South Dakota and the ACA’s Medicaid expansion

State is seeking federal approval for a Medicaid work requirement pilot program, but still has not expanded Medicaid

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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). The governor has supported Medicaid expansion since 2015, but has not pushed the issue because it does not have lawmakers’ support. Instead, the state is now seeking federal approval for a work requirement for low-income parents in the existing Medicaid program. The waiver application is for a pilot program that would be rolled out in Minnehaha and Pennington Counties, with the option to expand into other areas of the state in the future.

South Dakota seeks federal approval for a Medicaid work requirement in two counties

Instead of an effort to expand Medicaid, South Dakota wants to implement a work requirement for low-income parents in the existing Medicaid population. Governor Dennis Daugaard laid out the details in his State of the State address in January 2018, and the state published the proposed waiver application in May 2018 (and did not provide some crucial details to enable to public to accurately comment on the proposal).  After the state’s public comment period, the waiver application was sent to HHS, where it was deemed complete and is still under review.

Work requirements were a non-starter under the Obama Administration, but the Trump Administration has already approved them in four states, and several other states have pending work requirement waivers.

South Dakota’s waiver proposal would roll out a Medicaid work requirement (the Career Connector program) for low-income parents/caretakers (non-parents/caretakers are not eligible for Medicaid in South Dakota regardless of how low their income is, because the state hasn’t expanded Medicaid) as a pilot program in the two most populous counties in the state: Minnehaha and Pennington. The state chose those counties because of their population and access to job training and employment opportunities.

Daugaard’s 2018 State of the State address did not mention Medicaid expansion, other than to point out that since the state has not expanded Medicaid, the existing Medicaid population is mostly exempt from a work requirement. There would be exemptions for children, the elderly, parents caring for children under the age of 1, pregnant women, and disabled individuals.

To be in compliance with the work requirement, non-exempt parents would have to work at least 80 hours per month. The state projects that 1,300 people would be in the Career Connector program annually, and that about 15 percent of those participants would lose their eligibility for Medicaid each year. The state estimates that “the majority” of the people who lose Medicaid eligibility would do so because of an increase in income, but that a “small number” would lose their Medicaid coverage due to “choosing not to participate in the program.” People who lose coverage due to an increase in income would be eligible for a year of transitional Medicaid coverage and an additional year of premium assistance.

There are about 118,000 people enrolled in Medicaid in the state, but most of them would not be subject to a Medicaid work requirement, since the state has not expanded Medicaid (ie, virtually everyone in the South Dakota Medicaid program is also eligible for an exemption from the work requirement). Coverage under Medicaid is only available in South Dakota for those with low income who are either children, elderly, pregnant, disabled, or very low-income parents/caretakers of minor children (parents are only eligible with household income up to 57 percent of the poverty level, which works out to less than $12,000 a year for a household with three people). Children comprise more than two-thirds of the state’s Medicaid population.

So essentially, the only people who would be subject to the work requirement are the parents who aren’t already working (or caring for a child under the age of 1), which amounts to a tiny fraction of the state’s total Medicaid population. And limiting the waiver proposal to a pilot program in Minnehaha and Pennington counties further reduces the total number of people who would initially be subject to the work requirement.

Obviously, young children need childcare well beyond the age of 1. Daugaard’s State of the State address noted that “for those families whose income goes up, we will provide interim resources such as child care assistance and premium assistance to support families as they transition off Medicaid.” The waiver proposal notes that households subject to the Career Connector requirements would also be eligible for childcare assistance, and that “participants receiving childcare subsidy will be provided with [childcare] copayment assistance so as income increases, and child care out of pocket costs increase, the transition is gradual instead of immediate.”

South Dakota began voluntary enrollment in the Career Connector program in July 2018. Mandatory enrollment in Minnehaha and Pennington counties will begin if and when HHS approves the state’s waiver proposal.

No Medicaid expansion, despite Governor’s expansion proposal in 2015

In December 2015, Governor 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 was “not a done deal” at that point, and that there were still details to work out. But he said that the state should “seize the opportunity” to use federal funding to expand coverage, if possible. More than two years later, however, South Dakota has not moved forward with Medicaid expansion, and shows no signs of doing so in 2018.

Although states that expanded Medicaid began paying a small portion of the cost starting in 2017 (and that will grow to 10 percent of the cost by 2020, remaining at that level going forward), Daugaard noted that his proposal would 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 are 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 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.

In early 2017, in his State of the State address, Daugaard noted that he was optimistic about working with the Trump Administration to ensure that the federal government would begin to fully fund medical care for Native Americans, regardless of where the care was provided, without requiring “health care providers to jump through several hoops,” as he believed the Obama-era arrangement did. He did not mention Medicaid expansion in that address. The issue of Medicaid expansion was essentially off the table in South Dakota as of early 2017, and the same is true for 2018.


Governor’s 2015 expansion 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, which would only have expanded coverage to residents with incomes below the poverty level (HHS rejected that proposal, as Medicaid expansion capped at the poverty level was a non-starter under the Obama Administration).

Of the population that would have been 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 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, but Daugaard had noted that it’s a complicated process, and not all providers enter into those agreements.

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 in 2015 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 was created to consider Medicaid expansion

In order to expand Medicaid, states must determine how they will fund their portion of the cost. The federal government paid 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 in the range of $46 million by 2020, and $57 million by 2021, 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 would 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 indicated that the state would 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.

The coalition recommended various changes to the state’s Medicaid program, but updated their conclusions in December 2016 to note that Governor Daugaard was no longer recommending Medicaid expansion for 2017, in light of the incoming Trump Administration’s plans to overhaul Medicaid nationwide with block grants or per-capita allotments. Ultimately, that did not come to pass at the federal level in 2017, but Medicaid expansion has not been considered by lawmakers in South Dakota in the meantime.

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 was 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 in 2014). 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 (with much lower total out-of-pocket costs) 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 15,000).

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. But by November 2017, the net increase in enrollment since 2013 had dropped to just 2 percent, with a total of 118,241 people enrolled.

Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.

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How to apply in SD

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.

Eligibility: 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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