The Future of Colorado Health Care

8/14/2019 The Future of Colorado Health Care

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THE FUTURE OFCOLORADO HEALTH CARE

A preview to the forthcoming report on an economic analysis of health care reform

and the impact on Colorados economy


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This study is authored by the New America Foundation in

collaboration with University o Denvers Center or Colorados

Economic Future with support rom the Colorado Health

Foundation and The Colorado Trust. Based on original and

secondary state-specifc data, the study describes the economic

consequences o maintaining the current system o health

coverage and delivery o health care services. It then analyzes

the costs and benefts o increasing health insurance coverage

and reorming the health care delivery system. The reports

pairing o unique data and economic analysis is intended to help

state policy and business leaders make well-inormed decisions

about the uture o health policy in Colorado.

The New America Foundation team is led by

Health Policy Program Director Len Nichols,

PhD. The New America Foundation is a nonproft, nonpartisan

public policy institute that invests in new thinkers and new ideas

to address the next generation o challenges acing the United

States. The University o Denvers Center or Colorados Economic

Future team is directed by Charlie Brown. The Center inorms

and enhances public dialogue on issues aecting Colorados

long-term economic health and quality o lie by providing

inormation, research, and analysis. Henry Sobanet, principal o

Colorado Strategies, serves as manager o this project or the

University o Denver.

a b o u t t h i s s t u d y

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Health care costs place increasing strain on Colorado households, employers, and governments. Indeed, Coloradohas the seventh highest health care costs in the nation.1 In 2008, health insurance premiums in Colorado representednearly 22 percent o median amily income.2 During that same year, the average deductible the amount Coloradansmust spend beore insurance begins to pay or their medical care was more than $1,600. Te cost o healthinsurance will continue to grow in the uture. In act, the Colorado Business Group on Health projects that premiumsare expected to grow 10 percent per year.3

Tese high and increasing costs make health insurance and health care unafordable or many o Colorados citizens,businesses, and governments. As many as 834,000 Coloradans are uninsured.4 In addition, U.S. businesses spend nearlythree times as much per worker per hour or health benets, making it di cult to compete in a global economy.5 Smallbusiness owners cite the high cost and inaccessibility o health insurance as undamental obstacles to entrepreneurship.

Finally, health care costs continue to claim a larger share o government budgets. Colorado spends almost $1.6 billionon Medicaid alone. Tis represents roughly 21 percent o the $7.5 billion in the Colorado General Fund.6

Te upward trajectory o Colorados health care costs has proound implications or the states economy. o helpexplain the impact o these costs, this document previews a orthcoming report that analyzes how health care reorm

would impact the Colorado economy. Specically, the analysis uses Colorado-specic data to show that:

Failing to enact health reorm in Colorado will lead to higher health care costs, more uninsured Coloradans,and higher health spending, especially by businesses.

Increasing health insurance coverage in Colorado will spur increased economic activity and create more jobs,even aer accounting or the costs o nancing reorm.

Focusing Colorados health care delivery system on value and e ciency will allow the state to deliver higherquality care at lower costs over time, while reeing up resources or other state priorities.

Introduction


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The Colorado Blue Ribbon Commission and Federal Health Care Reform

Te Colorado legislature created the Colorado Blue Ribbon Commission or Health Care Reorm, also known asthe 208 Commission, (hereinaer the Commission) in 2006 to identiy a sustainable uture or the states healthcare system. Te 27 commissioners were appointed by the bipartisan leadership o the Colorado legislature and byGovernors Owens and Ritter. Te commissioners represented consumers, health insurance purchasers, providers,business leaders, and health care experts.

Aer receiving 31 comprehensive reorm proposals rom across Colorado, the Commission selected our to analyzeclosely. Te Commission then created its own h proposal.7 Tis h proposal (hereaer the CommissionProposal) served as the basis or its nearly unanimous recommendations to the state legislature. It represents theclearest consensus or comprehensive health care reorm in the state.

Te structure o the Commission Proposal is similar to major ederal health care reorm proposals being developedcurrently. Both the Commission Proposal and ederal reorm proposals:

Establish a new, regulated insurance marketplace to make health coverage accessible; Provide nancial assistance to help make coverage afordable; Require all individuals to purchase coverage; Expand Medicaid eligibility; and Include key building blocks to improve the way care is delivered, which should lead

to higher quality care and lower cost growth.8

Te most important diference between the Commission Proposal and current ederal legislation is their proposed

sources o nancing. In the absence o ederal reorm legislation, Colorado must nance its share o Medicaidexpansion and the ull cost o private insurance subsidies. Te Commission proposed to nance Colorados shareo reorm costs exclusively through increased tax rates or new consumer taxes. Under similarly-structured ederallegislation, Colorado would still need to nance its share o Medicaid expansion; however, the ederal government

would subsidize individuals who qualiy or nancial assistance to purchase private insurance. Federal reorm will benanced through a combination o sources. Federal nancing proposals include but are not limited to savings romthe Medicare and Medicaid programs, sector-specic health industry ees, and an excise tax on high-cost healthinsurance plans. Accordingly, while the Commission and ederal proposals would ofer roughly the same level ocoverage expansion, ederal reorm would ofer two additional economic benets to Colorado: 1) the ederalgovernment would nance a larger share o reorm costs, and 2) less o the nancing would be borne throughhousehold taxes.

THE FUTURE OF COLORADO HEALTH CARE

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ECONOMIC IMPACT

Real IncomeGrowth

Consumer PriceIndex

Private HealthSpending perCapita

Private Premiums Out-o-PocketHealth Care Costs

2009 - 2014 1.5% 2.0% 6.0% 7.0% 3.0%

2014 - 2019 2.0% 2.0% 6.0% 7.0% 3.0%

All ve proposals, including the Commission Proposal, were evaluated by the Lewin Group. Te Lewin Groupsanalysis o the Commission Proposal ocused on quantiying the number o people who would be covered, the

associated costs, and the potential savings to households. Te broader implications or job creation and theColorado economy as a whole were not considered.

Te study discussed herein builds on the Lewin analysis by considering the Colorado-specic benets and costs ocomprehensive health care reorm in a broader economic context. Te Commission Proposal is used as the basis toexplore the implications o comprehensive health care reorm over the next decade on a variety o state economicindicators including gross state product (GSP), job creation, and health care cost growth. At the time o theCommissions work, the prospects or comprehensive ederal reorm were dim. Tus, the Commission presumedlittle ederal help. Even at the time o our projects inception, the potential or ederal health care reorm was highlyuncertain (and remains somewhat uncertain at the time o this publication). Tereore, we assess the economicconsequences o health reorm as i the Commission Proposal or coverage expansion and delivery system reorm

were implemented. We will also indicate where ederal reorm as currently being contemplated would havesignicantly diferent implications or Colorados economy or health system or both. Tis preview presents ourcurrent ndings; additional inormation will be provided in the orthcoming report.

The Consequences of Inaction

A recent independent study by the Urban Institute a nationally recognized, nonprot, nonpartisan researchorganization nds that the economic and social costs o ailing to x Colorados health care system are high. Tisresearch was critical to our own study, providing the basis or our assumptions about expected health care costgrowth in the uture. Te Urban Institute study shows that without reorm, the number o uninsured Coloradans

will increase, while businesses, individuals, and governments will ace increasingly higher health care costs.9

Without reorm, health care and premium costs will grow at more than twice the rate o economy-wide

productiity. Current patterns o high health care cost growth are not an anomaly health spending willclaim larger shares o amily budgets or at least the next decade, as seen in able 1.

Table 1. Average Annual Growth Rate Assumptions, in Five-Year Intervals

Without reorm, more Coloradans will be uninsured, ewer will be covered by employer-sponsored

insurance, and more will rely on Medicaid coverage. By 2019, more than one-in-ve non-elderly (underthe age o 65) Coloradans will be uninsured. Fewer than 60 percent will be covered by employer-sponsoredinsurance. Medicaid enrollment will increase by more than a percentage point. See Figure 1 on page 6.

Source: Urban Institute, Health Reorm: Cost o Failure in Colorado, August 2009.


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Source: Urban Institute, Health Reorm : Cost o Failure in Colorado, August 2009.

*Non-elderly is dened as individuals under the age o 65.

Without reorm, employer health care contributions will continue to rise. As illustrated by able 2, total

employer health care contributions will rise by 109 percent without action. In addition, premium costsper worker will increase by nearly 105 percent, climbing rom $5,563 in 2009 to $11,375 by 2019. Further,uncompensated care costs care that is delivered and not paid or will rise by 113 percent. Tis is signi-cant because uncompensated care costs typically result in higher hospital prices, which in turn lead to higher

premiums or the privately insured. See Figure 2 on page 8 or urther explanation.

Table 2. Aggregate Spending 2009-2019, Non-Elderly Population (in millions)

Employer HealthInsurance

Non-GroupInsurance

Medicaid Other Uninsured

60%

50%

40%

30%

2009 2019

20%

10%

0%

Figure 1. Distribution of Health Coverage 2009-2019, Total Non-Elderly* Population

2009 2019 Percent change

2009-2019***

Medicaid/SCHIP $1,490 $2,792 87.3

Uncompensated Care* $871 $1,858 113.2

Employer Share o Premiums $7,321 $15,317 109.2

Premiums per Worker (in dollars) $5,563 $11,375 104.5

Individual and Family Spending** $5,829 $10,015 71.8

Source: Urban Institute, Health Reorm: Cost o Failure in Colorado, August 2009.

*Uncompensated Care is the cost o care provided or which no payment is received rom the patient or insurer or government.**Individual and Family Spending constitute the household contribution toward insurance premiums and out-o-pocket expenses on health care.*** Percent change may not calculate correctly due to rounding.

THE FUTURE OF C OLORADO HEALTH CARE

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ECONOMIC IMPACT

Costs and Benefits of Health Reform

CostsExtending enough subsidies to cover all uninsured Coloradans will require a signicant state investment, even

with some (and possibly considerable) ederal assistance. Tere are two ways to think about the costs o reorm.

Public budget cost. Te Lewin Group estimated that the public cost o nancing comprehensive reormin Colorado is between $980 million and $2.7 billion per year.10 Tis range o spending represents the totalestimated cost o increased Medicaid enrollment and subsidies or the purchase o private health insuranceincluded in the ve proposals analyzed by the Lewin Group. Under the Commission Proposal, Coloradosshare o the public cost will all below this range because the ederal government shares equally in the costo Medicaid. Colorado spending would be reduced even urther under ederal reorm, however, because theederal government will nance subsidies or lower-income Coloradans who do not qualiy or Medicaid.

Opportunity cost o new taxes to fnance reorm. New Colorado taxes or increased tax rates would be paidultimately by individuals or households, even i the tax takes efect indirectly through reduced business

prots. O course, new taxes reduce consumer spending by reducing consumers disposable income. TeCommission proposed several nancing options, including increases in tobacco, alcohol, and income taxesand a new tax on unhealthy oods such as salty snacks and soda. Te economic efect o an increase intaxation is less economic output, ewer jobs, and slower job growth. But can the benets to tax-nancedspending exceed the costs? We answer this question below as it relates to Colorado health care spending.

Failing to enact health reform in Colorado will lead to

higher health care costs, more uninsured Coloradans,

and higher health spending, especially by businesses.


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Benefits

In addition to the immediate benets o health reorm timely access to the lie-saving and lie-enhancing care that

insurance provides11 there are also additional, less-obvious benets. While it is not possible to quantiy all o thepositives o health reorm, those that we can quantiy are signicant.

Additional spending in the Colorado economy. Te amount o money that the Commission Proposal wouldspend on health care coverage expansion will be transmitted through the economy as individuals and healthcare providers spend more on health and household goods. One dollar in new spending results in more thanone dollar in increased economic activity. Tis multiplier efect is true or both health care and householdgoods.12 Te multiplier efect is particularly signicant or health spending because the vast majority o healthcare dollars are spent locally, rather than on products and services produced in other states or countries, as isthe case or general household spending. For example, as doctors provide care to more patients they will buymore medical supplies; the new supplies will translate into increased economic activity in the medical supply

industry, as well as those industries both health and non-health that supply goods to the medical supplyindustry.13 While the Commission Proposal would certainly stimulate new health spending, it would also

provide subsidies or the purchase o health insurance, thereby reeing Coloradans to spend more o theirresources on non-health goods and services in the short run. In addition, health care cost growth would belower in the long run. Tis would also lead to increased spending on non-health-related goods.

More jobs. As more Coloradans obtain health insurance and seek medical care, there will be an increaseddemand or all levels o clinicians and health care workers. Te increased demand will lead to more healthcare-related job opportunities in Colorado, resulting in more individuals with disposable income to buyother consumer goods rom Colorado businesses. Tis increased demand or consumer goods will createadditional jobs throughout the economy.

Reduced cost-shi. Te uncompensated care delivered to the uninsured combined with low Medicaidprovider payment rates (explained in Figure 2) leads to higher premiums and health care costs or theprivately insured. As more individuals obtain insurance and the Colorado Medicaid program increases itspayment rates to providers (as prescribed in the Commission Proposal), uncompensated care will be reduced.A reduction in uncompensated care will diminish the need or cost-shiing to insured individuals, whichshould make premiums lower than they would have been without reorm.

Figure 2. Explaining how cost-shifting occurs in the health system

Public programenrollees

Underpaymentfor services

Higher prices forservices delivered tothe privately insured

Higher premiums

Unpaidmedical bills

Uninsured

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ECONOMIC IMPACT

Reduced cost growth and higher quality care. According to research, between 30 and 50 percent o healthcare spending does not improve health in any demonstrable way.14 Recent innovations by health systemslike Denver Health and community collaboration in places like Grand Junction indicate that getting higherquality and better value or the money spent on care and making the delivery o care more e cient canreduce the cost o health care or households, businesses, and governments.15

Coverage Expansion

Effect of a Coverage Expansion on Economic Output

Based on our analysis o the Lewin Groups ndings, we estimate that the Commission Proposal would inject a totalo $2.45 billion16 into the Colorado economy in 2010.17 Tis money would be spent by consumers on health careand household goods. Industry-specic and inter-industry purchasing pattern data analysis by the U.S. Departmento Commerce estimates that every $1 in new health care spending in Colorado will generate $2.44 in new economicoutput in Colorado. Te Commission Proposal subsidizes lower income households, some o whom are spendingtheir own money on health insurance and health care today. As a result, these subsidy dollars enable some house-holds to spend more o their own money on other goods and services once their health care needs are addressed.18

Te U.S. Department o Commerce estimates that a $1 increase in household spending on consumer goodsgenerally will lead to $1.66 in new economic activity. New health care spending generates more economic outputthan new household spending because the purchases that are made as a result o new health care spending occur

primarily within the local economy. In contrast, a larger raction o household spending benets out-o-state andeven oreign producers o many consumer goods.

Colorados share19 o the nancing or the Commission Proposal will come primarily rom new taxes or increasedtax rates. Tereore, the Colorado-specic cost o reorm will be borne ultimately by Colorado households. Justas the efects o new spending are iterative, the drain o nancing reorm is also multiplied throughout Coloradoseconomy. Indeed, $1 in taxation results in more than $1 in economic costs.

Increasing health insurance coverage in Colorado will spur

increased economic activity and create more jobs, even afteraccounting for the costs of financing reform.


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Year Baseline Gross

State Product

(GSP)*

New Economic

Output rom

Coverage Expansion

Economic Output

Lost rom Financing

Expansion

Net New

Economic Output

Total GSP rom

Expansion Net o

Financing

2010 $253.7 $4.9 $2.6 $2.3 $256.0

2014 $305.9 $6.4 $3.5 $2.9 $308.8

2019 $410.3 $8.9 $5.1 $3.8 $414.1

Findings

Health care coverage expansion ensuring that most or all Coloradans have adequate health care insurance would create $3.8 billion in new economic output in 2019, even aer accounting or the economic costs othe taxes necessary to nance reorm. Tis means that the value o the Colorado economy will be $3.8 billionhigher as a result o the tax-nanced health coverage expansion envisioned by the Commission. Expandinghealth care coverage alone would increase economic output by $8.9 billion in 2019; however, the economiccost o tax-nanced health care reorm would reduce that gain by $5.1 billion. able 3 summarizes the overallgains rom a health coverage expansion.

Table 3. Total Economic Effect of Coverage Expansion (in billions), 2009 2019

*Gross State Product includes the economic value o all goods and services created and purchased within the boundaries o the state.

A good indicator o the economic benet o health care coverage expansion is how much o the new spend-ing will benet areas o the economy not related to health care. Under the Commission Proposal, nearly 60

percent o new economic activity in Colorado would occur outside o the health care sector. As illustrated in

Figure 3, a public sector investment in health insurance coverage benets the states entire economy, not justthe health care sector.

Figure 3. Distribution of New Economic Output Post-Reform in 2019

New GSP inNon-Health Sectors($2.2 billion)

New GSP inHealth Sector($1.6 billion)

59%

41%

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ECONOMIC IMPACT

Effect of Health Insurance Coverage Expansion on Employment

Successully expanding health insurance coverage will not only enhance the Colorado economy, but also create

new jobs or Coloradans. Health care coverage expansion will increase demand or both health care services andhousehold goods. As a result, job growth will increase in all sectors o the Colorado economy.

Findings

Health care coverage expansion in Colorado would create 23,319 jobs by 2019, even aer accounting orthe economic cost o the new taxes necessary to nance reorm. Expanding health care coverage alone wouldcreate 45,000 new jobs in the state; however, the economic cost o tax-nanced reorm would reduce that gainby 21,681 jobs. able 4 summarizes the overall job growth as a result o coverage expansion.

Table 4. Employment from a Coverage Expansion Net of Financing, 2009 - 2019

Currently, job growth in Colorado and across the country is highly concentrated in the health care sector,20

but health care coverage expansion would create new jobs throughout the economy. In act, we nd that over40 percent o job growth would occur outside o the health care sector under the Commission Proposal.

Figure 4. Distribution of New Jobs Post-Reform in 2019

Year Baseline Jobs New Jobs rom

Coverage

Expansion

Loss o Jobs rom

Financing

Expansion

Net New Jobs Total Jobs rom

Expansion Net o

Financing

2010 2,891,519 37,548 18,351 19,197 2,910,716

2014 3,090,073 40,938 20,007 20,931 3,111,003

2019 3,314,433 45,609 21,681 23,319 3,337,751

Percent of New Jobsin Non-Health Sectors(13,653)

Percent of New Jobsin Health Sector(9,666)

59%41%


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Health Delivery System Reform

Effect of Health Delivery System Reform

Te Commission recommended several policies designed to increase quality and e ciency in the health caredelivery system. In particular, it recommended policies that included medical homes and disease management

programs, health inormation technology, provider payment based on perormance, transparent insurer and pro-vider pricing, and improved end-o-lie care. Tese are exactly the type o delivery system reorms that many healthsystem stakeholders, researchers, and policymakers agree must happen in order to develop a patient-centered, highquality, and e cient health system.21 ransorming the health care delivery system will require active employerinvolvement, visionary stakeholder leadership, and sustained communication with consumers. Federal reorm canaccelerate this transormation. In particular, changing Medicare payment policy to encourage coordination, quality,and e ciency could help strengthen many o Colorados existing initiatives.

Findings

Colorado has already made progress toward health care delivery system reorm. In act, Colorado probablyhas more potential or transormative health system change than any other state in the nation. Tis progress isevidenced by several initiatives underway in Colorado that are discussed at greater length in the orthcomingull report.

Projections that measure the impact o delivery system reorm are inherently uncertain. Given Coloradosexisting inrastructure and local examples o care coordination and leadership (e.g., Grand Junction, DenverHealth, Kaiser Permanente), however, Colorado is in an excellent position to improve health outcomes whilelowering cost growth by between one to three percent per year over the next 10 years. Tis is a conservative

estimate compared to what many researchers and stakeholders think is easible.22

Savings o three percent and beyond are more likely i the employer community and the government demandthat insurers acilitate the delivery system reorms championed by interdisciplinary initiatives already under-

way in Colorado.23 Tis level o savings will take a concerted and coordinated efort among all health caresystem players. While employers stand to gain rom this efort in the orm o more productive workers andlower costs, they also have the responsibility to harness their purchasing power to demand more coordinatedand e cient care.

Based on the potential to reduce cost growth described above and Colorados commitment to a more sustain-able health system, we conclude that delivery system reorms could yield between $11 and $38 billion in

savings over the next decade in Colorado. Tis leaves $11 to $38 billion more to spend on other Coloradobusiness, household, and governmental priorities. Tese dollars, like the resources spent on coverage expansion,

will generate multiplier efects throughout the Colorado economy. In addition, these savings would lead topremiums that are 5.5 to 17 percent lower in 2019 than they would have otherwise been without deliverysystem reorm. Again, ederal reorm (or more active ederal involvement instate delivery system reorm eforts, i ederal reormails) could lead to even greater savings.

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ECONOMIC IMPACT

Potential Employer Savings

In the absence o health care reorm, the Urban Institute projects that amily premiums (represented as ESIamily premium in able 5 on page 14) will rise to $22,706 by 2019. Comprehensive health care reorm either the Commission Proposal or ederal reorms could change the trajectory o private premiums in threeimportant ways:

Reduced uncompensated care. Uncompensated care care that is delivered but not paid or will bereduced as more Coloradans become insured. With more insured patients, hospitals will not need toraise private rates as much to make up or unpaid medical bills. As a result, private payers will bargainor new, lower rates in the context o greater coverage levels. Private payers will likely be unable toreduce the amount they pay hospitals by the exact same amount that hospitals gain through more in-sured patients. Tereore, as shown in able 5 on page 14, we assume that private payers can efectivelynegotiate hospital rates that reect 40 to 75 percent o the reduction in uncompensated care costs. As aresult, private premiums should be reduced by more than two percent because o lower uncompensatedcare costs.

Increased Medicaid provider payment rates. All Medicaid programs reimburse providers below

market rates. Both the Commission and the Colorado legislature recognize that Medicaid paymentrates burden the ability o Colorados health system to unction sustainably. While the Commission

proposed to increase Medicaid payment rates to providers, Colorado has since taken additional actionto address this issue by approving the Health Care Afordability Act o 2009, which is in the process obeing implemented. Colorado House Bill 09-1293 seeks to increase Medicaid hospital payments rom55 to 85 percent o costs, among other provisions. As such, Medicaid payment rates will only under-

pay providers by 15 percent under the Act. Again, assuming that private payers can only achieve savingsequal to between 40 and 75 percent o increased payments to hospitals as a result o higher Medicaid

payment rates, private payers should see a 1.3 to 2.5 percent reduction in premiums. Some, but not all,ederal reorm bills and the Commission Proposal increase Medicaid provider payment rates to averagecost. Another 0.7 to 1.3 percent private premium savings can be achieved i the nal reorm package at either the state or ederal level commits to raising Medicaid payment rates closer to average costs.

Reormed deliery system. Improving the way care is delivered in Colorado is the best way to sustainlower premium growth over time. As discussed above, building and using a health inormationinrastructure, clinical efectiveness data, decision-support tools, new provider payment incentives,and consumer engagement is expected to reduce health care cost growth. Unlike other efects o healthreorm discussed above, employers should be able to capture the majority o the savings rom deliverysystem reorm in exchange or demanding higher quality and more e cient health services or theiremployees. As a result, we estimate that delivery system reorm in Colorado could reduce private insur-ance premiums by, and employers could realize savings equal to, between 5.5 and 17 percent in 2019.

Focusing Colorados health care delivery system on value and

effi ciency will allow the state to deliver higher quality care at lowercosts over time, while freeing up resources for other state priorities.


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*Source: Figures are fom Urban Institute, Health Reorm: Cost o Failure in Colorado, August 2009.

**Cost o health insurance aer reorm may not sum due to rounding. All g ures show cumulative efects o health reorm.

Percent Savings Premium per Worker ESI Family Premium

Cost o health insurance

with no reorm*

n/a $11,375 $22,706

Eects o Reorm

Conservative

Estimate

Optimistic

Estimate

Conservative

Estimate

Optimistic

Estimate

Conservative

Estimate

Optimistic

Estimate

Uncompensated

Care Savings

-2.20% -4.10% $11,125 $10,909 $22,206 $21,775

Raising Medicaid

Payment Rates to 85%

o Costs

-1.34% -2.52% $10,975 $10,634 $21,908 $21,227

Raising MedicaidPayment Rates rom 85%

to 100% o Costs

-0.67% -1.26% $10,902 $10,500 $21,761 $20,960

Delivery System Reorm

Savings

-5.47% -16.93% $10,305 $8,722 $20,570 $17,411

Cost o Health Insurance

Ater Reorm**

-9.69% -24.81% $9,307 $6,559 $18,578 $13,092

Table 5. Potential Savings for Employers from Health Reform in 2019

m e t h o d s Our economic model ocuses on the net impact o specifc increases in healthspending (under scenarios o both reorm and non-reorm o health care coverage and care) on statewide economic

output (measured as gross state product) and employment. The impact is measured using the Regional Input-Output

Modeling System (RIMS) generated by the Department o Commerce, Bureau o Economic Analysis using specifc

multipliers or Colorado.

There are two major inputs to our economic model: baseline health spending in Colorado and the necessary injection o

health spending to fnance coverage expansion. Each o these elements is used to calculate likely costs or benefts

o health system reorm in Colorado. Our data or these inputs come rom the Lewin Groups estimates o the

Commission Proposal to expand health care coverage. We also rely on the Urban Institutes determination o likely uture

health spending in Colorado to inorm our projections o the Lewin Groups fndings over the next decade.

For more detail, please see the orthcoming paper The Future of Colorado Health Care: An Economic Analysis of Health Care

Reform and the Impact on Colorados Economy.

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endnotes

1 Metro Denver Economic Development Council Report (orthcomingNovember 2009).

2 Sarah Axeen and Elizabeth Carpenter, Te Cost o Doing Nothing,New

America Foundation, November 2008.

3 Tese projections are based on historical trends. Colorado Business Group

on Health, Health Care and Business: Te Bottom Line, available at:

http://www.coloradoguidelines.org/pd/pcmh/employers/BusinessHealth-

Brochure.pd.

4 Findings rom the American Community survey, available at: http://www.

census.gov/hhes/www/hlthins/acs08paper/2008ACS_healthins.pd. Te

Colorado Health Institute estimates that nearly 14 percent o all Coloradans

(approximately 690,000 individuals) were uninsured in the rst quarter o2009 and that nearly 20 percent were uninsured at some point in the previous

twelve months; according to the Urban Institute, 776,000 Coloradans are

uninsured in 2009.

5 Len M. Nichols and Sarah Axeen, Employer Health Costs in a Global

Economy: A Competitive Disadvantage or U.S. Firms,New America

Foundation , May 2008.

6 Colorado Joint Budget Committee Fiscal Year 2009-10 Appropriations

Report, p. 14.

7 Te Lewin Group, Cost and Coverage Impacts o Five Proposals to Reorm

the Colorado Health Care System, Te Colorado Blue Ribbon Commission or

Health Care Reorm, December 29, 2007.

8 For example, the Commission proposed several potentially cost-saving

delivery system reorms including: implementation o medical homes and

disease management programs, adoption o health inormation technology,

provider payment based on perormance, transparency in pricing, and

improving end-o-lie care, among other strategies.

9 Te Urban Institutes assumptions about baseline health care cost growth

are more optimistic than some, like the Colorado Business Group on Health

cited above. Tis is because their assumptions are based on longer-run and

national trends.

10 Te dollar amounts presented are in 2007 dollars. Te Lewin Group, Cost

and Coverage Impacts o Five Proposals to Reorm the Colorado Health

Care System, Te Colorado Blue Ribbon Commission or Health Care Reorm,December 29, 2007.

11 Sarah Axeen and Elizabeth Carpenter, Te Cost o Doing Nothing,New

America Foundation, November 2008;Hidden Costs, Value Lost: Uninsurance

in America, Institute o Medicine (Washington, D.C.: National Academies

Press, 2003); New American Foundation, Te Case or Health Reorm: Te

Moral, Economic, & Quality Motives or Action, February 2009.

12 Te multiplier efect is the process by which a $1 investment grows in

the economy to produce more than $1 in economic activity. Authors

calculations, explained in Te Future o Colorado Health Care: An

Economic Analysis o Health Care Reorm and the Impact on Colorados

Economy, orthcoming 2009.

13 U.S. Department o Commence, Bureau o Economic Analysis, Regionalinput-output data tables, accessed April 2009.

14 National Academy o Engineering and Institute o Medicine,Building a

Better Delivery System (Washington D.C.: National Academies Press, 2005).

15 See or example, Health CEOs or Health Reorm, Realigning U.S. Health

Care Incentives to Better Serve Patients and axpayers,New America

Foundation, June 2009.

16 Te Commission Proposal would inject $2.45 billion o health spending

into the Colorado economy in 2010. Te $2.45 billion value is the result o

growing the Lewin Groups estimate o baseline health costs in 2007/2008

by the sector-specic growth rates identied by the Urban Institute orward

to 2019. Te Lewin Group originally reported that $2.14 billion would beinjected in 2007.

17 Tis injection o unds will be re-injected into the economy each year

that health reorm persists, relative to the baseline. However, the amount o

money injected each year will g row as we account or health care cost growth

and ination, as explained in note 16.

18 O the $2.45 billion in public subsidy cost, only $1.06 billion is actually

net new health spending, with $1.39 billion being shied by low income

households rom their ormer health care bills to other goods and ser vices

rom across the Colorado economy.

19 Colorados share o the cost o health reorm is equal to $1.55 billion o the

$2.45 billion total cost. Authors calculations, explained in Te Future o

Colorado Health Care: An Economic Analysis o Health Care Reorm andthe Impact on Colorados Economy, orthcoming 2009.

20 Bureau o Labor Statistics, Te Employment Situation, September 2009,

http://www.bls.gov/news.release/pd/empsit.pd; Bureau o Labor Statistics,

Regional and State Employment and Unemployment, September 2009,

http://www.bls.gov/news.release/pd/laus.pd.

21 Christine Eibner, et al., Controlling Health Care Spending in Massachu-

setts: An Analysis o Options,RAND Health, August 2009; Health CEOs

or Health Reorm, Realigning U.S. Health Care Incentives to Better Serve

Patients and axpayers,New America Foundation, June 2009; David M.

Cutler & Judy Feder, Financing Health Care Reorm: A Plan to Ensure the

Cost o Reorm is Budget-Neutral, Center or American Progress, June 2009;

Brookings Institute, Bending the Cost Curve: Practical, Realistic Strategiesto Contain Costs and Improve Value, Brookings Institute, June 2009.

22 Ibid.

23 Tese eforts and organizations include but are not limited to: Center

or Improving Value in Health Care (CIVHC), Colorado Regional Health

Inormation Organization (CORHIO); Improving Perormance in Practice

(Patient-Centered Medical Home) o the Colorado Clinical Guidelines

Collaborative; Colorado Medicaid Accountable Care Collaborative;

Colorado Foundation or Medical Cares Care ransition project; Rocky

Mountain Patient Saety Org anization; and Colorado Collaborative Quality

Improvement Project (CCIP).


16/16

The Colorado Health Foundation501 S. Cherry St., Suite 1100

Denver, CO 80246-1325

303-953-3600

www.ColoradoHealth.org

The Colorado Trust1600 Sherman Street

Denver, CO 80203

303-837-1200

www.ColoradoTrust.org

Te study is led by:

Te study is supported by:

For additional information, please contact Kelly Dunkin ([email protected]) or Christie McElhinney ([email protected]).

Documents

The Future of Colorado Health Care