The FMAP, the match rate for Medicaid, Foster Care, Adoption, and Child Care will change from 68.41 percent from federal funds in FY 2001 to 66.52 percent from federal funds in FY 2002. This change will require the state to finance an additional $5,883,823.

Increase in State Supplement to Title XX

The increase in the state's supplement ($3,144,652) to Title XX, the Social Services Block Grant, is due to a significant reduction in the annual grant award. Title XX is utilized for child welfare and elderly services, particularly salaries and wages for social workers staff. Mr. Ellenbecker added this decrease in federal funds is reflected in most programs.

Inflation Policy for Providers

Physician Services. The Governor recommends $31,818,574 which includes $10,652,859 from the general fund and $21,165,715 from federal funds. This is an increase of $2,185,910 (7.4 percent) from the FY 2001 budget. These funds are used for payments for physician services in a number of settings. According to the Department, there is a 1.0 percent inflationary increase for average costs to cover federally qualified health centers and rural health clinics. Both types of facilities are mandated to be reimbursed on a cost basis. The recommendation includes an expansion of $1,891,717 ($2,200,241 from the general fund) for a projected increase in clients ($625,914), an increase in utilization ($165,434), and a projected deficit in the FY 2001 base ($1,100,369).

Prescription Drugs. The Governor recommends $48,752,245 which includes $16,322,252 from the general fund and $32,429,993 from federal funds. This is an increase of $11,627,539 (31.3 percent) from the FY 2001 budget. These funds provide for prescription drugs dispensed to eligible recipients. The recommendation includes $4,989,707 ($1,575,022 from the general fund) for an inflationary increase of 13.4 percent. The Governor's recommendation also includes an expansion of $6,637,832 ($3,019,535 from the general fund) for a projected increase in clients ($1,222,699, an increase in utilization ($544,146), and a projected deficit in the FY 2001 base ($4,972,987).

Adult Dental Services. The Governor recommends $1,776,489 which includes $594,769 from the general fund and $1,181,720 from federal funds. This is an increase of $323,034 (22.2 percent) from the FY 2001 budget. The program provides basic dental coverage for adults. The recommendation includes:
1 *      $100,105 ($31,661 from the general fund) for an inflationary increase of 6.9 percent. This is due to a new three year contact. According to the Department, an inflationary increase will be required for FYs 2002 - 2004.
2 *      $224,976 ($103,962 from the general fund) for a projected deficit in the FY 2001 base
3 *      a reduction of $2,047 due to a decrease in clients

Assisted Living. The Governor recommends $1,410,720 from the general fund. This is an increase of $728,620 (106.8 percent) from the FY 2001 budget. The program provides assistance to individuals who need help with life activities. The enhancement includes $46,520 for an inflationary increase of 6.8 percent and $682,100 for an expansion in the number of clients by 125, from 125 clients in FY 2001 to 250 clients in FY 2002.

Adult Foster Care. The Governor recommends $65,000 from the general fund. This is a decrease of $10,000 (13.3 percent) from the FY 2001 budget. The program is an alternative to institutionalization.

Early and Periodic Screening, Diagnosis and Treatment (EPSDT). The Governor recommends $8,174,261 which includes $2,736,743 from the general fund and $5,437,518 from federal funds.

This is an increase of $1,860,940 (29.5 percent) from the FY 2001 budget. The program provides for treatment for psychiatric hospital services, nutritional therapy and supplements chemical dependency treatments, school district rehab sessions, residential treatment facility services, some prescribed drugs, and medical equipment for clients under the age of 21.

Growth in Medicaid Eligibles

Ms. Sharon Sonnenschein, Department of Social Services, provided the Committee with a printout showing South Dakota and surrounding states` Medicaid/CHIP eligibles that had been requested at the previous meeting. (Document # 3).

Increased Cost for Medicaid (Title XIX) Services

Mr. Ellenbecker reported there has been an increase in the budget for FY 2002 because of costs of some medical services covered by Title XIX, particularly prescription drugs.

Prescription Drugs. The Governor recommends $48,752,245 which includes $16,322,252 from the general fund and $32,429,993 from federal funds. This is an increase of $11,627,539 (31.3 percent) from the FY 2001 budget. These funds provide for prescription drugs dispensed to eligible recipients. The recommendation includes $4,989,707 ($1,575,022 from the general fund) for an inflationary increase of 13.4 percent. The Governor's recommendation also includes an expansion of $6,637,832 ($3,019,535 from the general fund) for a projected increase in clients ($1,220,699), an increase in utilization ($544,146), and a projected deficit in the FY 2001 base ($4,972,987).

Increased utilization of Medicaid (Title XIX services)

Utilization of some medical services is projected to increase beyond the FY 2001 budgeted level. Services include inpatient and outpatient hospital, other medical services, and EPSDT Treatment.

Physician Services, Inpatient. The Governor recommends $53,940,952 which includes $18,059,431 from the general fund and $35,881,521 from federal funds. This is an increase of $3,139,699 (6.2 percent) from the FY 2001 budget. These funds are used for payments to hospitals for inpatient services. The recommendation includes an expansion of $1,891,717 ($1,200,241 from the general fund) for a projected increase in clients ($625,914), an increase in utilization ($165,434), and a projected deficit in the FY 2001 base ($1,100,369).

Physician Services, Outpatient. The Governor recommends $13,999,308 which includes $4,686,968 from the general fund and $9,312,340 from federal funds. This is an increase of $1,942,772 (16.1 percent) from the FY 2001 budget. These funds are used to provide payment to hospitals for outpatient and emergency services. The recommendation includes $240,739 ($77,578 from the general fund) for a 2.0 percent inflationary increase. The recommendation also includes an expansion of $1,702,033 ($800,730 from the general fund) for a projected increase in clients ($286,293), an

increase in utilization ($101,094), and a projected deficit in the FY 2001 base ($1,314,646).

Increased Average Cost for Title XXI funded CHIP

Ms. Darla Blaseg, Department of Social Services, informed the Committee that the agency has made a change from a FY 2001 budgeted average cost of $948 per eligible child per year to a revised estimate of $1,120 in FY 2001. This increase will be $232,508 in general funds.

The Governor recommends $5,489,941 which includes $1,286,293 from the general fund and $4,203,648 from federal funds. This is an increase of $2,525,392 (85.2 percent) from the FY 2001 budget. Effective April 1, 1999, the eligibility requirements were increased from 140 percent of the Federal Poverty Level for all children through the age of 18. According to the Department 4,817 will be eligible in FY 2002.

Basic Family Foster Care

The Governor recommends $2,884,466 which includes $848,326 from the general fund, $1,872,398 from federal funds, and $153,742 from other funds. This is an increase of $707,624 (32.5 percent) from the FY 2001 budget. The program provides a family setting for children who have been removed from parents or guardians by court order because of child abuse and neglect. The recommendation includes $39,183 ($9,626 from the general fund) for a projected increase of 152 children from 495 children in FY 2001 to 647 children in FY 2002.

Committee discussion followed on the training provided for foster care parents and criteria that first must be met in order to be a foster parent.

Subsidized Adoptions and Guardiance.

The Governor recommends $3,575,888 which includes $1,321,474 from the general fund, $2,246,193 from federal funds, and $8,221 from other funds. This is an increase of $870,483 from the FY 2001 budget. The program subsidizes the adoption and guardianships of children who either have medical, emotional or behavioral problems or who would otherwise be hard to place. The subsidies may be annual or one-time payments.

The recommendation includes $686,353 ($203,598 from the general fund) and $184,130 from the general fund for additional grants to individuals and non-profit organizations. The Department estimates an additional 60 children will be eligible for subsidized adoption or guardianship, increasing the number from 809 to 869. The Governor also recommends that $139,008 (3.9 percent of the total FY 2002 recommendation) be financed by the general fund rather than from federal funds.

Mr. Mike Vogel, Department of Social Services, told the Committee that the elderly population in

our state is growing, and with that growth comes an expansion in programs. He said they have 56 locations throughout the state for services for the elderly.

Long Term Care Alternative Program (LTCAP) Nursing. The Governor recommends $1,007,300 from the general fund. This is an increase of $328,820 (48.5 percent) from the FY 2001 budget. The program contracts with home health agencies for maintenance nursing to LTCAP clients. The recommendation includes $17,850 for an inflationary increase of 2.6 percent and $310,970 for a projected increase in clients. According to the Department, the number of clients is projected to increase by 11,000, from 24,000 clients in FY 2001 to 35,000 in FY 2002.

CHS Regular. The Governor recommends $3,118,207 which includes $1,668,739 from the general fund, $1,365,332 from federal funds, and $84,136 from other funds. This is an increase of $53,011 (1.7 percent) from the FY 2001 budget. This amount is for an inflationary increase of 1.7 percent. This program provides services that allow elderly individuals to remain at home rather than enter a nursing home.

The Governor also recommends that $697,798 (22.4 percent of the total FY 2002 budget recommendation) be financed from the general fund rather than from federal funds. According to the Department, this service is funded with a combination of state funds and federal Title XX, Social Services Block Grant funds. The shift from federal funding to general funds reflects a reduction in the amount of federal Title XX, Social Services Block Grant Funds available.

Intergovernmental Transfer Funds

The Committee asked the Department to explain the status of implementing the financing mechanism for the Intergovernmental Transfer (IGT) Fund.

The IGT Fund was established by the Legislature in 2000. The Department of Social Services is authorized, by SDCL 28-6-28 to 28-6-36, to take advantage of a Medicaid loophole. Nursing home facilities which are owned and operated by government entities may be reimbursed at the higher Medicare rate rather than the lower Medicaid rate. The Medicaid loophole allows the state to assume that every nursing home resident in the state, for every day of care, resides at one of the five public nursing home facilities. Those facilities are located in Bowdle, Brookings, Estelline, Hosmer, and Brookings.

Under a written agreement with each of these facilities, the incremental difference between the higher Medicare rate and the lower Medicaid rate is paid to the nursing homes. Then each facility remits the payment, minus a transaction fee of an annual maximum of $10,000, back to the Department of Social Services (DSS). An amount approximately equal to the Federal Medical Assistance Percentage (FAMP) is deposited into the IGT Fund. For FY 2001 the FMAP is 68.41 percent, and for FY 2002 the FMAP is 66.52 percent. The remaining amount, which is

approximately 33 percent of the total remitted payments, is deposited back into the other funds that finance DSS.

To finance the IGT Fund in FY 2001, the Department plans to request a supplemental appropriation of $47.5 million. This amount will include $32.5 million from federal funds and $15 million from other funds. The agency plans to make this request to the Interim Appropriations Committee after the regular 76^th Session of the Legislature has adjourned. To finance the IGT funds in FY 2002, the Appropriation Committee may expect that the Governor to amend his recommendation by $42.8 million. This would include $28.5 million from federal funds and $14.3 million from other funds.

Assuming that the additional expenditure limitations are approved, then in FY 2001, $32.5 million will be deposited in the IGT Fund, and in FY 2002, $28.5 million will be deposited in the IGT Fund.

The committee recessed at 10:05 and reconvened at 10:30 a.m.

TANF Grants to Individuals. The Governor recommends $12,017,677 which includes $5,030,600 from the general fund and $6,987,077 from federal funds. This is an increase of $1,462,645 (13.9 percent) from the FY 2001 all funds budget. The Governor's recommendation includes:    
8 *      $671,546 ($327,820 from the general fund) for an inflationary increase of 6.4 percent in the need standard. The need standard is currently at $430 for a family of three. The inflationary amount would equal $39 (9.0 percent). According to the Department, the last inflationary increase was in FY 1995. There has been a 22.0 percent increase ($77) in the cost of housing since then.
9 *      $791,099 from federal funds for the new Combined Work and Education Activity (CWEA) Program. The Department estimates 230 cases per month for this new initiative.
10 *      A funding shift of $449,736 (3.7 percent of the total FY 2002 recommendation) from the general fund to federal funds.

TANF & Medicaid Eligibility. The Governor recommends $393,690 which includes $196,846 from the general fund and $196,844 from federal funds. This is an increase of $64,175 (19.5 percent) from the FY 2001 budget. This administrative office oversees the eligibility of the TANF, Medicaid, and the state's supplement to the federal Supplemental Security Income (SSI) program. The expansion is for the operating expenditures of travel ($1,700), contractual services ($15,250), supplies and materials ($45,725), and grants and subsidies ($1,500).

Provider Grant for Early Child Development. The Governor recommends $942,336 from federal funds. This is an increase of $247,336 (35.6 percent) from the FY 2001 budget. The program supports Early Childhood Enrichment programs in 5 locations by providing training and technical assistance to child care providers and after school programs. The expansion of $247,336 from federal funds is for additional grants.

Auxiliary Placement Change in Payment Structure. The Governor recommends $5,169,743 which includes $4,771,216 from the general fund and $398,527 from federal funds. This is a decrease of $331,404 (6.0 percent) from the FY 2001 budget. The program pays for the tuition and related service costs for children under the care of the state or other approved entities as required by SDCL 13-28-39. The decrease is primarily because the reimbursements will be financed through the state aid formula for all educational programs that are operated by a public school. The program will pay the difference between the daily tuition rate and state aid rate for special education. The recommendation also includes $54,905 ($51,198 from the general fund) for an inflationary increase of 1.0 percent.

Field Management

The Department is requesting an increase of 5 new social workers to allow DSS to take over Child Protection Services previously contracted with Yankton Sioux Tribe; 1.5 new employment specialists transferred from the Department of Labor and Ft. Thompson.

Ms. Darla Blaseg responded to questions from the Committee on the increase in FTE positions from 566 to 597. She said that 12 .0 have been added to take care of increases in the CHIP program.

Ms. Paula Hurd, Department of Social Services, answered questions from the Committee regarding qualifications for social workers that deal with child protection and determining eligibility for various programs. She said there is a large turnover due to the nature of the job, pay, liability, and physical risks.