savings and costs are measured against the no-ACA baseline.
    • Administrative efficiencies in provider offices result in $2.2 billion savings in 2016, and $6 billion in 2024.
    • Administrative efficiencies from reducing unnecessary insurance and government administration result in $3.7 billion savings in 2016, and $6.4 billion in 2024.
    • Reduced prices for pharmaceuticals and medical equipment due to the power to negotiate price decreases result in $1.2 billion savings in 2016, and $3.1 billion in 2024.
    • Fraud reduction due to a transparency and a single billing system results in saving $.7 billion in 2016, and $2 billion in 2024.
    • Savings from restraining increasing administrative costs and drug prices, and from universal electronic records with smartcards (portable electronic medical records on a wallet-sized card), as well as payment reforms through ACOs, and other methods will be developed slowly. In 2020, they save $2.2 billion with savings growing to $6.4 billion in 2024.
    • Total savings in 2016 are $7.7 billion and $23.9 billion in 2024.
  • Increased costs—Some of the savings are offset by increased costs that improve health care in Colorado.
    • Health care services for the previously uninsured increase expenses by $1.2 billion in 2016, and $2.1 billion in 2024.
    • Increased use of health care services due to removing access barriers increases costs $.3 billion in 2016, and $3.2 billion in 2024.
    • Medicaid reimbursements in the no-ACA baseline have been so low that many providers could not serve Medicaid patients. Raising reimbursements to the level needed to bring Medicaid into the Cooperative increases costs $.8 billion in 2016, and $1.4 billion in 2024.
    • The Cooperative adds some administrative expenses such as tracking income and residency and developing smartcards. This costs $.6 billion in 2016, and $1 billion in 2024.
    • Total increased costs are $2.9 billion in 2016 and $7.7 billion in 2024.
  • Spending on health care administration in 2016 decreases from 31% CHE in the no-ACA and ACA ($15.2 billion and $15.6 billion respectively) to 21.5% CHE ($9.5 billion) in the Cooperative.
  • Effects on economy and employment:
    • The Cooperative will, compared to the ACA, identify 19% more people who are Medicaid eligible. Additional federal Medicaid funds coming to Colorado would create 8,000 jobs in 2016.
    • The $2.2 billion reduction in administrative services in provider offices will cause the loss and subsequent shift of 15,000 jobs to provider medical offices, retail stores, and other businesses that are created by the $2.2 billion of savings spent in the Colorado economy. This is one-fifth of the typical monthly turnover of 75,000 jobs in the Colorado economy.
    • Colorado businesses, government, and residents will have a combined savings of $4.8 billion due to efficiencies in the Cooperative, which may be spent in the Colorado economy. Each billion spent in the Colorado economy creates 7,000 jobs.
    • The Cooperative generates jobs by redirecting $3.7 billion of health care spending back to Colorado. Sixty percent of insurance jobs that will be unnecessary are outof-state, and the savings on pharmaceutical expenses reduces the flow of dollars out of Colorado.
    • Employers will use some of their savings to hire more employees and some to increase salaries, further stimulating the economy.
    • By reducing the cost of health care, the Cooperative will lower the cost of hiring labor, generating additional jobs by allowing Colorado business to prosper.
  • Due to the Cooperative’s one-year residency requirement, 13,600 people will be uninsured (0.3% uninsured rate) in 2016.


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