Unaffordable Care Act: Why Medicaid Expansion is Bad Medicine for South Carolina

May 15, 2013

Oran P. Smith, Ph.D

Senior Fellow


“For every problem,” H.L. Mencken wrote, “there is a solution which is simple, clean and wrong.” Enter Obamacare and one of the main ways that it purports to reduce the number of uninsured: putting more people on Medicaid.

S.C. legislators are being pressured to do just that. The House has rejected the idea, and Gov. Nikki Haley has vowed to veto it, but it’s not dead. And if they ultimately sign on to the idea, they’ll find they’ve made a costly mistake and created a long-term fiscal problem. Specifically, some in the Legislature want to expand Medicaid eligibility to more adults during the three years the federal government covers the expansion population.

But this allegedly good deal will only bring turmoil to the state’s budget in the future. For one thing, Medicaid expansion is not “catch and release” for the states. Once such an expansion has occurred, it is politically difficult if not impossible to roll back enrollment. It becomes a permanent entitlement — and one that is completely unaffordable. If South Carolina expands Medicaid, taxpayers would be on the hook for millions. According to our research at The Heritage Foundation, the expansion would begin costing the state just four years from now and would cost $612 million over the next 10 years — outstripping any purported “savings.”

Already Medicaid is consuming a greater share of the state budget. Expanding Medicaid will make it even larger and harder to pay for other state priorities, including schools and roads, in the future. This also assumes that federal funding for the Medicaid expansion goes unchanged. Right now, Washington is struggling to get the country’s fiscal house in order. Any serious efforts to address this crisis would have to address real entitlement reform, including Medicaid.

Although administration officials say Medicaid is off the table, it was just last year that the president’s own budget proposed changing Medicaid financing. So these promises are good only until the president needs money to pay for his many other spending priorities. But affordability isn’t the only issue. Extending coverage via Medicaid doesn’t mean that individuals will, in fact, gain access to the health care they need. Already, it is becoming harder to find a doctor who will accept a new Medicaid patient, primarily due to lower payment rates.

Obamacare tries to temporarily raise Medicaid payment rates for some doctors. But here too it leaves the state holding the bag and ignores the reality that you can’t add millions of people on to a program where there are fewer doctors to see them. Not only will new and existing patients have a harder time finding a doctor, but the doctors will have less time to spend with each patient. The expansion of Medicaid also will displace private insurance and shift more of the cost of health care to the few who still have private insurance.

Who suffers the most if this happens? The needy, of course, including children. Medicaid doesn’t pay for many procedures, and physicians are only able to manage because of their non-Medicaid patients. If more people are dumped into the program, that lack of compensation will only worsen, and the doctors will be forced to do more for even less.

A massive expansion of Medicaid will not meet the needs of those it is intended to reach and will only further exacerbate the challenges of delivering quality care to those currently on it. Medicaid needs reform, not expansion. These reforms can start now with states, like South Carolina, working to develop their own solution for addressing the needs of the uninsured. Ideas that don’t depend on approval or more financing from the federal government.

But as the Hippocratic Oath says, “First do no harm.” S.C. legislators can honor that dictum by not expanding our Medicaid program.

Former United States Senator Jim DeMint is President of The Heritage Foundation in Washington, DC and Honorary Founding Chair of Palmetto Promise Institute.

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