RAND study finds SC will pay high price for Medicaid decision

South Carolina’s decision to forego expanding Medicaid coverage to more uninsured people will wind up costing the state more than if it did, a new RAND Corp. report concludes.

RAND looked at 14 states, including South Carolina, that have said they won’t expand Medicaid to uninsured families earning up to 138 percent of the federal poverty level under the Affordable Care Act, which takes effect next year.

The study, published in the June edition of the journal Health Affairs, examined the impacts of Medicaid expansion on insurance coverage, federal payments to states and state spending on care for the uninsured.

It concluded that not expanding will cost the 14 states a total of $1 billion more on uncompensated care in 2016 than if they did expand, according to the nonprofit think tank. Those states also would give up $8.4 billion annually in federal payments, the research shows.

“Our analysis shows it’s in the best economic interests of states to expand Medicaid under the terms of the federal Affordable Care Act,” said RAND mathematician Carter Price, the study’s lead author.

“States that do not expand Medicaid will not receive the full benefit of the savings that will result from providing less uncompensated care,” he added.

“Furthermore, these states will still be subject to the taxes, fees and other revenue provisions of the Affordable Care Act, without reaping the benefit of the additional federal spending which will costs those states economically.”

South Carolina Health and Human Services Director Tony Keck said he didn’t disagree with the study’s findings.

“If we do not expand, there will be fewer insured and less federal money coming into the state,” he told

“But it’s like walking into a store with no money in your pocket, and you see something you want or need for 50 percent off. It’s a great deal, but you have to come up with the money,” he added. “If it’s 10 percent or 5 percent, the state has to be able to come up with that money.”

The federal government will pay all expansion costs through 2016, which will gradually decline to 90 percent in 2020.

The 2012-13 DHHS budget is $5.95 billion, much of which is based on one-time funds, Keck said, noting he is already preparing the agency’s 2015 budget with an eye on getting less than he will ask for.

Keck added the state is already spending many millions on caring for the uninsured in hospitals and public health clinics, and that he doesn’t see how it would pay more if it doesn’t take the Medicaid expansion. Instead, he said, South Carolina will be more focused on improving the health of high-risk populations, which will help reduce costs.

RAND said state and local spending on the uninsured would be reduced by up to $18.1 billion annually across all states because of the additional coverage anticipated under health reform.

“State policymakers should be aware that if they do not expand Medicaid, fewer people will have health insurance, and that will trigger higher state and local spending for uncompensated medical care,” Price said.

The other states studied were Alabama, Georgia, Idaho, Iowa, Louisiana, Maine, Mississippi, North Carolina, Oklahoma, Pennsylvania, South Dakota, Texas and Wisconsin.

RAND Corp. is a nonprofit institution whose mission it to help improve policy and decision making through research and analysis.

RAND Health’s research portfolio focuses on health care costs, quality and public health preparedness, among other topics.