Colorado Moves to Curb Medicaid Peer Counseling as Costs Jump 286%

Colorado's Medicaid agency is weighing a moratorium on peer support services and has begun pressing its regional contractors to cut providers, after state data showed spending on self-help and peer services climbed 286 percent between 2022 and 2024. Total peer and support services cost $293 million last year in combined federal and state funds and reached roughly 35,000 people a month, according to figures presented to the legislature's Commission on Medicaid. The squeeze has already ended one nonprofit's contract: the Abundance Foundation in northern Colorado received a 90-day notice terminating its Medicaid funding, putting 230 clients, 11 recovery coaches and three sober living houses at risk.

How a small program outgrew its estimate

Colorado lawmakers passed legislation in 2021 directing Medicaid to cover peer support, with the goal of adding capacity to a behavioral health system where waits for a psychiatrist or therapist often run months. The bill's fiscal note projected the change would cost about $35,000 in state funds the first year and $54,000 the next. Actual spending ran in the hundreds of millions. State officials said a single peer services billing code jumped to $51.8 million last year from $8.4 million three years earlier.

The growth reflects how broadly the benefit was drawn. Peer counselors — people with lived experience of addiction or mental illness rather than clinical licensure — can bill for one-on-one support, recovery coaching and services delivered inside sober living homes. Providers describe the work as helping people coming out of jail or homelessness make appointments, hold jobs and stay in treatment. Departments with less clinical overhead can bill Medicaid for services that clinics cannot deliver at the same volume.

'There may not be appropriate clinical oversight'

Gretchen Hammer, executive director of the Colorado Department of Health Care Policy and Financing, told the commission the trajectory raised questions about what the state is paying for. "That is causing us concern," she said. "There may not be appropriate clinical oversight."

The department has since asked the regional accountable entities that contract with providers to work only with organizations that can "demonstrate improved health outcomes," spokesman Marc Williams said, describing an effort to "bring spending in line with the budget." Hammer told lawmakers the state was in talks with those entities about a moratorium on new peer services.

Projections show Medicaid overrunning its budget by nearly $1 billion next year, which has pushed every unlicensed-clinician benefit into the commission's crosshairs. The ten-lawmaker panel was created to find a sustainable path for the program.

Lawmakers split on how far to go

Sen. Judy Amabile, the Boulder Democrat who chairs the commission, opened with a direct comparison. "You don't go to somebody who had cataract surgery to get your cataracts removed," she said. "You go to a doctor." Amabile said she hears from constituents who report poor care and argued the state should look closely at what Medicaid is buying. She cautioned later, however, that dismantling the benefit outright would be risky, noting Colorado spent years building its behavioral health system so residents could find care. "This talk of 'let's just get rid of all that' is a little bit dangerous," she said.

Sen. Barbara Kirkmeyer, a Brighton Republican, pressed in the other direction, asking whether the department could stop paying for peer services now regardless of the 2021 statute. "That's outrageous," she said.

The peer services industry has acknowledged its own regulatory problems. Brian Bauer, who has been sober 14 years and runs the Abundance Foundation, said fraud exists in the field because it operated as "the wild west" for five years. His objection is to the remedy. "The argument that they need a medical professional is invalid," he said, arguing that people leaving prison or a shelter trust someone who has been through the same system far more readily than a psychiatrist. Without peer counselors, he asked, are clients "just supposed to white knuckle sobriety?"

A system already under strain

Peer services are not the only part of Colorado's safety-net behavioral health network contracting. In August, Jefferson Center Mental Health closed its adult residential recovery program, citing "substantial reductions in Medicaid reimbursement rates," and about 50 employees lost their jobs. SummitStone Health Partners, the largest nonprofit mental health center in Larimer County, frequently operates a waiting list, according to the Colorado Sun. Access to residential treatment and other step-down services has narrowed at the same time the state is trying to reduce spending on lower-cost community supports.

Rocky Mountain Health Plans, the regional entity that canceled the Abundance Foundation's contract, declined to explain the decision, saying in an email that its goal is to help members "find the right services at the right time" and that peer support "can be an important part" of behavioral health care. The state has not published a timeline for the moratorium or a proposal to replace peer services with licensed clinicians, and the standard outpatient providers that would absorb displaced clients already report capacity limits.

Nationally, peer recovery has been one of the fastest-growing parts of the behavioral health workforce, promoted by federal agencies as a way to extend reach in areas short on licensed providers. Colorado's review is the most concrete test yet of whether states will keep paying for it when Medicaid budgets tighten.