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South Dakota and the ACA’s Medicaid expansion

Lawmakers are expected to consider Medicaid expansion in 2017

south-dakota Medicaid guide

South Dakota has not yet accepted federal funding to expand its Medicaid program, so eligibility rules in the state remain the same as they were prior to the Affordable Care Act (ACA). But the governor has been pushing for Medicaid expansion for months, and the issue is likely to be considered during the 2017 legislative session.

In December 2015, Republican Governor Dennis Daugaard explained the details of his $4.8 billion budget proposal, including his proposal to expand Medicaid to cover 55,000 people who aren’t currently eligible. Daugaard noted that Medicaid expansion in South Dakota is “not a done deal” at this point, and that there are still details to work out. But he said that the state should “seize the opportunity” to use federal funding to expand coverage, if possible.

Although states that expand Medicaid will gradually begin paying a small portion of the cost starting in 2017, Daugaard noted that his proposal would actually end up being a financial net-positive for the state. That’s because he was working with the federal government and Native American tribal leaders to use Medicaid funding for Native Americans who are eligible for expanded Medicaid and who receive treatment outside of Indian Health Services (IHS) facilities. Those costs were being covered in part by the state, and Daugaard said that South Dakota would save more there than they would spend on their portion of the Medicaid expansion costs.

Daugaard has said that he wouldn’t continue his push for Medicaid expansion if it ended up needing additional money from the state’s general fund.

In February 2016, HHS agreed to establish arrangements under which non-IHS providers could enter into “care coordination agreements” with IHS facilities, and Native Americans enrolled in Medicaid would be able to receive care at those non-IHS facilities and the full cost would be covered by federal Medicaid funds (as opposed to the state paying a portion and the federal government paying a portion). But Daugaard noted that the practical implementation of the new HHS provision could be complicated, and that there was still work to be done to determine whether the savings from the new IHS rule would save enough money to make Medicaid expansion budget-neutral in South Dakota.

A few days later, Daugaard said that it was too late in the 2016 legislative session to get the ball rolling on Medicaid expansion, and said that he would remove Medicaid expansion from his proposed budget. He indicated that a special session was a possibility, but that waiting until the 2017 legislative session was also a possibility.

In June 2016, Daugaard confirmed that the issue would have to wait until the 2017 legislative session, as he was opting not to call a special session in 2016. Expansion proponents are gearing up for the 2017 session, but it’s still expected to be an uphill battle, as there’s significant anti-expansion sentiment among lawmakers in the state.

Governor’s proposal got initial approval from HHS

South Dakota officials announced in September 2015 that their new proposal to expand Medicaid had received “an initial ‘go ahead'” from HHS. Governor Daugaard’s senior advisor Kim Malsam-Rysdon noted that the plan was still preliminary, but it appeared promising and would expand eligibility to far more people than the state’s 2014 proposal that would only have expanded coverage to residents with incomes below the poverty level (HHS rejected that proposal).

Of the population that would be newly eligible for coverage under Medicaid expansion, more than a quarter – about 14,000 people – are Native Americans, although Native Americans make up just nine percent of the South Dakota population. Native Americans are disproportionately impacted by the state’s hitherto refusal to expand Medicaid. And although they are eligible for free care through Indian Health Services, the treatment options are limited at those facilities. The approval from HHS to allow non-IHS providers to enter into care coordination agreements with IHS facilities should help to open up treatment options for Native Americans with Medicaid coverage, with full funding from the federal government.

An evolving position on expansion

Daugaard’s position on Medicaid expansion has changed over time. In 2012, after the Supreme Court ruled that states could opt out of Medicaid expansion, he rejected expansion in South Dakota, citing the cost to the state and noting that the newly-eligible population would consist entirely of able-bodied adults; he didn’t want to encourage more dependence on the government among a population that’s able to work.

But his current position — while it still includes his qualms about providing coverage to able-bodied adults — has softened, and he reminded lawmakers to keep in mind that a single parent with three children might not be able to work enough hours to get health insurance, due to childcare costs.

Polling indicates that voters in South Dakota are in favor of Medicaid expansion. A non-scientific poll being conducted by Sioux Falls newspaper the Argus Leader had 490 votes as of October 2016, and 81 percent of them were in favor of Medicaid expansion. The South Dakota State Medical Association is also pushing for Medicaid expansion in the state.

Coalition working on the details

In order to expand Medicaid, states must determine how they will fund their portion of the cost. The federal government pays 100 percent of the cost of Medicaid expansion through 2016, but after that, the states gradually assume a small portion of the expense, reaching ten percent by 2020 (it will remain at that level going forward). In South Dakota’s case, the state’s portion of the bill was expected to be $30 million to $33 million by 2020, although some of that was expected to be offset by savings on uncompensated care costs.

A coalition of stakeholders, including state officials and Native American tribal officials, met for the first time in October 2015 to work on finding ways to free up the funding that the state will need in order to cover its portion of the Medicaid expansion bill in future years. But Daugaard’s proposal that was unveiled in December 2015 indicates that the state will actually save more than they’ll spend, once they incorporate the fact that the state won’t have to continue funding care for Native Americans outside of IHS facilities if they’re eligible for expanded Medicaid.

After HHS granted approval for the use of federal Medicaid funds to fully cover the cost of Medicaid-covered Native Americans’ treatment at non-IHS facilities, the coalition began working out the details to determine whether the specifics of the new rules would truly allow Medicaid expansion in South Dakota to be budget neutral.

2014 efforts to expand Medicaid

In 2014, Governor Daugaard tried to get HHS to approve his modified version of Medicaid expansion, covering only people with incomes up to the poverty level, instead of to 138 percent of poverty level as called for in the ACA. But HHS rejected his proposals, noting that federal funding for Medicaid expansion is only available if states agree to expand coverage up to 138 percent of the poverty level (states are allowed to use innovative approaches in doing so, however, such as using Medicaid funding to purchase private coverage for enrollees).

Medicaid expansion was one of the platform issues in the 2014 governor’s race, as Daugaard’s Democratic and Independent challengers both supported full Medicaid expansion (Daugaard won re-election). Full Medicaid expansion in South Dakota would expand eligibility to between 49,000 and 55,000 residents. Roughly half have incomes below the poverty level, while the other half have incomes between 100 percent and 138 percent of the poverty level. The latter population is eligible for premium subsidies to offset the cost of private coverage in the exchange, but would be eligible for Medicaid instead if the state moves forward with full expansion.

The impact of not expanding Medicaid

For the time being, Medicaid has not been expanded in South Dakota. Premium subsidies for private plans purchased through the exchange are only available for households with incomes between 100 percent and 400 percent of poverty level, so no financial assistance is available for people living below the poverty line in South Dakota.

According to state officials, roughly 26,000 people are in this “coverage gap” in South Dakota – ineligible for Medicaid and also without realistic access to private insurance, since they would have to pay the entire premium themselves on an income that’s under the federal poverty level (Kaiser Family Foundation data puts the coverage gap population in South Dakota at just 13,000).


Unless South Dakota expands Medicaid, the state will forfeit $2.1 billion in federal funding over the next decade. States that do not expand Medicaid are essentially subsidizing those that do, since the federal tax dollars come from all states but are flowing to those that have expanded Medicaid.

Who is eligible?

South Dakota’s Medicaid program became effective in October 1967, nearly two years after Medicaid was created. For many states, 2014 represented a significant shift in eligibility, particularly for childless adults. But in South Dakota, eligibility guidelines have not yet changed under the ACA. Non-disabled childless adults are ineligible for Medicaid, regardless of how low their incomes are. The South Dakota Medical Assistance Program (Medicaid and CHIP) is available to these legally-present residents:

  • Pregnant women with household incomes up to 133 percent of poverty.
  • Children with household incomes up to 204 percent of poverty are eligible for CHIP (Children’s Health Insurance Program).
  • Parents with dependent children are eligible with incomes up to 58 percent of poverty.

How do I apply?

You can apply at at any time — Medicaid enrollment is available year-round.  For people with access to the internet, this is probably the easiest way to enroll.  You can also apply over the phone with by calling 1-800-318-2596.

Paper applications for Medicaid and CHIP can also be downloaded from the South Dakota Department of Social Services website.  The application must then be mailed, faxed, or taken in person to a local Social Services office.  If you have questions, you can reach the SD Department of Social Services at 605-773-3165.

Enrollment growth

By mid-April 2014, 3,850 South Dakota exchange applicants had enrolled in Medicaid or CHIP through  They were eligible based on the pre-2014 enrollment guidelines, but may not have been aware that Medicaid was available to them. Medicaid/CHIP enrollment continues year-round, although it tends to spike during open enrollment due to outreach and enrollment assistance. During the 2015 open enrollment period, another 2,861 people enrolled in Medicaid/CHIP in South Dakota, also qualifying under the non-expanded eligibility guidelines.

But there is always transition in and out of the Medicaid program in any state as people experience changes in income and eligibility.  From the fall of 2013 until July 2016, total enrollment in South Dakota’s Medicaid program grew by 3,751 people – an increase of 3 percent.

South Dakota Medicaid

How to apply

Apply year round through or by phone at 1-800-318-2596. Download applications for Medicaid and CHIP from the South Dakota Department of Social Services website; then mail, fax, or take the application in person to a local Social Services office.  Have questions? Call (605) 773-3165.

Who is eligible

Pregnant women with household incomes up to 133% of FPL; children with household incomes up to 204% of FPL (for CHIP); parents with dependent children are eligible with incomes up to 58% of FPL.

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