NCPA - National Center for Policy Analysis


August 17, 2005

South Carolina is proposing to establish Health Savings Accounts (HSAs) for its 850,000 Medicaid recipients in an effort to manage the cost of the program and give recipients more control over health care spending.

Many observers believe that Medicaid creates little incentive for cost control. In fact:

  • South Carolina currently spends almost 19 percent of its state budget on Medicaid.
  • Spending is expected to grow to 24 percent of the state budget in five years and to 29 percent in 10 years.
  • South Carolina's plan would cap how much is spent per Medicaid recipient while allowing patients to use their HSAs for out-of-pocket expenses.

Critics argue that the plan amounts to a cut in services. Judith Solomon of the Center on Budget and Policy Priorities argues that South Carolina residents will go without health care if they cannot pay the out-of-pocket expenses, particularly the very poor and sick.

However, Devon Herrick of the National Center for Policy Analysis notes that the plan promotes personal responsibility.

"If they've made wise choices, they might have money left over," says Herrick. "If they've made poor choices, it might take some money out of their pockets."

Medicaid recipients already have a hard time finding doctors willing to see them because of the program's reimbursement rates, he said. The lack of access can itself lead to health problems.

"I think they'll get better care because I think most of us in private health plans do get better coverage than Medicaid enrollees, even if on paper, Medicaid looks better," he explains.

Source: Kevin Freking, "S.C. Proposing to Redefine Medicaid," Associated Press, August 16, 2005.

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