Report says ColoradoCare would have higher revenues than McDonald’s

An independent analysis says Colorado's proposed universal health care system would have $38 billion in projected revenues -- dwarfing Fortune 500 companies like McDonald's, Nike and American Express.

The report, by the Colorado Health Institute, is a primer on the potential benefits and drawbacks of ColoradoCare, a proposed state health care cooperative that would resemble single-payer health care systems like those in Canada and Europe. Coloradans will decide whether to create the giant system when they vote on Amendment 69 in the November election.

"Supporters estimate ColoradoCare would have $38 billion in annual revenues," the report states.

"If it were a private company, ColoradoCare would rank about 80th in the Fortune 500, just behind New York Life Insurance and ahead of well­-known companies such as American Express, 21st Century Fox, 3M, Sears, Nike and McDonald's."

Need more perspective? Colorado's annual state budget is $25.7 billion.

We examined the statement that ColoradoCare’s projected revenues would be $38 billion and overshadow huge corporates. We found that the number is right in theory, but it depends on the federal government signing off on a first-of-its-kind health system for Colorado.

How ColoradoCare would work

First, here’s how ColoradoCare would work.

If approved by voters, Colorado would be the first state to have a health care system where every resident has coverage financed by taxes instead of private insurance premiums, according to the Colorado Health Institute report.

The institute estimates that 83 percent of Colorado’s population -- about 4.4 million people -- would be eligible for primary health insurance coverage through ColoradoCare. The remaining 17 percent of residents would continue to be covered by federal programs, including Medicare and the Veterans Administration.

People would still choose their own health care providers, but ColoradoCare would pay the bills. Members would not have to pay an annual deductible, but they would have co-pays.

The system would be controlled by a powerful 21-member board, elected by the system’s members in seven districts across the state. The governor and legislature would have no role, except to select an interim board until elections were held.  

An economic analysis by supporters says ColoradoCare would produce a net savings of $4.5 billion for residents and businesses by eliminating private insurance profits, streamlining paperwork and more efficiently delivering services. Opponents say the proposed amendment will be costly, it won't impact rising health care costs and it will hamper the state’s ability to attract and retain medical providers.

The ColoradoCareYes campaign confirmed the proposed nonprofit health system is projected to have $38 billion in annual revenues.

About $25 billion would come from state taxes. Employers would pay 6.67 percent in payroll taxes and employees would contribute 3.33 percent, for a total of 10 percent of the payroll. Self-employed people would pay 10 percent of their net income.

The projected $25 billion in tax revenues have been independently confirmed by an economist at the Colorado Legislative Council, which provided a revenue impact report to the state board that reviews the language and legality of an initiative's ballot title and summary.

For the rest of its annual revenues, supporters say ColoradoCare would apply for waivers from the federal government, so that ColoradoCare takes over the state roles and funding for Medicaid ($10.8 billion) and the Affordable Care Act ($700 million). Out-of-pocket costs for medical care and dental care would each provide an estimated $1 billion.

But experts said obtaining the federal waivers is a challenging process -- and there’s no certainty of success.

Beginning on Jan. 1, states can apply for a federal waiver to create innovative, alternative health care programs that would take the place of the Affordable Care Act -- while staying true to its goals. ColoradoCare would have to pass a rigorous federal review, showing it would deliver coverage that's at least as comprehensive and affordable as the so-called Obamacare program, while covering the same amount of people. ColoradoCare would have to stay "revenue neutral" and not cost more than the existing federal program.

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Federal waivers, funding ‘not a sure thing’

What are the chances of obtaining the waivers and the federal funds that go with them?

"Definitely, I would say it’s not a sure thing," said Karen Pollitz, a senior fellow at the Kaiser Family Foundation, who specializes in health care reform, an issue she worked on for both the administrations of President Barack Obama and President Bill Clinton.

Yet, if approved by voters, ColoradoCare would be among the first states to seek an Affordable Care Act (ACA) waiver and bring "the most far-reaching health care reform in any state since the ACA," according to the Colorado Health Institute report.

"There's advantages for being the first one in the door. It lets you kind of establish the framework for the debate that's going follow," Pollitz said.

Medicaid waivers aren’t automatic, either, though several states, including Colorado, have received the so-called 1115 waivers -- named for a Section 1115 of the Social Security Act

"1115 waivers require a lot of work and back-and-forth between the state and the federal government and compliance with a number of criteria, including budget neutrality," said Elisabeth Arenales, the health care program director for the Colorado Center on Law and Policy. The center hasn't reviewed or taken a position on Amendment 69.

"States have to be careful in how they negotiate those waivers because they're essentially locked into a spending contract, and they need to be very mindful that they're both not costing the federal government any additional money but also that their projections of state spending are accurate," Arenales said. 

The ballot initiative’s language makes it clear that getting the waivers are a do-or-die matter for ColoradoCare. No waivers means no program.

Under the heading "Termination of ColoradoCare’s Operations," the initiative states: "If the board determines that ColoradoCare has not received the waivers, exemptions, and agreements from the federal government sufficient for its fiscally sound operation, the board shall: (a) shut down operations and return unused funds; (b) notify the governor of the State of Colorado of ColoradoCare's inability to function."

ColoradoCareYES campaign spokesman Owen Perkins acknowledged the waivers’ critical importance.

"ColoradoCare doesn't move forward without that," he said. But, at the same time, he said it should be reassuring to Colorado voters that health care system couldn’t launch until it passes a high bar set by the federal government.

"I think everybody in Colorado should be thankful that there is that vigorous standard," Perkins said. "That ensures that we can't go into this willy-nilly. It could pass with a 75-percent vote and everything look perfect, but if it doesn't receive that waiver, it's not going to happen."  

He stressed that the architects of ColoradoCare have done their homework.

The Colorado Health Institute is accurate in saying, given ColoradoCare’s projected $38 billion in revenues, if it were a private company is would rank about 80th on the Fortune 500 just behind New York Life Insurance ($38.7 billion in revenues). It’s revenues would be larger than American Express  ($35.9 billion), Twenty-First Century Fox ($31.86 billion), 3M ($31.82 billion), Sears ($31.2 billion), Nike ($27.8 billion) and McDonald’s ($27.4 billion).

On paper, the ColoradoCareYES campaign’s projected state tax and federal funding revenues add up to $38 billion.

Our ruling

The Colorado Health Institute analysis said the Colorado universal health care system would have a projected $38 billion in revenues, larger than major corporations.

The numbers seem to add up if everything with ColoradoCare goes according to its supporters’ plans. The revenues would be larger than some big companies. However, the health care plan has a make-or-break need to obtain federal waivers that would allow it to assume the roles of state Medicaid and Affordable Care Act programs. No waivers means no deal.

The statement is accurate but needs additional information. We rate it Mostly True.

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