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It's Medicaid or 'medicain't' in South Carolina

Bill Davis
Editor, StateHouse Report (SC)

November 23, 2010Next year looks to be  interesting for the state’s Department of Health and Human Services. “Interesting” being a euphemism for “hellish.”
Not only is DHHS, which administers Medicaid, facing a projected $228 million shortfall this fiscal year, which ends June 1 but the agency announced this week the likelihood it will run out of reimbursement money for Medicaid providers – doctors, hospitals, etc. – as soon as March 4, unless it gets additional mid-year solutions.

Unpaid medical bills could lead to a nightmare scenario, with doctors potentially refusing to take Medicaid patients for fear of never getting paid. Or, as it has happened in other states, South Carolina could get sued by health care providers for non-prompt payment for contracted services.

Whole lot of new money

Added on top of that is that DHHS released recently that it would, based on its current program size and usual rate of growth, need an additional $663 million new money for the following fiscal year, 2011-12, according to its spokesperson, Jeff Stensland.

Yes, $663 million in new money.   In a recovering economy.

That could be a tough sell in the legislature, according to multiple Statehouse sources, for a variety of reasons.

  • One, the state is looking at a budget shortfall of between $700 million and well over a billion dollars, thanks to a lagging economy and the disappearance of federal stimulus dollars.

  • Two, total state budget expenditures on health care and related programs eclipsed education spending for the first time in history, becoming the state’s most expensive budget item.

  • And three, some state number-crunching revealed that the $663 million in requested new money was more than the state puts toward the base operating budgets of all 33 of the state's public colleges and universities combined. In fact, what DHHS says it needs in new money is $240 million more than the combined amount of state funding to the 33 colleges’ base operating budgets.

Prepare for a slaughter

Some in Columbia and around the state, worry that DHHS and Medicaid, which was expanded to qualify for substantial federal stimulus cash infusions, will be led to the budget slaughter like the fatted calf.

Gov.-elect Nikki Haley this week talked about the state not taking part in Medicaid, inferring that, despite generous federal matching funding, that it is an unfunded federal mandate.

Her view has been echoed by others, desperate for cost-savings. Senate President Pro Tempore Glenn McConnell (R-Charleston) recently said the state couldn’t afford its health care program.

“It grows faster than the ability of the people of South Carolina to pay for it, it grows faster than the real growth in the whole budget and real income in this state,” said McConnell.

Looking for ways to cut

But how lean is the fatted calf? Stensland said that administration, usually the first line of cuts, only accounts for 3 percent of the massive agency’s budget, with only 1 percent going to personnel.

This week, Tuesday to be exact, DHHS, which has held roundtable discussions over past months with its providers in an attempt to come up with a workable solution, released its own deficit reduction plan.

The plan identified a “substantial” increase in demand for services coupled with $228 million budget reductions over the past three years, as well as the shifting in over a half-billion dollars to other agencies.

The plan also identified three major strategies to reduce the deficit.
  • One, eliminate optional services, like adult vision care.

  • Two, reduce long-term care services, like those extended to the elderly in some situations and children with “complex medical needs.”

  • And three, cut provider reimbursement, namely to doctors, hospitals, and other health care providers.

But, Stensland and the report warned, further cuts may fall afoul of federal guidelines, and may actually increase costs in the long run. For example, expensive trips to the emergency room for routine matters may increase, as more citizens are cut-off from various services.

Stensland also worried if any cuts, no matter how draconian or immediate, might not result in quick enough savings, especially with so many potential cuts have to be approved by federal agencies like the U.S. Centers for Medical and Medicaid Services, which administers not only Medicaid, but Medicare, and the Children’s Health Insurance Program.

Lobbyists and health care provider advocacy associations have been bracing for provider cuts for several years and have worked hard to avoid them. So far. But this may be the year that, according to one insider with access to the budgeting process, reimbursement rates could get cut, but probably not over 5 percent.

Crystal ball: South Carolina lags behind the rest of the country in the two areas the state government already spends the most money on: health care and education, in that order.  A bitter budget battle may erupt this year as legislators, ticked by diminishing returns on public investment, will have to trim the state’s annual spending to meet its constitutionally-demanded balanced budget.

Bill Davis is editor of Statehouse Report.


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