A Colorado Medicaid program was beset with explosive costs and fraud after state officials relied on a flawed analysis and recommended the legislature nearly triple the program’s reimbursement rate, The Denver Post has found.
It took three years for the state to reverse course and cut the rate back down. By that point, spending on a vital transportation program had ballooned to over $300 million a year — more than quadruple the annual cost before the rate increase, according to legislative analysts. The program also began battling fraud and misuse, as scores of new providers signed up and some packed their cars with patients to maximize their mileage payout.
In 2021, before the increase was approved, a state advisory panel had warned that Colorado was underpaying the transportation companies that drove Medicaid patients to and from routine medical appointments. But the analysis that underpinned its recommendation for a higher rate appeared to errantly compare Colorado’s way of reimbursing mileage for routine visits with how the federal government and other states paid for ambulances.
It appeared to set up a flawed equivalence that led state officials to pay for minivans and sedans as if they were emergency vehicles.
The analysis established a mileage reimbursement benchmark, a target created by examining what Medicare — another government-run health insurance program — and several other states paid.
But the Medicare code examined in the analysis is typically used to pay for ambulance mileage. While program details vary, several of the studied states were paying less per mile for similar services than Colorado, even prior to the rate increase. Ohio, for instance, was paying $1 a mile for wheelchair vans. The rate in Arizona was $1.53. New Mexico in 2023 paid Medicaid taxis $1.76 for each mile; Nebraska paid the same in 2022. North Dakota’s mileage rate topped out at $2.33.
By comparison, the legislature — acting on state Medicaid officials’ recommendation — increased Colorado’s mileage rate to $6.10, an increase of nearly $4 that one transportation provider called “shocking.”
“The problem — and this is what HCPF has not acknowledged — is that the root cause of the fraud was an overly generous rate that was so lucrative that people were willing to commit crimes to get that rate,” the provider, Ross Peterson, said in an interview.
HCPF is the state Department of Health Care Policy and Financing, which in Colorado oversees Medicaid, the program that provides health insurance primarily to low-income people. Peterson wrote a lengthy memo to HCPF leaders last year warning them about the problem.
In an initial statement to The Post for this story, HCPF spokesman Marc Williams acknowledged that the more expensive ambulance code had been used for routine and ambulance rides alike. As HCPF tried to get a handle on the fraud scheme, he said, it examined the mileage rates and found that they “seemed to be high compared to other states and may have made Colorado an attractive target for fraud.”
“The 2022 rate adjustment was implemented during a period of significant disruption, including pandemic-related workforce shortages, rising fuel costs and access to care concerns,” Williams said in a follow-up statement Friday. “At the time, the department’s priority was ensuring members could continue to access critical medical services. As program utilization and expenditures grew beyond initial projections, HCPF conducted additional analysis and worked with legislative partners to reassess the rate structure. Once trends became clear, the department took steps to strengthen oversight and implement safeguards to better align the rates.”
The impact of the rate change was swift: In the 2022 fiscal year, the nonemergency medical transport program cost $70.5 million. The next year, after the rate increase took hold, the toll skyrocketed to $211.9 million, according to legislative analysts, and then to $303 million in fiscal year 2024.
Fraud followed, too, despite warnings that the program was vulnerable to such risks.
A year into the new rates, state officials said that they were clamping down on the program because it had been targeted by what they have called an international fraud scheme. At least $25 million was lost to that fraud, which was perpetrated by drivers who loaded their cars with patients and drove them across Colorado to maximize their mileage reimbursement.
At least two drivers, who were indicted earlier this month, also allegedly billed for rides that never happened, including for one patient who had already died.
HCPF blames providers
Still, Williams argued that the mileage rate wasn’t the problem, nor was the underlying analysis “faulty,” as The Post had contended. He said the ambulance billing code was “improperly used by providers and HCPF didn’t have robust enough policies/procedures in place to prevent the abuse at the volume it was occurring.”
But archived copies of Medicaid billing manuals, published by the state in 2023 and 2024, show HCPF officials directed providers to use the ambulance code for more routine trips. The analysis that underpinned the rate increase recommendation also repeatedly referenced that code for nonemergency transport.
The state now directs providers to use a billing code intended for routine — or ambulatory — rides, with a mileage rate set at $3.
After The Post pointed out the previous guidance, Williams reiterated that providers had used the wrong code, which was intended for “ambulance and ambulatory” rides, he said, not “common vehicle” rides. But there’s no guidance in HCPF’s current or recent manuals for a “common vehicle” code, and Williams did not provide one.
Two providers who spoke with The Post on Friday both said that ambulatory trips are common rides, and both accused HCPF of confusing the words “ambulance” and “ambulatory.”
Jason Brabson, who operates a transportation company in Fort Collins, said that providers in a nine-county region surrounding Denver don’t even bill the state for their services. They work through a broker, Transdev, which handles billing with HCPF, he said.
“So whose fault is it?” Brabson said. “(HCPF) are the ones who set the rate, they’re the ones who do the rate review, they’re the ones who get the bills from Transdev, they approve it, they give the money to Transdev, and Transdev pays us.”
Transportation providers had also previously noticed the high rate increase. Two told The Post that they’d tried to flag the inflated rate to HCPF officials, including within a year of the increase. But the recommendation to reduce the rate wasn’t brought to lawmakers until a year ago, and the rate reduction itself took effect July 1.
“My alliance, the Colorado Transportation Alliance, did an entire market report and notified them probably in 2022 or 2023, saying: ‘Hey, you’re overpaying,’ ” said Kelly Milan, who runs a Grand Junction-based company and founded his alliance several years ago. “We want to be good stewards of the program because if (unnecessary spending) depletes the program, it’ll hurt all of us in the long run.
“We literally alerted them, and they did nothing until about two years later.”
Peterson, who is a transportation provider in metro Denver, said he sent a 17-page memo outlining the issue to HCPF executive director Kim Bimestefer last year. He sent the memo both via email and through the mail. He said that HCPF appeared to have used the incorrect code before the analysis, which led to issues in the underlying analysis in 2022.
Both he and Milan said they never received a reply from the agency.
Bimestefer and other agency officials have said that the cost increase in the program was largely due to the fraud that plagued its services. Adela Flores-Brennan, Colorado’s Medicaid director, told a panel late last year that the transportation program “saw a lot of growth in the last couple of years as a result of some fraudulent activity.”
But the $25 million lost to fraud represents a fraction of the program’s surging costs.
Williams, HCPF’s spokesman, said the growth in the program’s costs was not solely attributable to the rate increase.
“Multiple factors contributed to increased costs during that period, including higher utilization, member access needs following the public health emergency, and program expansion,” he wrote. “Fraud was one contributing factor, and the department has been clear that strengthening program integrity is a priority. HCPF has since taken steps to readjust rates, improve oversight and ensure the (Non-Emergency Medical Transport) program remains accessible to members.”
State Rep. Kyle Mullica speaks during a committee hearing at the Colorado State Capitol Building on Wednesday, March 16, 2022. (Photo by AAron Ontiveroz/The Denver Post)Not only problem identified in program
The mistaken billing analysis is also only the latest in a string of problems in the troubled transportation program.
Last month, legislative staffers told lawmakers that Medicaid officials had, for five years, overseen a separate billing error. In that case, Medicaid had paid a more lucrative ambulance rate to companies that picked up patients who used larger wheelchairs.
By 2025, the state was paying roughly 10 times the appropriate amount for every single pickup. Stopping that practice, lawmakers were told, would save the state millions of dollars annually.
Before the pandemic, Peterson said, the state’s mileage rate was mostly appropriate for Medicaid transports. Providers then needed a bump during and after the pandemic, he said, but the increase to $6.10 was “shocking.” It appeared that the state had been using the ambulance code before the 2021 analysis, he said, which led to the mismatched analysis comparison.
After sending his February 2025 letter to Bimestefer, Peterson provided his memo to the legislature’s Joint Budget Committee, which oversees state spending.
The next month, HCPF and legislative staff recommended that the legislature cut the mileage rate. The budget committee’s analysts wrote that the benchmark set by HCPF “may not be comparable.”
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“However, (HCPF) says Medicare mostly pays for ambulance trips,” legislative staff wrote last year. “The operating costs for an ambulance are very different from a standard vehicle or even a wheelchair van.”
The repeated problems within the program come as lawmakers, facing a roughly $850 million budget deficit, are now debating how best to trim Medicaid’s growing budget.
Legislators on the Joint Budget Committee were sharply critical of the wheelchair mistake earlier this year. Sen. Judy Amabile, a Boulder Democrat, told reporters Tuesday that lawmakers were looking at broader reforms for HCPF and Medicaid’s governance structure to get its overall costs under control.
On Thursday, as the state Senate debated a supplemental funding bill for HCPF, Democratic Sen. Kyle Mullica castigated the department for its prior issues with the transportation program as legislators braced for painful Medicaid cuts. He accused the department of losing “hundreds of millions of dollars” through “fraud and incompetence.”
“We’re talking about care for some of the most vulnerable people in our state. And the failure cannot be allowed to come out of this department any longer,” he told fellow lawmakers. “It cannot happen when we are asked to cut care for vulnerable people in this state.”
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