The Impacts of One Big Beautiful Act on Healthcare in South Carolina

Last year Congress passed the One Big Beautiful Act (also known as OBBA or H.R.1) which severely reduced availability to healthcare insurance or benefits. This mainly impacts middle-to-low income Americans. While the stated goal of H.R.1 was to make dramatic decreases to health care by making claims of huge “waste, fraud, and abuse,” what it really does is weaken how we fund healthcare as a whole.  These changes make Medicaid Expansion more favorable for South Carolinians than ever before, as it will allow us to provide this benefit at a very favorable cost to the state.

Key Healthcare Impacts to South Carolina from H.R.1

Massive Federal Funding Cuts: Over the next 10 years, state Medicaid programs face massive federal funding reductions, forcing choices to cut benefits or provider rates. We have already seen the state needing $200 million dollars just to maintain services in 2026-2027 budget year.

Financing Restrictions: While this section primarily affects Medicaid expansion states, the elimination of new Medicaid provider taxes and lowering of state-directed payments limits how all states can fund their share of costs. This is a huge cut to hospitals, but also will hurt our state’s ability to find new non-general state fund dollars for our states share of the program.

Increased Safety-Net Strain: Hospitals and providers in South Carolina will likely face higher rates of financial uncertainty and possible closure due to reduced payments. This will add pressure on safety net providers.

Increased Administrative Costs: States may face higher costs for running Medicaid, due to new, stricter, and bureaucratic eligibility and renewal rules.

Affordable Care Act Marketplace Instability: Due to increased red tape and the sunsetting of enhanced premium tax credits, lower-income residents between 100 and 150% of poverty in South Carolina(who rely on the Marketplace instead of Medicaid) have faced much higher insurance costs and reduced access to care.

Nonexpansion states, including South Carolina have experienced more severe coverage losses because their residents are forced to rely far more heavily on ACA Marketplace. 

• More low-income adults in South Carolina relied on the ACA Marketplace. Over 630,000 South Carolinians were on ACA in 2025. H.R.1 did not renew enhanced premium tax credits, which helped make coverage affordable.
  
  
• In January alone, it was reported that 50,000 South Carolinians immediately lost marketplace insurance due to costs, with no other options on the table.
  
  
• In South Carolina, 43% of Marketplace enrollees make under 138% of FPL, compared to just 9% in expansion states. Medicaid Expansion covers up to 138% of FPL. Most people who lost ACA marketplace insurance due to cost, would qualify for Medicaid under expansion if South Carolina adopted this program.
  

Key Terms to Know

Enhanced Premium Tax Credits was additional financial help from the government to help reduce the cost of marketplace insurance plans. These credits were not renewed by Congress in 2025, and expired in 2026, greatly raising the cost of ACA marketplace plans for everyone.

Provider taxes are state-imposed fees on health care providers like hospitals, nursing homes, and managed care organizations. These fees are used to help fund the state’s Medicaid programs. South Carolina only put these fees on hospitals.

State Directed Payments (SDPs) are payments that states make to Medicaid providers to compensate them for Medicaid’s low reimbursement rates.

CMS stands for Centers for Medicare & Medicaid Services. The Centers for Medicare & Medicaid Services is a federal agency within the United States Department of Health and Human Services that runs the Medicare, Medicaid and ACA marketplace programs.

FMAP is the federal match that SC would have to pay for Medicaid Expansion. Our regular match rate is 69/31 but our match rate for Medicaid Expansion is 90/10.

Home and Community Based Services (HCBS) are programs paid for by Medicaid that help older adults and people with disabilities live at home instead of in a nursing home. These services can include help with daily tasks, cleaning, planning care, preparing food, taking all medications and getting to appointments.

Provider Network is a list of doctors, other health care providers, and hospitals that a healthcare plan contracts with to provide medical care to its members.

A Look At Medicaid Funding and the Changes South Carolina Will Experience

Limits on Generating Revenue through Provider Taxes
Status: Active (July 4, 2025)

No state can start new health care provider taxes or increase existing provider taxes. This limits states’ ability to support Medicaid in the future. SC has hospital provider taxes in place but does not tax other health care providers. Many other states use this funding system for their Medicaid program. H.R. 1 bans these opportunities for SC to raise state Medicaid revenue through new provider taxes.

Reductions to State Directed Payments (SDPs)
Status: Starts Jan 1, 2028

Starting in 2028, H.R. 1 mandates a multi-year reduction by 10 percentage points per year until SDP falls to 110% of Medicare rate. Reducing SDPs will impact Medicaid provider networks and access to care. These funds were needed to help offset care for patients who have no funds, but received care.  Lack of funds for hospitals and nursing facilities will contribute to their closures. SC has the highest mean SDP rates in the country; and the largest SDP reduction for the Medicaid budget of any state. Estimated Cut to SC Medicaid: $1.4 billion in 2028

State Penalties for Payment Errors
Status: Starts Oct 1, 2029

Starting FY 2029, states will be forced to repay federal Medicaid dollars for certain payment errors if the state’s payment error rate is above 3%. In last audit by CMS it was found SC had the highest payment error rate of any state (20.5%). South Carolina must make a huge reduction in errors Medicaid billing. Over time, this will have fiscal and managerial effects for SC and will lead to sinking enrollment. Estimated Cut to SC Medicaid: $146.2 million by 2034

All burdens to beneficiaries and the state will cause people to lose Medicaid in the long run, as that is the only way to make up for the federal funding cuts.