Reducing South Carolina's investment in Medicaid will not save the state money

By Thornton Kirby, President and CEO, South Carolina Hospital Association

In today's economic environment, who would say no to an investment that is guaranteed to pay three dollars for every one dollar we invest?

That's the rate of return on every dollar the state of South Carolina invests in Medicaid, the government program that helps cover the cost of providing health care to South Carolina's poorest citizens. No other investment available to the state guarantees that kind of return. For every $1 million the state invests in the general Medicaid program, South Carolina receives another $3 million in federal funding plus a number of additional economic benefits. For the State Children's Health Insurance Program, the return on our investment is even higher because the federal government will match each state dollar with four dollars.

Just as tourism attracts money from outside the state that would have been spent elsewhere, Medicaid attracts new dollars from the federal government that would not have made their way into South Carolina without the state's initial investment.

Health care is one of South Carolina's largest industries, and Medicaid is a major economic driver of business and industry. According to researchers at the University of South Carolina's Darla Moore School of Business, each $1 million invested in Medicaid by the state results in $4.7 million in new business activities and nearly 47 new jobs. In 2002, when the USC study was done, the total economic impact of the Medicaid program on South Carolina was $2.1 billion dollars, supporting 61,000 jobs and $1.5 billion in income for state citizens. These are not just jobs in health care but also jobs in other businesses that sell goods and services to health care providers and to the people employed in health care.

As legislators return to Columbia to decide where they will cut the current state budget to bring it in line with dropping revenue projections, Medicaid may be seen as an easy target. Why? Because many people throughout the state, including lawmakers, do not understand that Medicaid is a powerful economic engine for our state. Too many people think it is an entitlement program that puts a strain on the state budget. They don't realize that that if we reduce our Medicaid investment, we"ll lose jobs and the state tax dollars contributed by the people who work in these jobs. And with rising unemployment rates will come an increased demand for more tax-supported services such as Food Stamps, unemployment benefits, and ironically Medicaid benefits. It will also mean more South Carolinians will lose their health coverage.

When hospitals provide care to people who cannot pay, that care may be free to the recipient, but it is not without cost to the hospital. Someone has to help defray those costs, and the Medicaid program is our nation's way of allowing wealthier states to help support poorer states. If we refuse to let the other 49 states pay 75 percent of the cost of caring for poor and disabled patients in South Carolina, we are saying we would rather do so ourselves. It is nonsense to believe that by discontinuing Medicaid, the costs of caring for the poor and disabled will vanish. They will not. South Carolinians will simply have to pay 100 percent of those costs in the form of higher charges and more expensive insurance premiums.

But look even closer at the faces of those who rely on Medicaid for their health care. Of every 10 Medicaid recipients, two are elderly and disabled and seven are members of low income, working families. For example, a family of four that earns $10,400 per year makes too much money to qualify for Medicaid. Obviously with the annual insurance premium for a family costing an average of $10,500, these families cannot replace their Medicaid coverage with a private policy. The annual premium is more than they make!

There are problems with our health care system that need to be addressed, and the Medicaid program is no exception. But there isn't any institution in our country – banking, government, education, etc. – that isn't screaming for reform. Those of us in health care are working diligently to continue to ensure access to quality, affordable health care regardless of each patient's ability to pay. In those efforts, the Medicaid program is a vital partner, efficiently providing coverage that is about 10 percent less expensive for children and 30 percent less expensive for adults than private insurance.

What other program reaches out to our most vulnerable -- single mothers making less than $6,840 per year, families making less than $10,300 per year, and aged, blind and disabled citizens making less than $10,400 per year – while providing a three-to-one return on every dollar spent? The answer is none.

We can stop spending state dollars on Medicaid, but we cannot prevent people from getting sick or injured. Since patients will still need medical care, the hospitals in our state will continue to bear the expense of caring for them. But if Medicaid won't pay for their care, hospitals will have to shift those costs to other patients who have insurance. And that means another increase in private insurance premiums in South Carolina.

Please contact your legislators and urge them not to cut any state funds for Medicaid because South Carolinians can't afford that kind of "savings."

02-26-2009 12:00 (EST)