Already strained in rural Colorado, mental health clinics often serve clients facing complex challenges such as depression, addiction and trauma, all the while operating with limited staff and tight budgets.

And for many, Medicaid is the only way to access care.

Now advocates fear what the proposed Medicaid cuts might mean for mental health in rural Colorado, while Republican leaders open to shrinking the federal bureaucracy argue that streamlining a bloated regulatory system is key to protecting the rural health infrastructure.

In some counties, Medicaid supports up to 60% of patients and is critical to keeping clinics open, according to a 2017 report from the Colorado Center on Law and Policy.

Chris Lindley, chief population health officer at Vail Health, called Medicaid “by far the best service offering for behavioral health.”

“We would love if commercial insurance covered the same services that Medicaid covers, because it’s better care, it’s more comprehensive care, and it’s fairer payment,” he said.

Proposed federal budget cuts, outlined in the Republican-backed spending bill, are projected to reduce Colorado’s Medicaid funding by more than $600 million. A University of North Carolina study, commissioned by Senate Democrats, warned that the cuts could lead to the closure of 338 rural hospitals nationwide, including six in Colorado.

Lindley said rural health care is extremely challenging — costs are going up, but reimbursements are going down.

“Those rural hospitals had such small margins to begin with that any degradation puts them in a very dangerous situation,” he said.

He also pointed to broader economic pressures: workforce shortages, housing costs and insurance companies “finding ways to deny claims better and better.” For behavioral health providers, in particular, the impact could be devastating.

“When there’s a cut to Medicaid, it’s really, really going to hurt them,” Lindley said, noting some providers rely on Medicaid for more than 70% of their revenue.

Republicans have long decried what they described as “wasteful” entitlement programs that continue to grow.

The debate comes as Medicaid costs continue to rise under the Affordable Care Act. Forty states, including Colorado, and Washington, D.C., have expanded Medicaid eligibility. Republicans argued that reforms are needed to address rising costs and ensure long-term program sustainability. They also pointed to the nation’s $36 trillion debt, not to mention the federal government running a $1.8 trillion deficit last year.

One study — from a group called Paragon — noted that the federal government has paid for a bigger and bigger share of Medicaid expenses, with the “Obamacare” expansion responsible for much of that shift. The group claimed the expansion led to Medicaid resources being diverted from children and individuals with disabilities to “able-bodied, working-age adults.”

The new categories of eligible enrollees receive a much higher federal reimbursement rate, leading to a diversion of resources away from traditional Medicaid enrollees, particularly low-income children and people with disabilities,” a “near quadrupling” of Medicaid’s “improper payments” and a “surge of spending” that contributed to the growing federal deficit.

An older study said states employed strategies to “artificially inflate their Medicaid spending in order to maximize the federal reimbursement.”

Vincent Atchity, president of Mental Health Colorado, warned that the Medicaid cuts could send shockwaves through local economies.

“Pulling six rural hospitals out of the state is a disaster, not just for health care providers but also for local economies and workforces,” he said.

Even in more urban areas, providers are bracing. At Naropa Community Counseling in Boulder, Medicaid accounts for up to 75%.

“Sometimes, we have to reduce sessions from four to two to avoid losing revenue,” said director Bill Monroe. “There will be limits on how many clients we can serve.”

Monroe added that partnerships with local organizations might mitigate some gaps, but the scale of the projected cuts would overwhelm even the most resourceful networks he said.

“If the cuts are as severe as projected, these partnerships likely won’t be enough to address all the challenges clinics and patients face,” he said.

In the University of North Carolina study commissioned by Senate Democrats, the six rural hospitals in Colorado said to be endangered by Medicaid cuts as written are Delta Health Hospital in Delta; San Luis Valley Health Conejos County Hospital in La Jara; Grand River Health in Rifle; Prowers Medical Center in Lamar; Southwest Memorial Hospital in Cortez, and Arkansas Valley Regional Medical Center in La Junta.

The study’s at-risk model is based on those hospitals serving a high share of Medicaid patients, and those experiencing negative total margins, or operating losses.

More than 123,000 Colorado residents could lose coverage if the bill passes, according to a report by the nonprofit Inseparable. The Kaiser Family Foundation put the number at 155,000 Coloradans losing Medicaid coverage under the proposed legislation.

Nearly 1 in 4 of the state’s Medicaid enrollees is managing a mental illness or substance use disorder. The report also links a recent decline in overdose deaths to improved access to treatment through Medicaid.

“You want to see more homelessness, more substance use, more overdose death? Cut Medicaid,” Atchity said. “This is a strike at the heart of health care for rural communities.”

That assessment has drawn pushback from U.S. Rep. Gabe Evans, R-Fort Lupton.

He told Colorado Public Radio that targeted changes, not more spending, are what’s needed to preserve Medicaid’s long-term viability.

“There’s a ton of fraud, waste, and abuse in the system right now,” he said, citing a $31 billion annual estimate from the Government Accountability Office.

“Making sure that we’re protecting this program for our most vulnerable by cutting out a lot of that fraud, waste and abuse … that’s the main goal.”

In that same interview, Evans, a member of the House Energy and Commerce Committee, said providers in his district support oversight efforts.

“Well, I just actually finished up a meeting with a bunch of providers,” he said. “They actually left that meeting feeling more reassured rather than worried.”

Regulatory streamlining, he added, will be key to keeping rural hospitals open.