A showdown is looming between Gov. Nikki Haley's administration and South Carolina's politically powerful health care industry over Haley's decision to forgo more than $13 billion in federal funds intended to extend health coverage to low-income residents.

The state's decision

The Medicaid expansion would have extended coverage to an estimated 350,000 South Carolinians under age 65 with income below 138 percent of the federal poverty level. That's about $15,000 for a single person or $31,000 for a family of four. Childless adults, generally not eligible for Medicaid under the current rules, would be eligible under the expansion.The U.S. Supreme Court ruled last month that the federal government cannot “penalize states that choose not to participate in that new program by taking away their existing Medicaid funding.”The law originally threatened to take away existing federal Medicaid funds to states that declined to participate in the expansion, which would have made it nearly impossible for states to do so. States rely heavily on substantial federal matches to state Medicaid contributions. South Carolina receives a 3-to-1 federal match under the current rules.The S.C. Department of Health and Human Services, which administers the state's Medicaid program, is planning to hold a meeting Tuesday for the state's health industry officials to discuss budget projections related to the Affordable Care Act.

The S.C. Hospital Association and most hospitals in the Charleston area want the state to take the money to expand Medicaid, the state and federally funded health insurance program that covers primarily low-income mothers, children and people with disabilities.

The Haley administration has said it would not comply with the Medicaid expansion as laid out in the Affordable Care Act, a decision made possible by the U.S. Supreme Court's ruling last month.

Hospitals are bracing for the law's scheduled reductions in disproportionate-share funds, which are lump-sum payments from the Medicaid agency meant to help cover costs at facilities that handle the greatest proportions of unpaid care.

The expansion, which would extend coverage to an estimated 350,000 low-income South Carolinians who are not eligible under current Medicaid requirements, was intended to bridge that reduction.

“The burden is still going to be on the hospitals to provide care,” said Teresa Finch, chief financial officer of the Charleston-area's Trident Health System, part of the HCA hospital chain.

Lisa Montgomery, vice president for finance at the Medical University of South Carolina, called the disproportionate-share cuts coupled with the opt-out decision a “double whammy.” She warned that “someone's going to pay” for uninsured patients' care.

“Typically those costs have been shifted to employers, small business, insurers,” Montgomery said.

Primary-care physicians have other reasons for supporting the expansion. The law increases the rates they are paid to treat Medicaid patients, although they still would be lower than private insurance.

Proponents of the expansion also said it would lead to increased demand for jobs in health fields. Growth in that industry, however, is not on the administration's radar.

“I'm not engaged in health care in terms of a business enterprise,” S.C. Commerce Secretary Bobby Hitt told The Post and Courier during a recent conference call with reporters to discuss his efforts to bring new jobs to the state.

Those issues leave the administration in the delicate position of alienating a large, politically active industry with deep pockets.

Haley, herself a former fundraiser for Lexington Medical Center of Columbia, has relied on the health care industry for campaign contributions.

In the most recent quarter alone, Haley collected more than $100,000 from people who identified themselves as health care professionals, the newspaper's review of the data shows. That's more than a quarter of the total amount she raised over those three months, according to the data.

Haley spokesman Rob Godfrey said fundraising was not a consideration in the governor's decision.

“Hospitals are doing just fine, and the governor doesn't make decisions based on fundraising numbers,” Godfrey said in a statement. “Our job is to do what's best for the people of South Carolina, to get the most health for the least cost, and the president's Medicaid expansion does just the opposite.”

S.C. Hospital Association leadership still hopes the governor will have a change of opinion.

“Perhaps she'll come around,” said Allan Stalvey, the association's spokesman and senior vice president.

Who pays

The U.S. Supreme Court in its ruling made the Medicaid expansion optional for states.

Haley and a handful of other Republican governors want to opt out of the expansion, because they said it would drain state resources, large proportions of which already are poured into Medicaid.

Haley and S.C. Medicaid Director Tony Keck have said they oppose putting any taxpayer money into what they call a broken system, although Keck has said his department would negotiate with federal counterparts to find a “South Carolina solution.”

“We're very anxious to hear what alternatives the agency is considering if the governor does succeed in opting out,” MUSC's Montgomery said.

Under the law, the federal government would pay for the expansion in full from 2014 to 2016. The state's financial match gradually would increase to 10 percent by 2020.

South Carolina would have matched at least $1.1 billion to the federal government's $13 billion for the expansion over that time, according to estimates by Milliman, a consulting firm for the state Medicaid agency. The agency is holding a meeting in Columbia Tuesday to review the figures with health industry officials.

The S.C. Hospital Association counts the expansion question among its priorities, and the group has planned a strategy meeting, MUSC lobbyist Hugh Faulkner said last week.

Jason Alexander, CEO of East Cooper Medical Center, a Tenet Healthcare hospital in Mount Pleasant, said it “makes sense to have more people covered.” He said scheduled cuts to hospitals are “not manageable if people who were supposed to be included (in Medicaid) aren't.”

“We would not be able to do the things we otherwise would do — growing services, filling community needs,” Alexander said.

Roper St. Francis Healthcare was more reserved in its judgment. In a statement, a spokeswoman for the nonprofit hospital system said officials there would “gauge potential impacts on our patients and enterprise. It would be premature for us to elaborate on any one specific benefit or concern at this time.”

Legislative insiders compared the Medicaid decision to the battle over stimulus money in 2009, when then-Gov. Mark Sanford refused the federal funds the state was entitled to receive.

The legislature passed a directive mandating Sanford to accept the stimulus, but he refused. He was sued over the matter and lost. The state eventually took the money.

Ultimately, the Medicaid decision probably will be made by the General Assembly, because the expansion eventually requires matching state funding, and the legislature approves the budget.

The S.C. Hospital Association is covering its bases.

“We're certainly talking to the legislature,” Stalvey said.

Political spending

The state's Democratic leadership sees the fissure between Haley and the health care industry as an opportunity to redirect political contributions.

“The Democratic Party would like her to accept the money,” S.C. Democratic Chairman Dick Harpootlian said of the federal Medicaid expansion funds. If not, “absolutely we'll be taking political advantage.”

The S.C. Hospital Association's political action committee has donated heavily to Democrats and Republicans, giving more than $140,000 to both party caucuses in the S.C. House and Senate since 2008, the newspaper's review of the data shows.

That amount is in addition to about $200,000 it gave to individual candidates of both parties.

Stalvey said his group “is not writing the governor off by any means.”

“We hope to be able to convince the governor at some point in time that it is a good investment for South Carolina,” Stalvey said. “The business community and others understand the value of a healthy population.”

Stalvey and health-care-reform supporters in the legislature said the expansion would be a boon to the health industry, which is among the only sectors of the economy showing consistent growth.

In South Carolina the health care workforce is expected to grow by 30 percent between 2010 and 2020, according to a national report released last month by Georgetown University's Center on Education and Workforce. Hitt, the state Commerce Secretary, said it is an area he would examine.

S.C. Sen Brad Hutto, an Orangeburg Democrat, criticized the administration's detachment from the economic development aspect of the Medicaid decision to date.

“Medicine, nursing, even the business angle — those are some good quality jobs that are generally high-paying,” said Hutto, whose wife is a pediatrician. “You would think that is something we would want.”

Editor's note: Earlier versions of this story misidentified Allan Stalvey. The Post and Courier regrets the error.