Colorado public option fight kicks off as hospitals push alternative

Colorado lawmakers unveiled legislation on Thursday that would create a privately administered public insurance option in the individual market, but hospitals are instead pushing an alternative policy.

The Colorado Hospital Association opposed the public option program, which was developed by the state government and has been pushed by Democratic Gov. Jared Polis.

Insurers and hospitals would be required to participate in the plan. The base reimbursement rate is 155% of Medicare rates, but hospitals’ individual rates would vary based on hospital type, payer mix and how efficiently they deliver care. The formula was developed by researchers at Johns Hopkins University who receive funding from Arnold Ventures.

“Coloradans can’t afford to wait any longer. The Colorado Option is truly a Colorado solution to a Colorado problem. This is us saying no to the status quo,” state Rep. Dylan Roberts (D), one of the bill’s lead sponsors, said Thursday.

The public option would likely only serve a small portion of the population, but the precedent that lawmakers could regulate hospitals’ reimbursement rates worries some providers and a well-financed national industry interest group, the Partnership for America’s Health Care Future.

“This proposal is untested and is based on a flawed policy — rate setting — that has been attempted and failed in nearly a dozen other states,” the Colorado Hospital Association said in a statement on Thursday.

Instead, hospitals are pushing to create an independent board that would analyze data and set a universal budget goal for the total cost of healthcare in the state and develop targets to limit growth for the overall budget and individual sectors. The structure would be based on similar entities in Massachusetts and Oregon.

However, there would be no punitive measures by which the board could enforce its growth targets besides ordering public hearings and an improvement plan.

The total-cost-of-care proposal could theoretically be compatible with a public insurance option, but sources following the legislation said it was clear the proposal was intended to be a replacement for the public option that would shift blame for high healthcare costs from hospitals onto other industry stakeholders such as insurers and drugmakers.

Adam Fox, the director of strategic engagement for the Colorado Consumer Health Initiative, said the consumer group believes the total-cost-of-care approach is insufficient because it simply limits future growth instead of addressing current costs.

“Essentially that would bake in the excessive hospital charges and profits and allow costs to continue to grow from a very high and unsustainable level,” Fox said.

The total-cost-of-care proposal has an unclear path through the legislature. The bill’s primary legislative proponent, state Sen. Bob Rankin (R), would likely either need unanimous support from the legislature’s Joint Banking Committee or special permission from leadership to introduce a bill because some legislative deadlines have already passed.

The Colorado Rural Health Center, Colorado’s not-for-profit office of rural health, has not yet decided whether to support either proposal.