Thank for your email in which you indicate your support for the expansion of the State’s Medicaid program. As you know, as a result of the Supreme Court’s decision, the expansion is optional and left to the states to decide whether to participate.
In the email, you expressed your concerns that we need to protect the low-income workers of this country.
I generally agree with your observations, but unfortunately, the state cannot afford to expand the program, and let me tell you why I feel this way.
First, let me say that the Medicaid program in South Carolina is under the jurisdiction of Governor Haley, and the agency head for the Department of Health and Human Services, Mr. Tony Keck, is appointed by her. The Governor has stated on many occasions that she does not support the expansion. In her State of the State address this year, she said that several other states are having deficits because of overspending for public healthcare programs. It was only a couple of years ago in South Carolina that we, too, were having problems funding the existing program.
I am not supporting the expansion of Medicaid because of many reasons. The foremost reason is that South Carolina taxpayers cannot afford to sustain funding for the current Medicaid program even at the 30% state match level. In addition, the funding demands for the current entitlement program is hurting the funding for everything else in the state budget- public education, law enforcement, corrections, economic development, natural resources and higher education. As attractive as the offer of 100% Federal funding for the first few years, we cannot continue down this spending road. Unlike the Federal government, the state cannot borrow money to keep state government operating.
For next year, DHHS is requesting $193 million, just to maintain the Medicaid program and deal with the costs associated with the healthcare mandates and other provisions in the new Federal law. This amount represents more than half of the projected “new” General Funds revenue ($262 million) that will be available to budget writers for next year. These funds are primarily from sales and income taxes.
According to the State Budget and Control Board’s Division of State Budget, the Medicaid program will need an increase of $357 million in funding for state fiscal year (FY) 2014-15; and $471 million in FY 15-16!
The House Ways and Means Committee is currently working on the state budget for FY 13-14. The Governor’s Executive Budget recommends funding to maintain the current program through a combination of General Funds, cigarette tax revenue of about $150 million, and other tobacco settlement revenue to the State. General funds for the Medicaid program total $1 billion and this represents 18% of the State’s total General Funds revenue.
As you know, although the expansion is initially 100% Federally funded, it gradually reduces to 90% over time requiring state matching funds of 10%. As I have said, the State is already having trouble funding the current program. Even at 10%, it is obvious we are having trouble finding the 30% for the current program due to increases in Medicaid enrollment, healthcare inflation and pressures to increase reimbursement rates to keep providers that will accept Medicaid patients.
We also know that at the Federal level, cuts are coming to government programs due to the Federal deficit and the possibility of the fiscal cliff. I question the ability of the Federal government to be able to keep its’ promise of 100% Federal funding.
Currently, there are plenty of persons already eligible for Medicaid but who have not enrolled. It is estimated that this number could be as high as 70,000 to 90,000 children and 40,000 to 56,000 adults. These are people that could enroll under current rules and will further increase the state’s matching requirement of 30%.
And it is important to recognize that Medicaid inflation normally runs at 6.6% annually. The State’s General Fund does not grow at this rate. At this rate, it would require about $66 million in state funds just to maintain the current program without consideration for increasing enrollments, provider reimbursement and the other mandates of the Affordable Care Act.
Another troubling fact impacting the existing healthcare system is that the current healthcare system doesn’t get to some of the root causes of the healthcare problems such as lifestyle choices that are contributing to the high costs of health care. 15% of all of the healthcare costs is due to sedentary lifestyles. It costs $1,200 more to treat the obese person than a healthy weight person.
Currently losses in the Medicaid program due to fraud and abuse could be as much as 10% of spending.
And there are also huge opportunities for more efficiency in the current healthcare system. According to Mr. Tony Keck, Director of the State Medicaid agency, there could be savings in the current program of as much as $30 to $40 million in hospital expenditures. The General Assembly needs to make sure we control these costs before considering expansion of the current system.
The number of physicians practicing in SC per 100,000 people is well below the national average. There are concerns that the physician workforce may not be able to keep pace with the future demands of the aging population, much less an expansion of Medicaid.
Thank you for sharing your concerns and views on the State’s Medicaid program. I appreciate your opinion on this important topic, but as a member of the House of Representatives, I have a responsibility to participate in the writing of a fiscally responsible budget that takes into consideration the fiscal impact of major policy decisions and the future financial realities of state revenue. Even with the Federal government’s 100% participation in the first few years of funding the expansion, there are too many uncertainties of funding Medicaid, Medicare and Social Security at the Federal level. State elected officials need to be good stewards of the taxpayer monies, and we are entrusted with that responsibility by the taxpayers. It is clear to me that as much as I would like to help more citizens with public health insurance, the state does not have the financial means to sustain the expansion.
Stephen L. Goldfinch Jr.