Federal Medicaid cuts could cause big S.C. budget problems, study says

The GOP federal budget blueprint that passed this week in the U.S. House of Representatives could blow about a billion-dollar-a-year hole in South Carolina’s state budget over the next decade, according to a new report from the Robert Wood Johnson Foundation.

The reason? Almost $1 trillion in cuts assigned to the House committee that oversees Medicaid—cuts that, if modeled after past GOP proposals, could force S.C. lawmakers to slash benefits or hike state health care spending by as much as 35%. Medicaid is the national health care program funded primarily by the federal government – but with some state matching dollars – that helps to cover medical costs for some people with limited incomes.

To arrive at the impact of possible Medicaid cuts, budget analysts studied two Medicaid reform plans Republicans have floated that would achieve savings of the magnitude called for in the resolution.

The first plan, similar to one introduced by former House Speaker Paul Ryan (R-WI) in 2016, would place a hard cap on traditional Medicaid expenditures per person, costing South Carolina about $8 billion from 2026-2035. Under the second plan, a broader cap that also targets new Medicaid spending under the Affordable Care Act, or Obamacare, would cost South Carolina $13 billion over the same period.

“The [Republican] talking points say this is all focused on waste, fraud and abuse,” said Katherine Hempstead, a health care policy analyst with the foundation. “But in reality, any kind of cut to Medicaid affects services for people who need them.”

All six of the state’s Republican House members voted yes on the spending resolution, which cut a total of $2 trillion in federal spending, while authorizing $4.5 trillion in income tax cuts. Democratic U.S. Rep. James Clyburn was the delegation’s only dissenter.

“President Trump’s mandate is clear: cut spending, slash taxes, and shred Washington’s waste,” 1st District U.S. Rep. Nancy Mace of Charleston said in a Feb. 25 release. “This resolution is a giant pair of scissors to the fiscal insanity driving our country into the ground. Delivering on Trump’s America-First agenda is the only way to stop DC from bankrupting our kids—and we’re getting to work.”

But closer to home, where the health care cost reductions would hit hardest, S.C. Senate Minority Leader Brad Hutto (D-Orangeburg) told Statehouse Report that the cuts could have “significant impacts” to the state budget.

“It’s particularly troubling for the hundreds of thousands of children who rely on this coverage,” he said.

S.C. Medicaid by the numbers

Credit: Unsplash.

According to health-care policy organization KFF (formerly the Kaiser Family Foundation), South Carolina spent $9 billion on Medicaid services in 2022, with the federal government picking up 75% of the cost, including administrative overhead.

Currently, Medicaid is estimated to cover 60% of all births in the state, as well as 63% of all nursing home patients. It also provides health care coverage for half the children in the state.

And according to Columbia policy analyst John Ruoff,, major cuts to Medicaid would have impacts on all South Carolinians, including those with private insurance.

“These cuts would threaten providers across the state, for whom Medicaid dollars basically pay the rent,” Ruoff said. “And that would seriously raise costs for everyone else because those provider costs would have to be shifted onto the rest of us.”

Those provider problems, he noted, would be felt most acutely in the state’s small towns and rural areas, where Medicaid coverage rates run as high as 30%.

“The rural hospitals we have left are for the most part in the larger small towns,” he said. “And they would have major problems.”

Sue Berkowitz, who’s worked on health care issues with the S.C. Appleseed Legal Justice Center since the 1980s, was even more blunt about the effect on providers.

“The state is not going to be able to make up for what we don’t get from the federal government,” Berkowitz said. “Medicaid is the foundation of our state’s health care system, and we all know what happens when the foundation crumbles – the whole house goes down.”

But beyond the budgetary and financial problems, she argues, the human toll would be “devastating.” And with health care for children, seniors and the poor at stake, the fight for resources would play out on the Statehouse floor.

“My biggest fear, if services are cut, is that we’re going to see groups saying, ‘Who’s the more deserving?’” Berkowitz said. “But people who need health care are all deserving.”

Nevertheless, she notes that the U.S. House-passed budget resolution is still a long way from becoming law. Members would have to actually make the cuts called for in committee. And the U.S. Senate, which is currently working on a much narrower budget package without sizable Medicaid cuts, would have to concur.

“This is bleak, but it’s not over,” she said. “There’s a lot that folks can do. But it’s going to be up to the people of South Carolina to tell their congressional delegation ‘You need to listen – you represent us up there.’”