How Medicaid Funding and Appropriations Work
May 20, 2026
When services change, budgets tighten, or difficult decisions are made, people understandably ask: Why is this happening? Who decided this? And why does it feel so hard to follow? The answer usually starts with Medicaid funding and the state appropriations process.
Part of the “Understanding Colorado’s Long-Term Care System” series
By Amy Becerra, Chief Strategy Officer
In the first two articles in this series, we looked at how Colorado’s long-term care system is structured and how home and community-based services developed over time.
But to understand the system, we also have to understand how it is funded.
This is where it can start to feel complex because, well, it certainly can be.
When services change, budgets tighten, or difficult decisions are made, people understandably ask: Why is this happening? Who decided this? And why does it feel so hard to follow?
The answer usually starts with Medicaid funding and the state appropriations process.
Like the long-term care system itself, the funding structure was not designed in one clean step. It has been built in layers over time — shaped by politics and federal legislation and regulations, Medicaid rules, state budget decisions, changing service needs, workforce realities, and the responsibility to balance a public budget every year.
Medicaid Is a Shared Investment
Medicaid is funded by both the federal government and the state. In Colorado, Medicaid is known as Health First Colorado.
The basic structure is a partnership: the state spends money on approved Medicaid services, and the federal government reimburses a portion of those costs. This federal share is called the Federal Medical Assistance Percentage, or FMAP.
For most Medicaid services, Colorado receives a 50% federal match. That means that for many approved Medicaid costs, the federal government pays about half and the state pays about half.
But even that simple explanation has layers.
Some services and populations can qualify for a higher federal match. Those enhanced matches are often tied to federal policy choices, incentives, and requirements. To receive federal Medicaid funding, the state must provide required Medicaid State Plan services, follow federal Medicaid rules, and meet specific assurances for home and community-based services. For HCBS waivers, that includes demonstrating that services protect health and welfare, support person-centered planning, and meet federal waiver requirements.
This is one reason Medicaid funding can be hard to follow, even for people who work closely with the system. A policy decision is not only about whether a service is needed or valuable. It may also involve whether the service is part of the Medicaid State Plan, whether it is authorized through a waiver, whether it qualifies for federal match, and what conditions come with that funding.
Community First Choice is a good example. Colorado’s decision to move forward with Community First Choice was not only a service design decision. It was also connected to federal financing because Community First Choice allows states to receive an enhanced federal match for certain home and community-based attendant services and supports.
At the same time, not every important program receives federal Medicaid matching funds. Colorado also chooses to fund some programs with state dollars because the state has decided those supports matter. Examples include the Family Support Services Program and State Supported Living Services. Another example is Cover All Coloradans, a state-funded health coverage choice that extends coverage to eligible children and pregnant people regardless of immigration status.
That is part of what makes this system so complex: Medicaid funding is not one bucket of money. Some services are required. Some are optional. Some are matched by the federal government at one rate, some qualify for an enhanced match, and some are funded entirely with state dollars.
Those choices reflect values as well as budgets. They show that funding decisions are not only technical decisions about what can be matched federally. They are also decisions about what Colorado chooses to support with state resources.
Medicaid and related state-funded programs support many different services and populations, including:
- Medicaid State Plan services, such as hospital care, physician services, pharmacy benefits, behavioral health services, home health, and other required or optional medical benefits
- Home and community-based services through Medicaid waivers
- Community First Choice services and supports
- Nursing facility care
- Personal care, homemaker, and attendant services
- Case management and service coordination
- State-funded supports, including programs such as Family Support Services and State Supported Living Services
- State-funded health coverage choices, including coverage for eligible children and pregnant people regardless of immigration status
- Health coverage for children, older adults, people with disabilities, pregnant people, and other eligible Coloradans
Because Medicaid touches so many parts of the health and long-term care system, budget decisions within the program can affect individuals, families, providers, case management agencies, and community organizations across the state.
How Colorado Builds the Budget
Every year, Colorado goes through a budget process to decide how state dollars will be allocated.
The process begins with requests, forecasts, and budget proposals. The Governor submits a proposed budget. The Joint Budget Committee, often called the JBC, reviews department requests, hears from state agencies, works with nonpartisan staff analysts, evaluates revenue projections, and makes funding recommendations.
The JBC’s work eventually becomes part of the Long Bill, which is the state’s primary budget bill. The Legislature debates and passes the budget, and once it is signed by the Governor, it becomes the spending plan for the fiscal year.
But even then, the work is not really finished.
The Budget Is Balanced for One Day
One of the most important things to understand about public budgeting is that the budget is built on estimates.
The Joint Budget Committee is also one of Colorado’s year-round legislative committees, which means budget work continues outside the regular legislative session. The JBC continues to meet, review information, and prepare budget recommendations throughout the year because the budget does not stop moving once the legislative session ends.
The budget reflects what the state believes will happen based on the information available at that moment: how many people are expected to qualify for services, how much services are expected to cost, what state revenue is expected to be, and what federal funding is expected to be available.
But Medicaid does not stand still.
Costs can change. Enrollment can change. Service utilization can change. Federal requirements can change. State revenue can come in higher or lower than expected.
That means the budget may be balanced when it is passed, but the state has to keep monitoring what is actually happening throughout the year.
This is why budget decisions can continue after the Long Bill passes. Supplemental budget requests, mid-year adjustments, rate changes, implementation decisions, and additional legislative action may all become part of the picture.
In other words, the budget is not a single fixed number that stays untouched. It is a plan that has to be monitored, adjusted, and managed over time.
What Appropriations Actually Mean
An appropriation is the legal authority to spend public money for a specific purpose.
When the Legislature appropriates funding for Medicaid programs, it is deciding how much money is available for those services during the budget year and where that money can be spent.
That does not mean every future cost is already known. It means the state has approved funding based on the best available estimates at that time.
If costs are higher than expected, more people need services, or revenue changes, the state may have to come back and revisit the budget. That can be difficult to understand from the outside because the decisions do not happen all at once. They happen through a series of connected steps.
For people relying on services, those steps can feel distant and technical. But the impact is not distant at all.
What This Looked Like This Year
This year’s budget process showed how quickly financial pressure can move through the Medicaid system.
Colorado faced a significant budget shortfall while Medicaid costs continued to grow. Early proposals and decisions focused on reducing spending in parts of the long-term services and supports system, including changes that affected individuals receiving services and the organizations supporting them.
As the process continued, it became clear that those changes alone would not fully solve the budget problem. Additional reductions were considered and adopted, including reductions affecting Medicaid provider reimbursement rates and other parts of the health care system.
For organizations like Rocky Mountain Human Services, these decisions affect the funding available to operate programs, support staff, and provide service coordination.
For individuals and families, the same decisions may be felt through changes in services, access, provider capacity, or the systems they rely on every day.
These are not separate issues. They are connected parts of the same structure. When funding changes at the state level, the effects can move through agencies, providers, case management systems, direct support professionals, families, and individuals.
That is why it is important to understand not only what changed, but how the funding structure allows those changes to happen.
Why This Matters
Understanding Medicaid funding helps explain why changes in the long-term care system can feel complicated, technical, and frustrating.
Decisions made in federal and state budget processes eventually shape what happens locally. They influence services, staffing, program capacity, provider stability, and the support available to individuals and families.
At the community level, organizations like Rocky Mountain Human Services work within those funding structures while continuing to support people as thoughtfully and consistently as possible. When changes happen, we often help individuals and families understand what the changes mean, navigate next steps, and maintain as much stability as possible.
We also participate in broader policy and budget conversations when we have the opportunity. When we can share what we are seeing on the ground, explain the real-life impact of proposed changes, or advocate for the individuals and families we serve, we do.
Funding may begin as numbers in a budget document, but it does not stay there. It shows up in people’s daily lives.
Continuing the Conversation
Understanding funding is an important part of understanding how the system functions overall.
In the next article in this series, we will look at what happens when policy changes — including how legislation, rulemaking, State Plan Amendments, waiver amendments, and implementation decisions move through the system and eventually affect individuals, families, providers, and community organizations.
Individuals and families remain at the center of all of this work. Our goal with this series is to make the system easier to understand for the people who rely on it and the professionals who help support them every day.
