South Carolina Eliminates Medicaid Payments for Treatment Mistakes

Published December 1, 2008

In an effort to stop what a state official calls “encouraging sloppy practices by reimbursing hospitals,” South Carolina’s Medicaid program will no longer pay hospitals for cases in which medical errors have been made.

The state Department of Health and Human Services chose to implement the policy after the legislature cut its health budget by 3 percent, or $28.5 million.

Some 800,000 South Carolina residents are covered by Medicaid, but only 53 percent of state physicians take Medicaid patients, a drop from 60 percent of doctors in 2003.

Critical and Overdue

Experts are calling the move a “critical” reform that should not have taken so long to be implemented.

“South Carolina’s plan to eliminate reimbursement for medical errors is a critical reform to the state Medicaid program,” said Bryan D. Cox, communications director for the South Carolina Policy Council.

“When providers know they will be paid regardless of performance, it eliminates their self-interest to provide high-quality care,” Cox continued. “By refusing to pay for medical errors, the state is finally providing an incentive for medical staff to take the time and give the effort to get things right.”

“I’m surprised it’s taken insurers, both public and private, this long to stop paying for medical errors,” said Devon Herrick, Ph.D., a senior fellow at the National Center for Policy Analysis.

“Health care is arguably the only industry where poor quality pays more than high quality,” Herrick said, because the errors create the need for additional treatment. “Hospitals can actually earn more by providing poor-quality care than by fixing their mistakes.”

The decision is a better way to cut expenses than paying all providers less would be, Herrick says. “State Medicaid programs generally ration care by squeezing providers with low reimbursement rates,” he said. “That results in poor access among Medicaid enrollees compared to people with private coverage.”

Holding Providers Accountable

South Carolinians should see both improved quality of care and lower cost to the taxpayer as a result of the new effort to hold providers accountable, said Cox.

“Since South Carolina’s Medicaid costs are growing at 8 percent a year—more than twice the rate of inflation—state lawmakers must face the reality that the system is not economically sustainable, and therefore requires fundamental reform. Given these fiscal realities facing Medicaid, a ban on giving doctors taxpayer money for their mistakes is an absolute no-brainer,” Cox concluded.

Krystle Russin ([email protected]) writes from Texas.