Research & Commentary: South Dakota Medicaid Expansion

Published October 18, 2015

South Dakota Gov. Dennis Daugaard (R) proposes to expand the state’s Medicaid program under a provision of the Affordable Care Act. If the Obama administration approves the plan, South Dakota will become the 31st state to expand Medicaid under Obamacare.

This expansion opens up Medicaid coverage for able-bodied, childless adults who earn up to 138 percent of the federal poverty level. The federal government would fully cover the cost of this expansion until 2016, and it would then begin scaling back its commitment. The planned reductions continue until 2020, when matching federal funds plateau at 90 percent. Because the federal match rate can be altered at any time, states are always vulnerable to the possibility the national government could suddenly require states to cover more of the costs for those newly enrolled.

While Daugaard projects roughly 48,500 people will sign up under the expansion, South Dakotans should be very skeptical of these numbers. Daugaard says the cost to the state for the expansion will reach a maximum of between $30 million and $33 million per year by 2020, but experience in other states shows projected enrollment and cost figures for Medicaid expansion have been significantly underestimated. The Foundation for Government Accountability ran the numbers for all 17 Medicaid expansion states where data were available and found enrollment under the expansion has already exceeded the maximum projected enrollment by 61 percent. Of those 17 states, only Iowa’s enrollment numbers did not exceed the projected maximum, falling short by only 95 people.

Medicaid is already the biggest line-item expenditure in the South Dakota budget, chewing up one out of every five of the state’s tax dollars. South Dakotans also spend more to fund Medicaid than to fund K–12 education or transportation and infrastructure. The state is already $7.7 billion in debt, significantly more than South Dakota’s entire annual budget of roughly $4.3 billion.

If South Dakota’s actual enrollment numbers come in above projections, which experience shows they are almost certain to do, it will have a deleterious effect on state finances. Unlike the federal government, states don’t have the luxury of printing their own money to pay their debts. Any exponential growth to what is already the state’s biggest program will either mean large tax increases, big cuts to other vital state programs, a serious increase in the state debt, or, most likely, a combination of the three.

Expanding what is already a failing program to cover people the program was never originally intended to cover will not solve any health care access problems. Elected officials in South Dakota and other states should consider cost-effective ways to provide health insurance to those who are truly in need. Giving those who are temporarily uninsured for short periods the funds they need to pay directly for health care through health savings accounts is one way to reduce government expenditures while ensuring people have access to quality health care. Another is high-risk pools, which provide subsidized comprehensive health insurance to those with serious medical conditions who cannot get insurance in the marketplace. Short-term or long-term, expanding Medicaid is not the solution.

The following documents provide additional information on Medicaid expansion:

The Growing Medicaid Expansion Bubble
One of the most damaging Obamacare provisions—Medicaid expansion—has largely gone unnoticed by the general public. Despite the lack of attention to the issue, the growing Medicaid population could lead to state government meltdowns around the country and a national health care crisis for which most Americans are completely unprepared.

Ohio’s Medicaid Spending Increasing Rapidly Under Gov. Kasich
Ohio Gov. John Kasich is campaigning for the Republican presidential nomination as a budget-balancing welfare reformer, but since he took office his state’s annual Medicaid spending has increased by nearly $6 billion, a 30 percent rise from 2011 to 2015, according to the Ohio Department of Medicaid. Averaged across Kasich’s first two budgets covering fiscal years 2012–13 and 2014–15, Ohio’s Medicaid spending increased by 7.4 percent per year.

EIF: Obamacare, Medicaid Expansion and Welfare Reform
This edition of The Heartland Daily Podcast provides presentations from The Heartland Institute’s Emerging Issues Forum (EIF) in Seattle, Washington in 2015. EIF brought together elected officials, policy analysts, and government affairs professionals from across the country. In this first panel, expert analysts discuss the debate over Medicaid expansion, the future of Obamacare after the King v. Burwell decision, and how certificate of need laws restrict competition among health care providers and drive up costs.

Nation’s Number of Uninsured Declines, Access to Care Worsens
Less than two years after Obamacare went into effect in October 2013, the proportion of uninsured individuals in the United States fell to less than 10 percent of the population during the first three months of 2015, the lowest level in 50 years, according to a survey by the Centers for Disease Control’s National Center for Health Statistics (NCHS). The change, however, resulted mainly from the Obama administration’s expansion of Medicaid, not a rise in people obtaining high-quality insurance.

Alaska’s Governor Unilaterally Expands Medicaid
Alaska Gov. Bill Walker (I) announced in July his plans to circumvent the State Legislature to expand Medicaid by using executive powers. Obamacare allows states to expand Medicaid eligibility to able-bodied, working-age adults with incomes below 138 percent of the poverty line, currently about $20,300.

Problems with Access, Budgets Complicate Medicaid Expansion
Thirty states have expanded Medicaid under the Affordable Care Act. There is a huge amount of money involved in this decision. States must decide whether to expand Medicaid eligibility to all adults with incomes up to 138 percent of the federal poverty level. From 2014 to 2015, the federal government paid for 100 percent of the expansion, and it will do so again in 2016. In 2017, the government’s share drops to 90 percent, with states supplying the rest, plus all the administrative costs of covering new enrollees and any other costs related to the expansion.

Medicaid, Medicare Threaten New Mexico’s Budget
High health care costs in government programs and other expenses have New Mexico on its way to becoming the Greece of the United States. One out of every 2.5 New Mexico residents is on Medicaid, whereas the national average is one out of every 4.5 Americans, according to the U.S. Census Bureau. New Mexico, like Greece, is becoming a textbook example of what happens when politicians hand out too much to people without requiring anything in return.


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