Obamacare Driving Proposed $307 Million Budget Hike for S.C. Medicaid Agency

November 6, 2013

Investigative Reports

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ObamacareAs a state legislative panel this morning considers a stalled bill that seeks to “nullify” the federal health-care law known as “Obamacare,” South Carolina’s Medicaid agency says it needs an extra $307.8 million next fiscal year to handle projected Medicaid enrollment growth resulting from the Affordable Care Act.

In its proposed budget for the fiscal 2014-15 year, which starts next July 1, the S.C. Department of Health and Human Services (HHS) is seeking an additional $90.7 million in general funds, which is required to obtain an approximately $217.1 million federal match, to handle the estimated enrollment growth.

To put it in some perspective, HHS’ proposed budget increase is larger than the total budgets of most other state agencies.

“We believe the mechanics of the federal law – including the outreach activities of the federal health insurance exchange and loss of employer based insurance – will result in an increase of $307,800,000 in total funds over FY 14 appropriated levels,” HHS Director Tony Keck said in his budget proposal, filed recently with the Office of State Budget (OSB).

“Working with the legislature over the past three years, the Department has built cash reserves sufficient for a program of our size experiencing the volatility of the Affordable Care Act (ACA),” Keck wrote. “Because of our stronger position, the Department took special care in these FY2015 projections to reduce the structural operating surpluses achieved in previous years.”

The Nerve reported in September that HHS entered this fiscal year on July 1 with $232.5 million in general fund reserves – the largest among all state agencies.

Keck in his fiscal 2015 budget proposal said based on his agency’s “best estimates” about Medicaid enrollment growth,” 1,846,638 “member months” will be “attributable to ACA growth” next fiscal year compared to 712,609 this fiscal year.

In his proposed budget for this fiscal year, which was submitted in the fall of 2012 to OSB, Keck projected that even if South Carolina didn’t participate in the Medicaid expansion under Obamacare, various mandates under the federal law would result in an additional $321 million in costs, mainly by adding tens of thousands of parents and children who currently are eligible for Medicaid but who are not enrolled in the program.

The proposed HHS budget for next fiscal year will be considered by Gov. Nikki Haley as she prepares her executive budget to be presented to the Legislature, which returns to session in January.

A Senate select committee headed by Sen. Tom Davis, R-Beaufort, is scheduled to hold a public hearing this morning at the Gressette Building on the State House grounds on a bill (H. 3101) calling for South Carolina to resist the Affordable Care Act.

The bill, which passed the House but stalled in the Senate as the legislative session ended in June, mandates that no state agency, officer or employee “may engage in an activity that aids any agency in the enforcement of those provisions” of Obamacare.

The bill would prevent the state and any political subdivision, including special districts, from establishing health care exchanges, which are aimed at providing consumers more options for health insurance, though critics have questioned their effectiveness and cost.

The legislation, sponsored by Rep. Bill Chumley, R-Spartanburg, also would give South Carolinians a tax break for any Obamacare tax penalty levied against them, and empower the state attorney general to take action if the implementation of the federal law harmed a resident or business.

HHS’ proposed fiscal 2015 budget doesn’t mention H.3101.

The agency wants a total of $467.1 million more in general, federal and “other” funds for next fiscal year – the single-biggest budget request among 79 state agencies and divisions that have submitted spending plans to OSB, a review by The Nerve found. Besides the requested additional $307.8 million as a result of Obamacare, HHS says its needs another $94.2 million in state and federal funds to cover increased Medicaid costs because of inflation.

By law, agencies’  proposed 2015 spending plans were due Friday, though a number of budget requests were not posted on OSB’s website as of Tuesday.

That includes, for example, the proposed fiscal 2015 spending plans for the House and Senate chambers, which historically have avoided the traditional budget process – resulting more than once in hefty staff raises, as The Nerve has previously reported.

House Clerk Charles Reid and Senate Clerk Jeffrey Gossett did not respond to written questions this week from The Nerve.

The 79 agencies and divisions that have submitted proposed budgets are seeking a total of $2 billion more next fiscal year – a collective increase of nearly 8.3 percent over this fiscal year’s ratified total budget of $24.2 billion.

HHS’ request for an additional $467.1 million in fiscal 2015, if approved, would represent an increase of slightly more than 7 percent over the agency’s total ratified budget this fiscal year of nearly $6.5 billion – the largest total budget among all state agencies.

Rounding out the five-largest proposed budget increases, which include general, federal and “other” funds, for next fiscal year are:

  • University of South Carolina, Columbia:  $190.3 million ($125 million for renovation of Carolina Coliseum);
  • Department of Education:  $178.8 million ($34 million for new school buses; $35.9 million for instructional materials for K-12 schools; $36.2 million to replace the possible loss of federal funds over an ongoing dispute with Washington over funding for special education students);
  • Department of Transportation: $102.4 million ($46.2 million for “non-federal-aid” secondary road improvements; $52.5 million for construction of a 1.2-mile port access highway to I-26); and
  • Transportation Infrastructure Bank:  $100 million ($100 million for “bridge replacement, rehabilitation projects, and expansion and improvements to existing mainline interstates,” as authorized by H. 3360, which passed this year).

At least 34 agencies and divisions have asked for total budget hikes of at least 10 percent for fiscal 2015,The Nerve’s review found. Those requests include:

  • $1.4 million to the Judicial Department for four new circuit and family court judges, plus 10 support staff, as reported by The Nerve on Monday;
  • $3.9 million to the Retirement System Investment Commission to hire 11 full-time investment and operations staffers, and to acquire “reporting and back office systems”; and
  • $17 million to the Department of Commerce’s “closing fund,” which is used to assist companies that locate or expand in South Carolina.

Reach Brundrett at (803) 254-4411 or rick@thenerve.org. Follow him on Twitter @thenerve_rick. Follow The Nerve on Facebook and Twitter @thenervesc.