The Obama Effect on Medicaid Expansion in SC

While the Obama victory ensures the survival of his landmark Affordable Care Act (ACA), the decision whether to expand Medicaid in our state remains in the hands of South Carolina's Republican Governor and Legislature. Therefore, an Obama victory does not mean that his health care overhaul will be fully realized in South Carolina. The debate centers on the ACA's direction to expand Medicaid to those citizens with annual incomes up to 138% of the Federal Poverty Level. That's roughly $15,000 a year for a single adult, and around $32,000 a year for a family of four.

An April report from the South Carolina Department of Health and Human Services (DHHS) projects that 236,000 South Carolinians stand to gain coverage from Medicaid expansion, but it's the ones that are already eligible that will really affect South Carolina's bottom line. That's because now that all citizens are required to have health insurance, DHHS will be responsible for enrolling thousands of individuals and families that are already eligible for Medicaid, but have not enrolled in the program. In fact, the majority of costs associated with the ACA come from those that are already eligible for Medicaid coverage.

So what is the State's incentive to expand Medicaid in South Carolina? Not surpisingly, it all comes down to money. While the federal government currently offers a 70/30 match for Medicaid in our state, Medicaid Expansion under the ACA will be 100% paid for by the federal government for the first 3 years, gradually declining to 90% in 2020 and beyond.  That means that the State will recognize a permanent 9 to 1 match on funds associated with the newly eligible population. Rejecting Medicaid expansion in South Carolina will forgo over $11 Billion in federal funds to our state from the increased matching rate.

Not to mention, as part of the compromise to pay for Medicaid expansion under the ACA, hospitals agreed to significant reductions in Medicare reimbursement and Medicare and Medicaid Disproportionate Share (DSH) funds that provide financial assistance to hospitals for uncompensated care provided to uninsured patients. The reasoning was that hospitals could offset these reductions with the additional revenue received from an increase in patients covered through newly created health exchanges and an expanded Medicaid program. Although we will see some of the uninsured covered through the insurance exchange, without Medicaid expansion, statewide cuts in Medicare and Medicaid DSH funds to hospitals total $2,773,605,270. These cuts without an increase in the insured population will significantly hurt South Carolina's hospitals.

So where does SCHA stand in all of this? SCHA believe this is a unique opportunity to transform the Medicaid program, producing better health outcomes and controlling costs whether we expand Medicaid as directed by the ACA or negotiate a solution that better suits our state. However, our hospitals literally cannot afford a total rejection of Medicaid expansion due to the cuts already in place. Without an alternative plan, SCHA will support Medicaid expansion as outlined in the ACA.