Medicaid feeds economy

Today the South Carolina House of Representatives begins debating the 2011-12 state budget. One important issue will be how to address Medicaid funding—reduce state funding and thus lose up to hundreds of millions in federal dollars or adopt a plan by the hospitals for them to pay extra into the Medicaid program to avoid the loss of federal funds.

In the letter below The South Carolina Small Business Chamber of Commerce weighed in on the issue with House members.
March 14, 2011

Dear Representative:

Earlier this month we asked that the Legislature take a more business approach to budgeting in regard to spending cap legislation. As you begin the budget debate this week, no better example of a decision requiring a business approach will be the issue of Medicaid funding.

Some have expressed concern that taxpayers must be protected from increased taxes. However, the bigger fear for the small business owner is less money circulating through our economy that creates consumers. Starving our local economies hundreds of millions of dollars will worsen the economy at the very time it appears to be improving. If small businesses need protection, it is from a state-inflicted loss of customers.

Our hospitals have made a good business proposal to keep federal Medicaid funds from being dramatically reduced to our state and thus reducing the financial impact to themselves. By increasing their contribution to the state’s Medicaid program, they can help keep federal funding to our state from being dramatically reduced.

The importance of this to our small businesses is twofold. First, while our large urban hospitals might be able to weather reduced Medicaid compensation with few layoffs, the same is not true for our rural hospitals. These will certainly need to scale back their personnel costs regardless of the wishful predictions of those with little or no business experience. There will definitely be a negative economic impact on our rural communities and their small businesses struggling to survive.

Second, fewer Medicaid dollars for any health care provider will mean increased cost shifting to those with insurance. The fact that all of us with health insurance are paying for the uncompensated care of others is a primary reason for rising health insurance costs. Intentionally increasing this upward pressure on premiums, at a time when small businesses are hard pressed to offer employees health insurance due to costs, runs counter to the Legislature’s positive efforts to make health insurance more affordable (ex. raising the cigarette tax).

We strongly encourage you to accept the Medicaid funding proposal by the hospitals. It is a good business decision for them and for our small businesses.


Frank Knapp, Jr.
President & CEO

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