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CT scan in hospital
Some South Dakota residents are unable to afford diagnostic procedures such as a CT scan. (South Dakota News Watch file photo)

Health care costs in SD second most expensive in nation

SIOUX FALLS, S.D. – The high cost of obtaining health care in South Dakota – ranked second most expensive in the nation – is prompting some residents to forgo necessary medical care over worries they cannot afford it, according to a recent national data analysis.

South Dakota is followed only by North Carolina in a new national ranking of health care expenses based on the cost of medical care and insurance. At nearly $12,500 per year, the state has the highest per-capita health care spending rate among all Great Plains states, the data show.

Largely based on data from KFF, formerly the Kaiser Family Foundation, the Forbes Advisor team examined nine metrics to determine which of the 50 states and Washington, D.C., had the highest and lowest annual health care costs for consumers.

In labeling South Dakota second highest, Forbes noted that the state has high rates of families that struggle to pay for child medical bills, high deductibles for individuals and families with insurance and high costs for policyholders within the Affordable Care Act marketplace. Forbes Advisor is a consumer financial analysis group sponsored in part by Forbes magazine.

The ranking comes as South Dakota continues to lag behind the nation and most neighboring states for median household income ($69,457 in 2022) and also has the highest poverty rate among all Great Plains states (12.5%). KFF also reported in 2023 that South Dakota ranked 35th in the country for quality health care outcomes.

Taken together, the data paint a worrisome picture of access, affordability and quality of health care in South Dakota.

The high cost of health care has caused nearly 1 in 10 state residents to skip necessary medical care and 1 in 4 to forgo mental health treatment due to cost, according to KFF.

“If you delay needed care because you can’t afford it, it’s eventually going to cost you, the providers and the insurers a lot more money,” said Les Masterson, an editor and insurance expert at Forbes Advisor. “That is also causing problems where people are getting sicker and dying younger.”

Lack of competition, higher overhead costs

Masterson acknowledged that health care costs are high and rising across the country and that the variables that determine what medical care and insurance cost in each state are complicated.

Masterson and two South Dakota health care officials interviewed by News Watch said the state’s high cost ranking can be attributed largely to a lack of competition among providers and insurers, worker shortages causing increased employee costs, higher overhead costs due to inflation, a high level of indigent care, and generally poor health condition of the population that increase risks and costs for insurers and providers.

“Health care is expensive, insurance is expensive and every citizen in this state who pays for those things knows that,” said Tim Rave, CEO of the South Dakota Association of Healthcare Organizations, which represents hospitals and clinics across the state.

And yet, Rave said, the convoluted and expensive modern system of health care economics is necessary to allow medical providers to remain viable.

“Hospitals in this state are nonprofit. But you still have to make money or you close the doors. And profit margins for them is in the red or at a maximum in the 3 to 4 percent range,” he said.

Ten NapelShelly Ten Napel, CEO of the Community Healthcare Association of the Dakotas, said the rising costs of health care, particularly emergency, specialist and life-saving care, are putting some individuals and families into untenable situations.

“We’re seeing the faces of that on a day-to-day basis of folks who can’t afford coverage,” she said. “We see the people with a cancer diagnosis who have to ask themselves if they are willing to bankrupt their family in order to get the care they need.”

A February 2024 poll by KFF found that about 75% of adults were very or somewhat worried about being able to afford unexpected medical bills or pay for health care for themselves or their families. About half of poll respondents were worried they cannot afford their monthly insurance premiums or to pay for needed prescription drugs.

Medicaid expansion may lower costs in South Dakota

All three experts interviewed by News Watch pointed to recent Medicaid expansion as a possible path to reducing overall health care and insurance costs across the state.

The state enacted looser income guidelines for Medicaid eligibility in July 2023 after voters approved the expansion by a statewide referendum in 2022. The expanded eligibility guidelines allowed 18,000 new Medicaid participants as of February,

Some studies have shown that Medicaid expansion in other states has led to lower insurance premiums overall. 

Business trends don’t favor lower prices

And even if two-thirds of South Dakotans with insurance have an employer-supported plan, it doesn’t mean they won’t face outsized health care costs, Ten Napel said.

The high number of small businesses, the high level of self employment and large agricultural industry prevent many state residents from benefiting from large employer plans that offer lower prices due to a wide subscriber base.

States are taking steps to reduce overall health care costs while increasing access, Ten Napel said.

In Minnesota, a large consortium of businesses was formed to expand the pool of policyholders to reduce costs. In North Dakota in 2019, she said, the state implemented a reinsurance program that uses federal and state funds to help insurance companies reduce costs for policyholders statewide.

And, Ten Napel said, South Dakota has had success with its Home Health program within Medicaid that provides additional medical services and support for low-income patients with serious, life-altering illnesses. State data show the program saved more than $8 million in Medicaid costs in 2022 while improving care for qualifying patients with chronic illnesses.

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