First look at 'dirty details' of South Dakota's Medicaid expansion plan
The Department of Social Services laid out the infrastructure needed to handle some 57,000 South Dakotans newly eligible for Medicaid
PIERRE, S.D. — Near the end of a full-day session with the Department of Social Services, legislators sitting on the Joint Appropriations Committee engaged with the first detailed look at the planned rollout of the state’s expanded Medicaid program since the constitutional amendment passed in November.
While the Jan. 17 presentation revealed the specific methodologies and assumptions behind the $12.7 million and 68 additional full-time staffers requested by Gov. Kristi Noem in her budget, some questions remained unanswered, including how exactly the department will ramp up staffing and technology infrastructure to meet the constitutionally mandated July 1 start for accepting applications.
Still, Brenda Tidball-Zeltinger, the deputy secretary and chief of operations with the department, was confident that the expanded Medicaid program could begin accepting applications even before the beginning of services on July 1, and applauded the work of the department to make that a reality.
“There are some mechanical issues to work through,” she told the committee. “But I would say that there will be the potential that we'll be working with some applications at some point prior to July.”
Administrators err on the side of caution with Medicaid estimates
The Department of Social Services casts a wide umbrella over child care, behavioral health and disability programs in the state, many of which interact with different parts of the federal Medicaid program.
This year, the department will handle the administration of the newly expanded Medicaid program, offering health coverage to uninsured South Dakotans who sit below 138% of the federal poverty line; in 2022, that meant an income ceiling of $18,755 for a single adult and $38,295 or a family of four.
Even during Noem’s budget address last month and a Bureau of Finance and Management budget overview last week, the message on Medicaid has been preparing for cost overruns. Sen. Jim Bolin, who sits on the Joint Appropriations Committee, said he was not surprised that the Department of Social Services took the same approach.
“The department is going to overestimate the cost,” Bolin said. “Because the last thing they want is to run out of spending authority and have to call a special session for appropriators to give them more.”
To arrive at the estimated $12 million net cost to the state in year one — an annual cost that will quickly increase to at least $70 million in the third year after federal subsidies die down — the department factored in 10% “contingency” increases in both enrollment and per-person cost.
Part of this assumed cost overrun, according to the department’s Medical Services Division Director Sarah Aker, is that some in the expansion population could have put off important medical procedures due to a lack of insurance. Yet Aker said those higher upfront costs could lower over time.
“Our hope is that we'll be preventing higher costs by creating an environment where individuals can access those preventative services, prevent more hospitalizations and try to avoid those higher health care expenditures,” Aker said.
Furthermore, rather than assuming a steady ramping up toward that number over the first several months of the program, the department is budgeting the program as if every single eligible person in the 57,500-person expansion group will immediately access the services.
That explains the wide gap between the department’s estimates and those of the Legislative Research Council, which ballparked total first-year enrollees at around 35,000, according to Rep. Mike Derby. The question for appropriators, then, will be whether they feel better on the side of fiscal responsibility or accurate budgeting.
“We'll just take a look at both of those, and we'll have to come to a consensus,” Derby, the vice-chair of the Joint Appropriations Committee, told Forum News Service after the session.
Still, Derby said nailing the exact estimates is not life-and-death, especially with such a new program, as the legislative session in 2024 would allow legislators to make any adjustments to forecasts and funding.
“The good thing is, we’re never more than six months from a legislative session,” he said. “If we kick off in July and there are changes that need to be made six months in, we can do that.”
Rollout complicated by federal policy, aging technology
On top of costs related to the care side of the Medicaid expansion group, the Department of Social Services requested approximately $10 million in state spending — some of it covered by federal subsidies — for 68 new full-time employees to handle increased claims and onboarding.
Making the sign-up and billing process of tens of thousands of South Dakotans more difficult, however, is the convergence of federal policy and technology changes.
At the federal level, the “maintinence of effort” requirement — which meant states could not remove people from the Medicaid rolls for an increase in income since the beginning of the pandemic — is scheduled to end April 1.
Tidball-Zeltinger told Forum News Service this administrative requirement for income verification for tens of thousands in the state will require some staffing increases. The process could soak up some administrative resources from the early onset of Medicaid expansion.
On top of the new task of monitoring income “churn” as it’s called, the department has a new, automated technology system coming at the end of the year. Tidball-Zeltinger explained to the appropriations committee that patching the some six months between the beginning of Medicaid expansion and the new system is one of the major need points for staffing increases.
“What I would tell you is that in this area, I think until we implement that new system, have it fully operational, I don't think that we're going to know exactly what that might mean for fully realizing some potential savings, or potential changes to utilization of staff,” she said.
That waiting time could delay certain types of payments to hospitals for about six months, though the department said they plan to have a better idea of the ramping-up of payments by late February.
Despite legislative concerns over these planned delays, Deb Fischer-Clemens, a lobbyist for Avera Health, explained that the state’s larger health systems have already been providing uncompensated care to these uncovered populations; waiting six months for full payment would not be too much to ask.
While the department did express confidence that the requisite deadlines would be met even with these complications, Rep. Linda Duba, one of two Democrats on the Joint Appropriations Committee, was worried that the department would struggle to find the required workforce to keep up with already-planned delays in certain payment structures, even with a built-in wage increase.
“I was concerned about the delayed payments and delayed claims,” Duba told Forum News Service. “Much work to do, and where do they find 68 [full-time employees]?