Gov. Dennis Daugaard�s proposal to cut 10 percent from the Medicaid budget has left some local organizations grappling with how they will reduce expenses.
One of these entities � SESDAC, Inc., which assists people with development disabilities � currently receives about 80 percent of its funding through Medicaid. In addition, 100 percent of its clients are Medicaid users.
�Cuts like these can be pretty devastating to our organization,� said Executive Director Gerry Tracy. �There is no ability for us to shift cost to private pay or to insure people. There is no other revenue source for us to look at, except for fundraising and things of that nature.�
That would mean SESDAC would have to raise approximately $340,000 for the coming year.
�It�s not something that�s probably possible,� Tracy said.
SESDAC currently supports 80 people with developmental disabilities, along with an additional 80 families spread over 11 southeast South Dakota Counties. The organization also runs Vermillion Public Transit.
Sanford Vermillion also would be affected by the cut, with 20 percent of the people who use the clinic utilizing Medicaid, as well as roughly half the residents in Sanford�s 66-bed nursing home.
�Just the nursing home side alone, a 10 percent cut would probably mean a $25,000-a-month decrease in revenues from the state,� said CEO Tim Tracy. �We have the ability to make that up if we pass the cost on to the residents of the nursing home who pay their own way and don�t depend on the state.
�These figures are very rough, but in order to do that, we would have to shift the burden by about $10,000 a year to the private-pay residents. It would cost them an extra $830, $840 a month just to absorb the state�s share of that $25,000,� he said.
The governor�s budget plan was announced last week, and includes $127 million in cuts to reduce spending of state general funds to about $1.1 billion in the next budget year, which starts July 1.
In addition to the reimbursement to doctors and others who provide services to Medicaid users, the 10-percent budget cuts include state aid to school districts.
Daugaard said the state has relied on the federal government to make up the difference accrued through South Dakota�s structural deficit.
�We�ve been relying on our uncle � Sam � to fill the gap with stimulus money,� he said.
The governor said his goal is to eliminate the structural deficit this year.
�We�re going to be having to make tough choices for that to occur,� Daugaard said.
While Gerry Tracy and Tim Tracy said they agree with the need to operate under a balanced budget, they may have to make some tough choices to keep their organizations operating on-budget.
�As an organization, we�re going to look under every rock and turn every stone, but there are not many places to look here,� Gerry Tracy said. �We run extremely lean as an organization. We�re a service organization, which means that 75 percent of our budget is tied up in employees and benefits. When you sit back and think about that � there�s very little left to carve out that doesn�t impact jobs, benefits and the heart and the pulse of what our organization is.�
Sanford Vermillion faces a similar issue, with approximately 70 percent of its expenses falling under human resources.
�We�ll have to figure ways to reduce expenses in order to accommodate any reduction in the state payment,� Tim Tracy said. �On the nursing home side, there will definitely be a shift of the burden from the state to the private-pay resident. There�s no question about that.
�The state doesn�t pay the cost of long-term care, and hasn�t for quite some time. There already has been a significant shift from the years past in the differential from what the state pays and what someone pays for themselves,� he said.
SESDAC will begin �line-by-line budget analysis� to find ways to economize, Gerry Tracy said.
�We�ll look for ways to economize in bulk purchasing and things of that nature, but we do that already,� he said. �We will probably start to reduce service options like transportation, going out and being a part of the community. �
�Unfortunately, some of the cost will end up going on the backs of those that we support, who don�t really have any financial ability to sustain that cost,� he said.
Employees may find themselves affected, as well. Gerry Tracy said SESDAC will need to �look at wage reductions, all the way through to having to eliminate positions.�
As the costs shift more toward the clients and patients, ramifications the state had not anticipated may begin to unfold, Tim Tracy said.
�In many ways, we�re impacting those people who have been saving money (their whole lives) and were going to hasten their dependence on the state,� he said. �But as the cost of nursing home care continues to go up and we transfer a bigger burden of care to them, there will be an increase in numbers that find the state as their parachute. �
�My worry is � particularly in Vermillion, with the high poverty rate � is that sooner or later, somebody is going to say, �We don�t get paid enough to take care of Medicaid. We may have to quit.� We see evidence of that around the country, in other states where people have stopped taking Medicaid and Medicare,� he said.
This has already been reflected somewhat in the state�s dental industry, he said.
�I do think this is round one,� Tim Tracy said. �I�m not terribly concerned at this point, knowing that it�s round one, and there are legislators out there that are really concerned with doing the right thing for the state and for their districts. I really believe that we�ll come up with an equitable package, somewhere less than what the governor is proposing, and somewhat more than what the legislature walked in thinking was going to happen. We�ll end up with a compromise, and hopefully it won�t have too many ill effects across the state.�
� The Associated Press contributed to this report.