- Associated Press - Tuesday, May 3, 2016

PIERRE, S.D. (AP) - South Dakota’s ability to expand Medicaid under Gov. Dennis Daugaard’s conditions got a boost from federal policy changes that could help the state cover the costs of expansion, a top adviser to the governor said.

Officials examining expansion hope to have a better idea next month whether a federal move to take on more Medicaid costs for Native American enrollees will allow South Dakota to cut spending enough to offset broadening eligibility for the public health coverage program. Daugaard has proposed expanding Medicaid as long as the state’s share of the cost is covered by savings contingent on the federal policy changes.

The number of services the federal government announced in February it will fully fund in certain situations through Medicaid for Native Americans came as a pleasant surprise for South Dakota officials looking to identify savings in state spending.

“That’s good news,” Kim Malsam-Rysdon, a senior adviser to the governor, said during a recent meeting on Medicaid expansion. “What that does is it expands the opportunity for savings for the state.”

But, she cautioned in a Tuesday statement that the state still needs a realistic plan to put the policy changes into practice.

South Dakota would need to identify $12 million in ongoing savings to fund the plan through the 2017 fiscal year, and $57 million in savings to fund expansion through 2021, according to the state.

Daugaard has said he would like a special legislative session to consider expansion if his administration determines that moving forward would be viable.

Shortly before the end of the 2016 session, the federal government said that it will use Medicaid dollars to fully fund services for Native Americans who are eligible for Medicaid and receive care from providers outside the Indian Health Service. But only if the provider has an agreement with IHS or a tribal facility.

Currently, there is a rough split in financing through Medicaid between the state and the federal government when people who are eligible for both IHS and Medicaid go to an outside health care provider.

The federal changes could reduce current state Medicaid spending to be redirected toward expansion, which is what the state is evaluating now.

South Dakota had initially identified a total of $67 million in state Medicaid spending in the 2015 budget year that could be reduced by the federal changes and redirected to covering the cost of expansion. With the new analysis, the total amount of state Medicaid spending identified as available to turn into savings jumped to about $85 million.

“This news is very exciting because the governor has said all along that he does not want to support this unless it is budget-neutral,” said Tim Ridgway, president of the South Dakota State Medical Association. “We think it is just a tremendous opportunity for those patients.”

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