Rocky Mountain High: Colorado’s Runaway Medicaid Spending And Soaring Wait Times

Colorado’s Medicaid program is in disarray, with the resignation of its top health care official after a bipartisan vote of no confidence last week. This controversy is the culmination of a series of high-dollar failures that illustrate how quickly costs and errors can spiral.

Lawmakers have pointed to a pattern of excessive and poorly controlled spending. The Colorado Sun reports that total Medicaid spending in Colorado has surged to roughly $14.6 billion, more than doubling over the past decade, even as enrollment has grown only about 7 percent over that same period. This mismatch between spending growth and enrollment raises red flags about efficiency and oversight. Specific problems include:

• The state’s waitlist for adults with developmental disabilities to receive 24-hour care is on the brink of doubling to fourteen years because of the spending surge.
• The costs of Colorado’s expanded coverage for certain immigrants, including unauthorized immigrants, exceeded projections by more than 600 percent. The expansion covers pregnant women and children who would not otherwise qualify for Medicaid due to their immigration status.
• The HHS Office of Inspector General published an of the state’s management of Applied Behavior Analysis (ABA) therapy for children with autism between 2022 and 2023, finding that all payments sampled had at least one error. This mismanagement resulted in at least $77.8 million in improper payments for ABA—and up to $207.4 million in additional, potentially improper payments for ABA. Most of the erroneous payments consisted of federal funds. This audit revealed that ABA providers failed to submit the required documentation, and the state’s gross mismanagement allowed improper payments to go out the door.
• A billing error involving non-emergency medical transportation led to overpayments that went undetected for five years, with a projected cost exceeding $30 million in a single year. The U.S. attorney’s office recently indicted two Coloradans who are accused of fraudulently obtaining a combined $4 million for rides. One individual is accused of submitting reimbursements for rides that were hundreds of miles long or never happened, then using those funds to “buy a home…, a BMW and Mercedes, jewelry, and cosmetic surgery.” The other individual is accused of billing for rides for herself and family members, including for her “husband, who was incarcerated on the dates provided.”
• Beyond outright improper payments, the program has also been marked by explosive cost growth in certain benefits. One program for home and community-based services saw costs increase by 1,178 percent since 2018, far outpacing enrollment growth. As a result, Colorado is now scaling back the program to no longer cover “community outings” as well as “household cleaning, cooking and laundry.”
• Colorado is one of the few states that does not require proof of identity for people to sign up for the program. Its website, as of April 2026, states “You do not need to show proof of identity if you do not have identification.”

Mass fraudulent and wasteful Medicaid spending has contributed to severe budget strain. Medicaid consumes roughly one-third of Colorado’s state budget, forcing lawmakers to consider cuts to services even as evidence of past overspending continues to surface. The state is simultaneously grappling with a $1.5 billion budget shortfall.

While Colorado has received recent attention, Medicaid waste, fraud, and abuse are not unique to the state. They are the natural result of Medicaid’s underlying financing structure.

The federal government provides open-ended reimbursement of state Medicaid spending, covering about 70 percent of the costs. That means when a state increases spending, it draws down additional federal dollars while bearing a relatively small portion of the cost. This is true regardless of whether the increased spending is from policy choices, weak oversight, or improper payments.

Mechanisms like provider taxes and intergovernmental transfers (IGTs) further exacerbate this dynamic, allowing states to maximize federal matching funds in ways that can resemble money laundering. The result is a system where increasing expenditures can maximize federal dollars flowing into the state, regardless of whether the payments were appropriate. Colorado uses a provider tax and an IGT to help fund its program.

Colorado’s experience, like Minnesota’s recent scandals, should not be viewed as a one-off.

Rather, these cases reveal the darker side of Medicaid’s federal-state partnership: states are less inclined to be vigilant when spending money that is not their own. When factoring in the cost of correcting mismanagement and recovering funds, states like Colorado have little financial incentive to recover what belongs to the taxpayer.

This is why stronger federal enforcement and recovery of improper payments is so critical. Without it, the states will continue to face strong incentives to increase spending and neglect proper oversight. Until the incentives to spend profligately on Medicaid are addressed, waste, fraud, and abuse will continue to characterize much of the program.

Medicaid was originally intended to care for the truly needy—children, pregnant women, the elderly, or people with disabilities. But the situation in Colorado reveals how the program has grown in ways that harm taxpayers and traditional populations. Leadership change is a start for the Centennial State, but larger, permanent Medicaid reforms are necessary to reach a durable solution for the program’s runaway spending.