Election could impact South Carolina's $6-billion Medicaid program

The State (Columbia, S.C.)October 2, 2012 

The next president’s biggest impact on South Carolina could be found in the future of Medicaid, the government health-insurance program for children, the poor and the disabled.

In South Carolina, the program is immense – both in dollars and impact.

Taxpayers spend $6 billion a year for South Carolina’s Medicaid program – roughly $11,000 every minute. The program covers 1.1 million people, nearly a quarter of the state’s population. About 58 percent of those covered are children. South Carolina’s Medicaid program pays for half of all births in South Carolina, and 85 percent of teen births. And Medicaid contracts with 78 percent of the state’s nursing homes and pays for 70 percent of the people in those homes.

The program also is one of the biggest contributors to the federal budget deficit – now $1.17 trillion a year, according to the Congressional Budget Office.

In conservative South Carolina, reducing that deficit is the top priority for many voters. But that can’t be done without changing Medicaid. President Barack Obama and Republican candidate Mitt Romney both want to spend less on the program – but in different ways, ways that will have a big impact on South Carolinians on Medicaid, and the doctors and hospitals who serve them.

The federal government pays for a portion of the program in each state. The poorer the state, the more money the federal government gives to that state. South Carolina has the fifth-highest federal contribution rate in the country – meaning the Palmetto State is so poor that it is unusually dependent on the program.

Romney wants to change how the federal government pays for its share of the program. Right now, the government pays a matching rate. In South Carolina, that is 70 percent of the program’s cost, regardless of what the total cost is.

Romney wants to turn Medicaid into a grant program. Under this scenario, states would get a specific amount of money – and no more. In return, states would have more flexibility in deciding what medical procedures to cover.

The Congressional Budget Office estimates one version of this approach could save $287 billion over 10 years – a 25 percent cut in federal Medicaid spending.

Romney’s plan for Medicaid

This idea is popular with Republican governors, including S.C. Gov. Nikki Haley.

“We’re not going to shove more South Carolinians into a broken Medicaid system that further ties our hands when we know the best way to find South Carolina solutions for South Carolina health problems is through the flexibility that block grants provide,” Haley spokesman Rob Godfrey said in an email to The State newspaper. “As the governor has said, block grants hold the state accountable for improvements in health but free us from useless federal red tape.”

This approach could work in South Carolina, but only if state officials are successful in negotiating the right amount of money from the federal government, said Robby Kerr, the state’s Medicaid director under former Gov. Mark Sanford.

“If you receive a block grant and get capped at what you have now with very little inflationary growth ... you are going to box yourself in,” said Kerr, now a lobbyist. “If you receive a block grant with good flexibility and very adequate inflation factors, you will succeed.”

But critics say remaking Medicaid as a block-grant program is sure to shrink it, resulting in some poor South Carolinians losing their health insurance.

“It would be the worst thing that could happen to our state,” said Sue Berkowitz, director of the S.C. Appleseed Legal Justice Center, which advocates for the poor. “What happens when your needs grow and there are no dollars to go into it? You know the state won’t pony up the money.”

Others say they are wary of the promise of increased flexibility, adding they don’t trust Haley. In 2011, for example, Haley signed a bill that cut Medicaid payments to health-care providers, they say.

“How am I going to ensure what our governor, who has at track record of not taking care of her citizens, will do when you give her the money?” said state Rep. Bakari Sellers, D-Bamberg.

President Obama’s plan

Democrat Obama would not turn Medicaid into a grant program, but he, too, has proposed changing how the federal government pays for its share of the program.

Now, the federal government pays for part of the cost of Medicaid in each state using a formula to determine the reimbursement rate. But every state has multiple rates. For example, the federal government pays for 70 percent of South Carolina’s Medicaid program. But the federal government also pays 79 percent for the Children’s Health Insurance Program, part of Medicaid.

The president has proposed combining all of South Carolina’s rates into one “blended rate.” This would save $100 billion in federal spending over 10 years, according to the president.

“A blended rate may be a little more administratively efficient,” Kerr said. “But it is a cow with different spots. If I blend the rate, does the blended rate come out to the equivalent that I was receiving under individual rates? The key is in the numbers. Am I going to be able to sustain my program?”

Critics say no.

They say the president’s plan, while saving the federal government money, would just shift the costs to states. South Carolina would have to spend $1.5 billion more on Medicaid over eight years, projects the Heritage Foundation, a conservative think tank that is critical of the proposal.

While Obama plans to cut back on Medicaid spending, he also wants to expand who is eligible for the program. The Affordable Care Act, often referred to as Obamacare, would make more people eligible for Medicaid, causing the program and its cost to increase.

S.C. officials estimate those changes would make 500,000 more S.C. residents eligible for Medicaid, a population that would cost the state budget a total of $1.1 billion by 2020.

The Department of Health and Human Services, the state agency that runs the state’s Medicaid program, already is preparing for the change. Its budget for this year includes an extra $29 million to add 70,000 children to the state’s Medicaid rolls, a move that director Tony Keck compared to a trial run for the broader Medicaid expansion.

But, in July, the U.S. Supreme Court ruled states could choose whether to take part in the Medicaid expansion. That shifted the Medicaid fight to state legislatures, which must decide whether to expand Medicaid.

S.C. Gov. Nikki Haley has been clear: she does not support the expansion and would not sign it into law. But Democrats and some moderate Republicans want to expand Medicaid – setting up what is sure to be one of the major fights of the legislative session that begins in January.

“I think the discussion in the Legislature will come down to a veto of the governor,” Kerr said, noting the Legislature could pass the expansion, which Haley then would veto, forcing the Legislature to try to override that veto. “Do they have to get enough votes to override it?”

If Romney wins the presidential election, all that maneuvering could be moot.

Romney has vowed to repeal the Affordable Care Act or, at the very least, issue several executive orders and special waivers that would gut the law’s impact.

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