WASHINGTON — An economic stimulus plan being prepared by President-elect Barack Obama could bring South Carolina $404 million in new federal Medicaid funds, restoring money lost in three recent rounds of state budget cuts.
The Medicaid boost, part of Obama's $500 billion economic recovery package, could help create 7,800 new jobs and spur $712 million in new business activity in South Carolina, according to a nationwide analysis by Families USA, a healthcare advocacy group in Washington.
"An increase in federal Medicaid matching funds for South Carolina is a win-win proposition," Ron Pollack, executive director of Families USA, said Monday. "It would enable South Carolina to meet the growing health-care needs of its families while providing a major boost to the state's economy."
The S.C. Budget and Control Board last week cut $61 million from the state's Medicaid programs in the third round of cuts since August, increasing to $137 million the low-income and elderly health programs have lost since July.
That total means the SC Department and Health and Human Services has seen its budget slashed by 14.4 percent in the current fiscal year.
"South Carolina Medicaid, like other Medicaid programs all around the country, is facing some real tough budget decisions right now," said Jeff Stensland, an SC DHHS spokesman. "A large infusion of money (from the Obama stimulus plan) would give us more flexibility to fund programs that we've had to reduce as a result of the budget situation."
The total loss to the state's Medicaid programs is much larger because for every dollar South Carolina spends, the federal government contributes anywhere from $3 to $9.
Taking into account the corresponding federal money lost because of the state Medicaid funding cuts, Stensland said, South Carolina has lost $459 million for hospitals, nursing homes, pharmacies, doctors to treat the elderly and the poor.
The new Medicaid cuts last week will mainly hit individual beneficiaries because two earlier rounds of funding reductions primarily targeted health-care providers, Stensland said.
"People being served by Medicaid will bear a disproportionate burden of this latest reduction," he said.
The Budget and Control Board last week reduced overall state spending by $388 million, bringing to more than $1 billion in total cuts it and the General Assembly have enacted since July under a state constitutional balanced-budget requirement.
Gov. Mark Sanford was the only member of the five-seat Budget and Control Board who voted against the $388 million cut last week, which included the $61 reduction in Medicaid funding.
Sanford opposes across-the-board spending reductions that take money from all state agencies. He believes that legislators should prioritize the hundreds of state programs and weigh cuts accordingly.
"The governor did vote against across-the-board cuts because he doesn't believe all programs should be treated equally," Joel Sawyer, a Sanford spokesman, said Monday.
Sawyer questioned the new report's claims that pumping federal Medicaid money into South Carolina and other states would create tens of thousands of new jobs and spur billions of dollars in new business activity.
"Nationally, growth in Medicaid spending has grown roughly 10 percent a year, without a commiserate increase in economic output," Sawyer said. "Whether to increase Medicaid spending is certainly an important public-policy consideration, but calling it a form of economic stimulus is a stretch."
Families USA said its report was based in part on analysis by the National Governors Association and Obama's transition staff, as well as on a proposed bill by Senate Majority Leader Harry Reid.
The Obama stimulus plan could bring North Carolina $1.1 billion in federal Medicaid funds, spur $1.9 billion in new business activity and help create 20,200 jobs, the Families USA report said.