S.C. Medicaid Budget Swelling Even Without ‘Obamacare’ Expansion

May 13, 2013

Investigative Reports

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MedicaidTalk about sticker shock for S.C. taxpayers.

Over the past 10 years, the General Assembly has hiked general-fund appropriations to the S.C. Department of Health and Human Services, which manages the state’s Medicaid program, by more than $500 million, a whopping 89 percent increase overall or nearly 50 percent when adjusted for inflation. Lawmakers appropriated more than $1.2 billion in state funds to the agency for this fiscal year, which started July 1.

During the same 10-year period, the agency’s total ratified budget, which relies mainly on federal funds, shot up 72 percent overall, or nearly 36 percent when adjusted for inflation. For this fiscal year, the agency’s total budget of nearly $6 billion – the largest of any state agency – represents 25 percent of the state’s total ratified budget of about $23.6 billion.

Both the House and Senate Finance Committee versions of the fiscal 2014 state budget call for a total HHS appropriation of nearly $6.5 billion, which would be a 9 percent hike over this year’s ratified budget. The Senate is expected this week to take up the Senate Finance version of the state budget, which was passed on May 3.

Amid HHS’ rapid budgetary growth, a state lawmaker has proposed accepting Medicaid expansion funds under the federal health-care law commonly referred to as “Obamacare”  for HHS to operate an initial three-year, managed-care program that is projected to cover tens, and possibly hundreds, of thousands of poor, uninsured South Carolinians.

In an interview last week with The Nerve, Rep. Kris Crawford, R-Florence and an emergency room doctor, said he didn’t know how much the federal government would provide to South Carolina under his bill (H. 4095), which was introduced on May 2, noting that the state wouldn’t receive anything unless it first obtains a waiver from Washington to operate the program.

“This is by no means a slam dunk that the feds will let us do this,” he said. “But it is our intent to find a common ground.”

Republican Gov. Nikki Haley has publicly opposed expanding Medicaid coverage under Obamacare in South Carolina, and the GOP-dominated House and Senate budget-writing committees have rejected attempts to participate in the federal program.

Asked about Haley’s position in light of his bill, Crawford replied, “I understand that doesn’t mesh with someone’s personal, national goals, but the last time I checked, I’ve got South Carolina to represent.”

Under Crawford’s bill, which had 69 Republican and Democratic co-sponsors as of last week, adults 18 up to 65, including legal immigrants, who are not already covered by other Medicaid programs and whose income is up to 138 percent of the federal poverty level – about $15,000 – would be eligible for federal Medicaid funds if they enroll in a managed-care health plan through HHS and set up a medical-savings account.

Dubbed the “Truth in Health Financing and Responsible Consumer Health Care Act,” the bill would establish a managed-care program that “requires individuals to be personally responsible in the use and purchase of health care services, that encourages thoughtful, active participation in making health care decisions, and that rewards health improvement and maintenance.”

Crawford said under his bill, patients would contribute toward paying for their health care, and that preventive and primary care would be emphasized.

Federal law requires hospitals to provide emergency treatment regardless of a patient’s ability to pay. Crawford said he believes his bill, among other things, would encourage patients with non-emergency medical needs to seek medical treatment outside of hospital emergency rooms, which typically are overcrowded. That, in turn, would allow for better care of those with emergency conditions, he said.

It also would help hospitals reduce their overall costs of treating the uninsured, Crawford said, adding that those costs often are shifted to those with private commercial insurance plans.

“If we don’t do something like this or have a better idea, historically, the story is you just end up in a default situation,” Crawford said.

Asked about the fiscal impact of Crawford’s proposal, HHS spokeswoman Colleen Mullis told The Nervelast week in a written response: “Rep. Crawford never consulted with SCDHHS on his bill, thus the agency has not been asked to price this out. However, as this bill expands Medicaid to the same population as Obamacare (344,000 new people under 138 percent fpl), and requires that we put them in a premium based managed care program, it will be just as expensive or more than any Obamacare care option.”

Under Obamacare, the federal government would pay participating states 100 percent of the costs in the first three years of the expansion, and would cover 90 percent of the costs in the initial ensuing years. If South Carolina participated, its cost of the expansion afterward could rise to as much as $1.9 billion by 2020, according to an HHS estimate.

Crawford’s bill does not specify a state match as is typically required for Medicaid programs, though he told The Nerve that the state would cover the cost of HHS to administer the managed-care program – likely to run in the millions – which, under the bill, would be paid out of the state’s Medicaid reserve fund in the first year of the program and with hospital license taxes in the second and third years. The bill also would allow a newly established “Responsible Consumer Health Care Fund” to be funded in part “pursuant to the annual general appropriations act.”

In her written response to The Nerve, Mullis said while the bill “includes cost sharing,” the federal government has been “clear to date they won’t approve that.”

Although the legislation calls for accepting Medicaid expansion funds from Jan. 1, 2014, through Dec. 31, 2016, it also says the state “must not participate” during 2015 and 2016 in “disproportionate share” payments, which are Medicaid payments to hospitals for treating large numbers of low-income patients.

“In the worse-case scenario, it’s revenue neutral,” Crawford said about his bill, noting that if the federal government failed to provide all of its promised funds during the initial three-year period, the program would terminate within 120 days.

Given that the bill was introduced on May 2 – the day after a deadline for legislation passed by one chamber to be moved to the other chamber – and that there is about a month left in the regular session this year, it faces an uphill climb for passage this year.

Meanwhile, the House and Senate Finance versions of next fiscal year’s state budget would appropriate at least $75.2 million and $82.2 million, respectively, in federal and “other” funds through HHS for a GOP alternative to Obamacare that, among other things, would pay hospitals to steer uninsured patients away from hospital emergency rooms to other places such as free health clinics and community health centers. Rural hospitals also would receive full reimbursement for uncompensated patient care under the state’s Medicaid “disproportionate share” program, under the proposals.

In his proposed budget submitted last fall to the Office of State Budget, HHS Director Tony Keck projected that even without participating 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.

Those costs would be covered with an approximate 70-30 percent match of federal and state funds, respectively, according to Keck’s budget proposal.

In her written response to The Nerve last week, Mullis said HHS is projecting the addition of at least 160,000 “currently eligible but unenrolled” individuals in the state’s Medicaid program next fiscal year even without participating in the Obamacare expansion, noting the influx of enrollees is the “result of the laws of other dynamics – especially health insurance exchanges.”

“SCDHHS believes these individuals will enter the system, and the agency needs to be prepared,” she said.

Outside of Obamacare, Keck in his budget request submitted last fall projected that the number of new Medicaid enrollees in fiscal 2014 would grow by 2.8 percent to 1,063,164, which he estimated would add nearly $187 million to his agency’s budget.

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