South Dakota’s Low-Income Residents, Native Communities, and Budget Could All Soon Benefit From Medicaid Expansion

On November 8 South Dakotans will vote whether to approve Amendment D, requiring the state’s Medicaid program to cover adults aged 18-64 with incomes below 138 percent of the federal poverty level. If they do, about 42,500 low-income South Dakotans — most of whom work in jobs with low pay or with fluctuating hours — could qualify for affordable health coverage starting on July 1, 2023. Expansion would also help reduce health disparities in Native American communities, while bringing in millions of dollars available to the state to offset health care costs.

States have the option to expand Medicaid to low-income adults through the Affordable Care Act. South Dakota is one of only 12 states that have not done so, meaning the state’s adults without dependent children aren’t eligible for Medicaid regardless of their income; and an adult with two children would have to make less than about $10,590 per year to qualify. (These estimates are calculated using the Kaiser Family Foundation’s 2022 Medicaid eligibility guidelines.) If Amendment D passes, individual adults would qualify with earnings up to about $18,750, and adults in a family of three up to $31,780.

In 2021 some 83,000 people in South Dakota were uninsured, putting the state’s uninsured rate at 9.5 percent — higher than in all bordering states except Wyoming (12.2 percent), which is also a non-expansion state. The average uninsured rate among states that expanded Medicaid fell roughly by half between 2013 and 2019 (from 35 percent to 17 percent), compared to a relatively modest drop in non-expansion states (from an average of 43 percent to 34 percent).

Most of the South Dakotans who would be eligible for coverage work in low-paid jobs or in industries where hours and earnings are more likely to fluctuate. Among those who have gained coverage through Medicaid expansions in other states, millions are workers whose work is necessary to provide critical goods and services , including health care workers, bus drivers, grocery store workers, food manufacturers, and others on whom many people rely. In 2019, 17 percent of low-income workers in these types of industries were uninsured in expansion states, down from 35 percent in 2013, compared to 32 and 43 percent, respectively, in non-expansion states.

Many people who are uninsured are employed but are offered no or unaffordable health coverage options through their employer. About 16,000 people in South Dakota were in the coverage gap in 2019, which means their income was too low to qualify for subsidies on the health insurance marketplace but above their state’s extremely low, non-expansion-state Medicaid threshold. Over half of South Dakotans in the coverage gap were either working or available and actively looking for work. While most people in the coverage gap are employed, those who aren’t in the workforce are typically caregivers of children or older family members, have a disability that doesn’t meet the strict state or federal standards for disability, or are enrolled in school.

The lack of Medicaid expansion affects more than the 16,000 South Dakotans in the coverage gap in 2019 because the coverage gap affects more people over time than point-in-time estimates indicate. Many adults transition into and out of the coverage gap over the course of a year, given high rates of income volatility among households with low incomes and frequent coverage loss among low-income people. If South Dakota expands Medicaid, workers in industries where income isn’t always stable or there is a higher risk of injury — like farming, meat processing, or construction — would be able to better maintain access to health care and the financial stability that health insurance provides.

Scott, who lives in Rapid City, South Dakota, is one of the people who recently moved into the coverage gap. Scott lost his health coverage after suffering an injury at work and has been uninsured since 2020. Expanding Medicaid would ensure that Scott and thousands of other people in the coverage gap can get affordable coverage and not have to decide between paying for health care and meeting other basic needs.

Expanding Medicaid in South Dakota would also help reduce racial and ethnic disparities in coverage rates. American Indians and Alaska Natives (AIAN) make up 30 percent of the state’s uninsured population, compared to 8 percent of state residents identifying as AIAN. Non-elderly AIAN adults are more likely to report having fair or poor health status, diabetes, substance use conditions, and asthma compared to non-elderly white adults. These disparities are a result of historical policies like assimilation, which led to the spread of infectious disease and poor living conditions for Native American communities, and ongoing challenges such as lack of access to quality housing on and off of reservations.

In addition to providing better coverage access to this group, Medicaid expansion would provide an important revenue boost for facilities under the Indian Health Service (his), a historically underfunded federal program that provides health care services to AIAN people. When Montana expanded Medicaid, IHS was able to increase the amount of care it provided, including by allowing more people to receive preventive care.

Rural health care facilities and their communities broadly benefitted from expansion in Montana. An evaluation conducted in 2022 found that people in rural areas in Montana saw improved access to behavioral health services, and rural health facilities’ costs declined by over 40 percent. All but two of South Dakota’s 66 counties are rural or frontier and adults in the rural counties are more likely to be uninsured. The top eight counties with the highest proportion of uninsured adult workers are all rural and 5 out of the 8 are entirely tribal land, according to a 2021 analysis by the Georgetown Center for Children and Families.

And while South Dakota residents would benefit from Medicaid expansion, the state would also see benefits to its budget and health care systems. The state’s share of Medicaid expansion costs would be almost fully covered in the first five years thanks to reduced uncompensated care costs and new federal funding. In expansion states there is strong evidence of savings in uncompensated care (care that goes unpaid by patients or insurers) and reduced spending on other programs that serve people without health insurance. The federal government covers 90 percent of the costs of Medicaid expansion, which brings in millions of federal dollars that help states save money on health services such as behavioral health care and reduces the amount of unpaid care that health systems provide.

The savings from Medicaid expansion could cover 98 percent of the costs in the program’s first five years, according to a 2021 fiscal note by the South Dakota Legislative Research Council. With a total expected savings of $162.5 million covering almost all of the state’s 10 percent share of costs, the state cost of Medicaid expansion is expected to be $3.8 million over that period.

Most of the savings in the first two years would come from an incentive in the American Rescue Plan. Available to the 14 states that hadn’t expanded Medicaid when the bill passed in March 2021, this incentive increases a newly expanding state’s traditional federal Medicaid matching rate by 5 percentage points. South Dakota is eligible for up to $128 million in additional federal Medicaid funds through this incentive. Two states — Missouri and Oklahoma — are receiving the incentive after implementing their Medicaid expansion programs in 2021 following successful ballot measures.

Even after the Rescue Plan incentive ends, South Dakota would see ongoing savings from the higher Medicaid match rate associated with moving certain groups who are currently eligible for Medicaid to the expansion group, such as people eligible for Medicaid related to breast and cervical cancer treatment or family planning. The state would also continue to see ongoing offsets to state general funds that now support services like mental health and substance use treatment, health care provided in IHS facilities, and some health care in the corrections system, like inpatient care provided at an outside medical facility to people who are incarcerated.

Other states have experienced similar benefits to their state budgets, including Montana, whose savings within Medicaid and in other programs combined was at least 40 percent of the state’s share of expansion costs and up to 85 percent on the higher end of estimates. Further, growth in Montana’s Medicaid spending remained steady after expansion while federal spending increased rapidly.

If South Dakota voters approve Amendment D, their state will be the seventh to expand through a ballot initiative. Before now, Medicaid expansion has been on the ballot in six states: Idaho, Maine, Missouri, Nebraska, Oklahoma, and Utah. Voters approved all six.