South Dakota should provide health care coverage to low-income South Dakotans — but only if they work full time, lawmakers propose in a new bill.
The current measure also takes aim at South Dakota’s hospitals with a proposal to end their exemption from the state’s property taxes.
The measure’s prime sponsor, Rep. Scott Munsterman, R-Brookings, says it’s a new approach to covering the uninsured. Previously, legislative debates had focused on whether the state should expand Medicaid under the federal Affordable Care Act.
It’s unclear what future the measure has after passing its first committee hearing Thursday morning.
Within a few hours of the committee vote, hospitals began lobbying against it, Gov. Dennis Daugaard came out in opposition, and Republican leaders huddled to discuss strategy.
"I’m confident (Munsterman) has very good intentions, looking for a new way to skin the cat," said House Democratic leader Bernie Hunhoff, D-Yankton. "But the bill that passed out just doesn’t have a snowball’s chance in Hell."
Munsterman said he just wants to “lay the facts out for (lawmakers), without emotion.”
"It’s about creating a new health care strategy for us, and at least to think differently about what kind of solutions we should have to create more access to care," said Munsterman, who has also voted in favor of Medicaid expansion. "I want to be able to provide another alternative strategy. At the end of the day, I want to cover people."
People covered under the proposal could get a health insurance plan that covers 70 percent of medical expenses, with the state providing premium subsidy for all but $25 a month of the cost.
It would be available only to people earning less than 100 percent of the federal poverty line — $11,670 for an individual or $23,850 for a family of four. That’s the population that would be eligible for Medicaid but can’t get subsidized insurance on the Affordable Care Act’s health care exchanges. Daugaard has asked the federal government for a waiver to expand Medicaid just for the population earning less than the poverty line, but has not yet heard back.
But unlike Medicaid expansion, this state-provided health care would have significant strings attached. To receive health care coverage, individuals would have to not be eligible for Medicaid, Medicare, or the Indian Health Service, and would have to work 40 hours per week.
A number of Republican lawmakers have limiting extra state health coverage to people who have jobs.
"I think there should be a work requirement," said Rep. David Lust, R-Rapid City, the House Majority leader. "How strict (it) should be, I haven’t given enough thought to the nuances of that."
Munsterman said if the state can only help a certain number of people, those who are working but still unable to get health insurance is a good place to start.
"This is a strategy we could use to actually help those folks, well-defined, that are working 40 hours a week, and how we could begin to take care of them today," said Munsterman.
Hunhoff said Democrats are open to some sort of work requirements, but said it would have to be much more flexible to reflect the “real world.” He said the requirement would have to account for reservations with 80 percent unemployment, where residents can’t get a job even if they wanted to, as well as people with disabilities who can’t work but haven’t yet qualified for Medicaid disability coverage.
Limiting aid to uninsured people who work at least 40 hours per week amounts to an estimated 3,978 South Dakotans, out of around 26,000 who are uninsured and earn less than the federal poverty line.
Munsterman said 1,803 of those 3,978 are Native Americans who aren’t eligible for IHS. The other 22,000 are either Native Americans eligible for IHS, or don’t work 40 hours per week. They wouldn’t get coverage under the measure unless their circumstances changed — such as if they started working enough hours to qualify.
Subsidizing insurance would cost an average of $3,480 per year per person, or around $14 million for just under 4,000 eligibles.
An earlier version of the legislation set the limit at 30 hours of work per week, but a revision backed by Munsterman raised that to 40 hours. He did that to lower the cost of the program.
"I wanted to try to keep this bill under $15 million, which 40 hours does," Munsterman said.
If the measure required people to work 30 hours per week to qualify, it would cover an estimated 6,903 South Dakotans for $24 million per year. At 20 hours per week, it would cover 8,012 South Dakotans for $28 million.
If South Dakota expanded Medicaid, the federal government would cover 90 percent or more of the cost of covering low-income individuals with the federal health program. A partial expansion for just people earning below 100 percent of the poverty line would have a total state and federal cost of around $150 million per year. The state share 10 percent share, starting in 2020, would be just under $20 million per year.
Attached to the health proposal is a tax idea that Rep. Melissa Magstadt said would help pay for it.
She proposed removing the property tax exemption for health care facilities with 50 or more beds.
Magstadt said hospitals were given tax exemptions to offset the costs they incur covering people who can’t pay, but cited a study saying that for-profit hospitals cover the same amount of charity care as the tax-exempt nonprofits.
As written, though, Magstadt’s provision wouldn’t raise any money for the state. That’s because property taxes in South Dakota go entirely to schools and local governments.
"The problem with (Magstadt’s) amendment is it doesn’t link up the dollars to the state," Lust said.
Lust said discussions are underway about the tax proposal.
If a way could be found to tax health care facilities for the state, it’s unclear how much money that would bring in. No one knows for sure how much those properties are worth.
"Most counties don’t bother assessing tax-exempt properties… because they know that they’re never going to levy taxes on these properties," said Mike Houdyshell, who oversees property taxes for the South Dakota Department of Revenue.
Instead, every five years, nonprofit health care facilities file reports with the state to maintain their tax-exempt status. In those reports, they say how much those exempt properties are worth.
The 2012 report has not yet been compiled, Houdyshell said. But the 2007 report showed 386 tax-exempt health care properties, with a total valuation of $576 million.
At average effective property tax rates, that would produce around $9.8 million in tax revenue.
Hospital chains already pay property taxes on some of their property. For example, a hospital building might be exempt, but the clinic next door might be taxed.
Avera Health as a company pays around $3.3 million in property taxes, said Bob Sutton, Avera’s vice president of community relations. Mark Johnston, Sanford Health’s vice president of public policy, said Sanford pays around $3 million per year in property taxes.
Neither man knew what percent of their company’s property is tax-exempt.
The tax proposal was introduced Thursday morning as an amendment, and caught both legislators and lobbyists by surprise. There was no testimony taken on the tax proposal. But the bill containing the provision passed 8-4 and heads to the full House.
Hospitals are gearing up to oppose the measure.
"We earn our tax exempt status every day," said Johnston. "We care for the citizens of our region 24-7, 365 (days per year), whoever shows up at our door, regardless of their ability to pay."
Sutton also said Avera has concerns about Munsterman’s health care plan.
"We have long supported full Medicaid expansion," Sutton said. "If this bill undermine’s the state’s willingness to move towards full expansion, or at least (a partial expansion), then we would have concerns."
Perhaps more significantly, after reviewing the proposal Thursday morning, Daugaard came out against it.
"It is very expensive and it creates a new, entirely state-funded program that duplicates the purpose of Medicaid," wrote Daugaard aide Tony Venhuizen in an email. "It is also a large tax increase on health care providers, and those costs would be passed on to health care consumers."
Venhuizen said Daugaard is more focused on trying to secure a waiver to do a partial Medicaid expansion.
Some lawmakers praised the idea.
Rep. Steve Hickey, R-Sioux Falls, applauded what he called a “colossal” change.
"This brings in millions and costs people millions. But it’s a conversation that this state needs to have, because the average person out there scratches his head at how some of these hospitals can be construed as nonprofit," Hickey said, citing the large hospital chains’ multi-million dollar donations and sponsorship deals.
But Rep. Scott Ecklund, R-Brandon, worried about the decision to tax hospitals.
"We had a good bill, and we just killed it," Ecklund said. "Then at the 23rd hour and 59th minute, we decide we’re going to take on the hospitals. That’s suicide for this bill."
The measure now heads to the full House.