Federal action could make SD's Medicaid work requirements ‘an exercise in futility,' official says

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3 days ago

South Dakota Department of Social Services Secretary Matt Althoff speaks at a press conference in Sioux Falls on April 25, 2025. (Makenzie Huber/South Dakota Searchlight)
South Dakota's proposal to implement work requirements for Medicaid expansion could be 'an exercise in futility' now that the federal government is also considering it, said state Department of Social Services Secretary Matt Althoff.
The state began drafting its proposal immediately following the end of the state legislative session in March, Althoff said, before debates about work requirements heated up at the congressional level.
Department officials presented their plan at the state Board of Social Services meeting Friday morning via video conference, just before the first of two public hearings on the proposal.
'Respectfully, humbly, we ask for your grace,' Althoff told board members, 'because we're asking for your feedback on something that might be obsoleted by the vote of 100 senators and the stroke of a pen from our president.'
Health care advocates form coalition urging Republicans to take their 'Hands Off Medicaid'
Medicaid is government-funded health insurance for people with low incomes. South Dakotans voted in 2022 to expand Medicaid to adults with incomes up to 138% of the poverty level, a decision that allowed the state to capitalize on a 90% federal funding match — funding that could be in jeopardy, pending the outcome of congressional action. Last year, voters passed another constitutional amendment to let the state seek approval from the federal government to impose work requirements on expansion enrollees.
At the federal level, proposed Medicaid work requirements would mandate those between ages 19 and 65 who rely on the program to work, participate in community service, or attend an educational program for at least 80 hours each month. The work requirement would be applied at the time of application, and Medicaid renewal would be changed to every six months instead of an annual basis.
South Dakota's plan would require adult Medicaid recipients work, train, attend school or serve as a caretaker for a child or elderly or disabled person in their home unless they meet an exception. Compliance with the state-level work rules would be reviewed on an annual basis, at the time of Medicaid renewal, rather than at the time of application. The state would not require a set number of hours of work or education time.
Heather Petermann, Medicaid director at the department, said the requirement would be a 'complement' to Medicaid to 'encourage' work without 'trying to track arbitrary work hours.'
'This approach really recognizes that for many individuals who need assistance with health care, that comes first,' Petermann said. 'Then it allows them to maintain their health so that they can work, or obtain the health needed to seek employment.'
The federal government also has more exceptions in its proposal than the state, including tribal community members, people who are in foster care or were in foster care who are younger than 26, and people released from incarceration in the last 90 days.
South Dakota would allow exceptions for people who are:
Pregnant or postpartum.
Disabled, as determined by the Social Security Administration.
Diagnosed with cancer or another serious or terminal medical condition by a physician.
In an intensive behavioral health treatment program, hospitalized or living in a nursing home.
In an area with unemployment 20% or more above the national average and are exempt from Supplemental Nutrition Assistance Program requirements for able-bodied adults without dependents.
As of last month, 30,542 South Dakotans were covered by the Medicaid expansion. The state estimates 80% of them already work or qualify for an exception.
SD seeks Medicaid work rules in spite of similar moves by Congress
The proposed state-level work requirement would reduce enrollment by an estimated 5-10% in the first year. That would save the Medicaid program between $48.9 million and $71 million in the first year, the department says.
The federal proposal as it stands now will cost more administratively than South Dakota's proposed work requirements, Althoff added. States 'will be asked to absorb' costs if the federal proposal is adopted. The state's proposal requires less administrative oversight to reduce anticipated costs, due in part to the state's tight budget approved by the Legislature this year.
'That's just sort of naming the tension about how not having new funds is sort of an important wrinkle to our development process,' Althoff said. 'It's really having to be done within an existing budget.'
Board member Colleen Winter said the proposal is 'respectful' of the individuals the department serves.
Work requirements are already in place for some federal programs, such as SNAP, and state efforts, such as child care assistance and parental reunification expectations within Child Protection Services.
While more than 20 people sat in on a virtual public hearing regarding the state's proposed Medicaid work requirements on Friday, only one member of the public spoke.
Attorney Nathaniel Amdur-Clark spoke on behalf of the Great Plains Tribal Leaders Health Board. He said his client wants to see an exception for Indian Health Service beneficiaries.
Native Americans who are tribal enrolled members are eligible to receive health care services through the federal Indian Health Service. Those individuals are eligible for Medicaid coverage even if they do not meet other Medicaid requirements, such as income limits, 'to implement and further trust and treaty obligations the U.S. has to provide health care' for tribal members, Amdur-Clark said.
Though Althoff and Petermann did not respond to Amdur-Clark's comments about IHS patients, they did address the subject during the earlier board meeting. Petermann said the proposal includes 'geographic exemptions,' including areas of the state with 'high unemployment.'
'Things like that would also apply to tribal members and American Indians, but we otherwise did not call out or exclude American Indians,' Petermann said. 'The approach is that this is a benefit and we want that dignity and pride to be part of the benefit for everybody, so they would be treated the same in this approach.'
Amdur-Clark added that there are technical concerns regarding exemptions in the proposal and that more work is needed to achieve 'real tribal consultation.' The department met with some tribal leaders last week to discuss the proposal, Althoff said.
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Shelly Ten Napel, CEO of the Community HealthCare Association of the Dakotas, said in an emailed statement that her organization is monitoring state and federal work requirement proposals closely. The group did not give input at the first public meeting, but plans to share its perspective on state work requirements during the public comment period.
Ten Napel opposed last year's ballot measure authorizing the state's pursuit of work requirements. Compared to the work requirement proposal being considered in Congress, Ten Napel said, the state proposal is 'overall pretty reasonable.'
Gov. Larry Rhoden's administration 'did a careful job of responding to concerns' raised during the debate last year, Ten Napel said, including administrative burdens and exceptions.
'We look forward to working with them to ensure smooth implementation of the new rules if they are approved by the Centers for Medicare and Medicaid Services,' Ten Napel said in the statement. 'We also encourage members of Congress to take a careful look at the common sense approach South Dakota is taking and rethink some of the heavy-handed rules currently under consideration in the Big Beautiful Bill.'
The 'big beautiful bill' is the budget reconciliation legislation that the U.S. House sent to the Senate last week, including a Medicaid work requirements provision.
Petermann said during the board meeting that South Dakota could perhaps seek to impose its own work requirements, even if the federal legislation passes.
'For example, some of the draft language does include references to things like 'the provisions from the federal legislation cannot be waived,' but we don't know whether that means states still could or couldn't have something that is less or more restrictive, as long as it has the same components,' Petermann said. 'We really don't know for sure yet.'
If the state moves forward, it will submit an application to the Centers for Medicare and Medicaid Services in July or August. After that, the proposal would go through a federal comment period and application review.
The department's next public hearing on the proposed Medicaid work requirements is set for 11 a.m. Central on June 12 at the Sioux Falls office of the Department of Social Services, and online.