This Election Day, South Dakota votes on Medicaid expansion

South Dakotans will vote Tuesday on whether to expand Medicaid coverage to low-income adults through a ballot initiative that’s garnered endorsements from key players in the Mount Rushmore State’s healthcare industry.

The South Dakota Association of Healthcare Organizations and the South Dakota State Medical Association are among the initiative’s public supporters, along with Sanford Health and Avera Health, both based in Sioux Falls, and Monument Health of Rapid City. 

Proponents contend adopting the expansion under the Affordable Care Act would reduce the uncompensated care burden on South Dakota providers, increase the revenue providers generate and enable community health centers to expand.

“In South Dakota, like other states, the rural hospitals are losing money in part due to providing care for those who have no health insurance,” said state Sen. Michael Diedrich (R), who also is Monument Health’s vice president of governmental affairs. “Expanding Medicaid will protect that access to healthcare in rural communities because it’ll help save those rural hospitals or clinics from having to close.” 

Although Medicaid typically provides low reimbursements compared with Medicare and private insurers, the low-income people who would qualify under the ballot measure tend to be uninsured currently and therefore likely are unable to afford the medical care they receive, leaving providers with unpaid bills.

“The prospect of Medicaid expansion means that those folks are able to pay for their care and hospitals and clinics are carrying a lot less bad debt,” said Kelly Hall, executive director of the Fairness Project, a progressive organization that supports grassroots campaigns to make policy at the ballot box.

An estimated 42,500 South Dakotans with incomes below 133% of the federal poverty level—or about $18,000 a year for an individual—would become eligible for Medicaid benefits starting July 1 if the constitutional amendment garners majority support, according to the South Dakota Legislature’s nonpartisan budget analysis office.

A Kaiser Family Foundation analysis of Census data shows 9.4% of people in South Dakota were uninsured in 2021, compared with 8.6% nationally. In 2019, 16,000 South Dakotans fell into the “Medicaid gap,” meaning they are ineligible for both Medicaid and the ACA’s premium tax credits for private health insurance, a separate KFF analysis found.

The ACA called for Medicaid expansion to take effect nationwide, but the Supreme Court ruled in 2012 that states could opt out. But because the law also only allows people who earn at least poverty wages to qualify for premium tax credits, that leaves millions in non-expansion states unable to access Medicaid or subsidized coverage from a health insurance exchange.

Research suggests Medicaid expansion is associated with fewer hospital closures. “States that did not expand Medicaid experienced a large increase (0.429 closures per 100 hospitals) from 2008-12 to 2015-16 in the unadjusted rate of closures. In contrast, the closure rate decreased by 0.33 per 100 hospitals in expansion states,” according to a University of Colorado study published in Health Affairs in 2018.

Community health centers, health systems, and healthcare associations are putting money behind the ballot initiative and vocalizing their support for the expansion campaign, which is spearheaded by a coalition called South Dakotans Decide Healthcare.

In addition to several major health systems and healthcare industry groups, the Medicaid expansion measure is endorsed by dozens of organizations including the South Dakota Nurses Association, the South Dakota Farmers Union, the Greater Sioux Falls Chamber of Commerce, the American Cancer Society Cancer Action Network, the American Heart Association, the American Diabetes Association and AARP South Dakota.

Gov. Kristi Noem (R), conservative legislators and organizations such as Americans for Prosperity oppose the measure, saying it will inflict high costs on the state.

Fifty-three percent of South Dakotans support the Medicaid expansion constitutional amendment, according to survey results South Dakota State University published last month. In June, 67% of voters rejected a GOP-led initiative aiming to curtail the Medicaid vote by requiring a 60% threshold to enact ballot initiatives.

“Ballot measures have been the way that we have broken through the logjam on this issue,” Hall said.

Avera Health operates 17 rural hospitals that would benefit from more people gaining coverage, said Kim Malsam-Rysdon, the health system’s vice president of public policy. “The thing that Medicaid will bring to bear is better fiscal stability for rural hospitals. If they’re serving a population that has a greater propensity to be uninsured, then they’ve got more uncompensated care,” she said. Malsam-Rysdon previously served as South Dakota secretary of health under Noem.

Expansion would also allow Avera Health to maintain services that are at risk right now, Malsam-Rysdon said. The health system would be able to continue to provide regionalized cancer care in rural communities rather than having to move people further from their homes and offer more behavioral health services, she said. “We want to expand that service across our footprint, and that would be another thing that I just don’t see us being able to do without addressing things like Medicaid expansion,” she said.

At community health centers in South Dakota, about 20% of patients are uninsured and others have health insurance that requires high cost-sharing they can’t afford, said Shelly Ten Napel, CEO of Community HealthCare Association of the Dakotas, a trade group and backer of the ballot measure. Moreover, rural clinics see fewer patients than urban clinics, she said. “All of those economics make it tough to make ends meet,” she said.

The Community Health Center of the Black Hills in Rapid City is financially reliant on Medicaid payments, said Dr. Douglas Lehmann, an internist and pediatrician who practices at the clinic. Making more people eligible for Medicaid would generate a crucial few hundred thousand dollars a year and enable the community health center to hire more mental health providers, he said. “Expanding services would be a big thing for us,” he said.

Six Republican-led states have expanded Medicaid eligibility by ballot measure since the ACA became law in 2010. South Dakota is one of the twelve remaining states that hasn’t implemented the expansion. Then-Gov. Dennis Daugaard (R) conceived a plan to adopt Medicaid expansion in 2015 but abandoned it after failing to win enough support from fellow Republicans.

Under the ACA, the federal government finances 90% of the cost to cover newly eligible beneficiaries in states that expand Medicaid. In addition, President Joe Biden enacted a law last year offering states that haven’t already broadened Medicaid eligibility with a two-year, 5% boost to the federal share of their total Medicaid expenses if they adopt expansion.

As a consequence of reduced spending on state healthcare programs and the additional federal money, adopting Medicaid expansion would result in $162.5 million in savings for South Dakota over five years, according to the Legislature’s budget office.

Elected Republicans in states such as Idaho, Maine and Utah delayed implementing or attempted to alter the details following successful ballot measures to expand Medicaid, although all eventually opened up enrollment to newly eligible people.

Despite her opposition, Noem—who faces off against South Dakota House of Representatives Minority Leader Jamie Smith (D) for reelection Tuesday—has vowed to carry out the law if voters back the constitutional amendment.

“We’ve done everything we can to build a legally strong ballot initiative, to put protections in place, and we’re just going to keep working with our partners at the state legislature and at the Department of Social Services to make sure that implementation goes smoothly and we’re able to execute on the will of the voters,” Ten Napel said.