South Carolina’s Health and Human Services Director on why his state might sit out the Medicaid expansion

July 13, 2012

We've written a lot here at Wonkblog about whether the states will end up participating in the Affordable Care Act's Medicaid expansion (see this article from Sarah Kliff, or this column that I wrote). One of the states that everyone agrees is most likely to sit the program out, at least in the near term, is South Carolina. Tony Keck, director of Health and Human Services for South Carolina Gov. Nikki R. Haley, sent along these thoughts, which he's given us permission to print in full.

Since the Supreme Court's ruling on the Affordable Care Act, there has been considerable commentary that states contemplating rejecting the ACA expansion would be foolish for doing so because the 90% federal match is simply too good to pass up.  This argument, however, falls into a classic trap in cost-benefit analysis by comparing a program’s attractiveness against an arbitrary benchmark instead of comparing it against its other alternatives.  And when governing a state, there are many alternatives.

In South Carolina, for example, the simple inflationary/natural enrollment growth in Medicaid for this coming fiscal year is $66 million state dollars - about the same amount of money the legislature struggled over when considering a small-business tax cut, close to double state-only spending on pre-K education (S.C. is ranked 11th on access and 39th on per pupil spending), and close to double the new state general funds required to keep the state pension fund solvent after other reforms.

I'm afraid that many of those concerned with social justice have been bamboozled by the idea that health = health services = health insurance promoted by those who politically or financially benefit from continual increases in health care spending. It is not such a straightforward equation.  The social determinants of health model suggests that somewhere between 80-90% of health and well-being of individuals and their communities are driven by factors such as income, education, race, social support systems, genetics, personal choices and environmental conditions. Health services make up the remaining balance.

Yet in last year's Institute of Medicine roundtable summary, "The Healthcare Imperative: Lowering Costs and Improving Outcomes," participants lamented that out-of-control health care sp ending is destabilizing the health care system, depressing growth in national wages and employment, and forcing states to divert money from other important programs such as education.  Thus we have a vicious cycle where out-of-control spending on the 10-20% displaces potentially more effective spending on the 80-90%.

So there are valid arguments for why this expansion decision should ultimately rest with the states. For one, the Court determined it was unconstitutional otherwise. But just as importantly, because states are different. South Carolina is not Massachusetts or Vermont no matter how desperately the think tank crowd would want it to be.  We have wildly different rates of poverty, educational attainment, racial mix and economic bases which are the primary drivers of health. Massachusetts was 93% insured prior to their reforms because of their wealth; they weren't wealthy because they were 93% insured.

I think it's fair for South Carolina and other states to want to debate catching-up on much needed investments and policy to increase per capita income and education levels before setting in concrete that health care services are the number one spending priority. And in South Carolina we are doing a pretty good job when you look at our recent economic wins - Boeing, GE, BMW, Bridgestone, and Google to name a few.

This certainly isn't to say that South Carolina isn't investing in and improving Medicaid and our health system in general. While many states, (including ACA supporters) have implemented drastic cuts in Medicaid this coming fiscal year, South Carolina allocated an additional $345 million state funds to the program, including $29 million to identify and enroll an additional 70,000 eligible children under 133% poverty, $12 million to reward physicians practicing in patient centered medical homes and $4 million to incentivize leading edge approaches to better birth outcomes.  With these new investments, and almost one in four South Carolinians receiving Medicaid last year, it's simply a false generalization to accuse the state of lack of concern.

So 90% federal match requiring an additional $1.1 billion to $2.3 billion state dollars between 2014 and 2020 is not a slam-dunk for South Carolina.  If match rate were the most important measure of good policy, then every state should build a massive Medicaid program with the richest benefits, fewest cost controls and most generous eligibility limits possible.  But not even President Obama envisioned that. He drew the line of government's generosity somewhere - some would draw it higher and others would draw it lower. Those who attach their measure of morality and compassion to that line should be cautious - there is always someone willing to claim higher ground.

Anthony (Tony) Keck is Director of Health and Human Services for South Carolina Governor Nikki R. Haley.  He has over 24 years of experience in health care management, consulting, and policy in the United States and Latin America.  Prior to his appointment in South Carolina,  Keck served three years in the administration of Louisiana Gov. Bobby Jindal as health and social services policy advisor to the governor, and chief of staff and deputy secretary of the Louisiana Department of Health & Hospitals.  He holds both a Bachelor of Industrial & Operations Engineering and Master of Public Health from the University of Michigan and is completing his doctoral thesis in health systems management at the Tulane University School of Public Health focusing on physician workforce issues.  

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Dylan Matthews · July 13, 2012