The South Dakota Department of Social Services is taking a second look at two administrative rule changes the department originally proposed last year.

More than a hundred South Dakotans spoke against proposed changes last year to reduce benefits for the Temporary Assistance for Needy Families program and adjust payment methodologies for hospitals.

The new proposals back away from the most controversial elements of the original changes. Department officials held public hearings for both in Sioux Falls on Friday.

Public comment remains open on the proposed changes until May 25, with comments accepted at Rules.South Dakota.Gov. The legislative Rules Review Committee is scheduled to consider the changes at its June 9 meeting.

TANF change is partial restoration of earlier benefit reduction

TANF is a federal-state program used in South Dakota to provide assistance to families with children who need financial support because of the death of a parent, an absent parent, or the unemployment or physical or mental incapacity of a parent. Caregiver participants are required to work, search or train for a job.

Last year, the Legislature’s budget committee cut state TANF funding by 30%, authorizing the department to backfill the gap with leftover federal funds. Instead of fully replacing the state cut with those carryover funds, the department reduced benefits by 10% — saving the state about $1.5 million, department Secretary Matt Althoff said at the time. The cut reduced the average household benefit by $51 per month.

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That decision set off a monthslong dispute between the department and Representative Erik Muckey, D-Sioux Falls, a budget committee member, over whether the committee understood the department’s plan when it approved the cuts.

The South Dakota Legislature partially restored the cuts earlier this year. 

The Legislature’s approval pairs a $427,000 increase in state funding with another $427,000 in authority to spend carryover federal funds — together restoring half of last year’s cut through a 5% benefit increase.

The proposed rule changes adopt the 5% increase as well as a 1.4% inflationary increase for beneficiaries. That raises the average monthly TANF payment from $478.53 to $509.49 — or an increase of $30.96, according to a fiscal note.

The program distributed $15.3 million in benefits in fiscal year 2024, when the average monthly benefit per household was $518.06. Nearly 5,000 people in the state, most of them children, benefit from the program.

Three people spoke Friday during public comment, including Cathy Brechtelsbauer, who organized a protest last year against the department’s cuts. She presented a “shoestring budget” for a parent with two children, totaling $1,420 per month. The estimate included rent at $650, utilities, phone and internet, transportation, clothing, and food not covered by other assistance programs.

The average TANF benefit still falls short of those needs, Brechtelsbauer said, adding that her estimates show why the state should “step up the payments.”

Medicaid changes attract support after previous concerns

Last year, the department proposed revising how it reimburses hospitals through Medicaid — the joint federal-state program that provides health coverage to low-income residents and people with disabilities.

Officials from LifeScape, the state’s primary caretaker for people with complex disabilities, and families who use its services testified last year about the risk the changes posed to the organization. Althoff pulled the proposals after the backlash.

On Friday, Althoff said hospitals “weren’t ready” for the original proposal. He called the new changes “a win for South Dakota taxpayers” because they modernize Medicaid reimbursement and help contain costs.

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The changes heard on Friday should not negatively impact providers in the state, South Dakota Medicaid Director Heather Petermann added. They align hospital reimbursement methodologies more closely with industry standards and ensure more equitable reimbursement among providers, she said.

Petermann said the department “better explained” proposed rule changes to providers and adjusted proposed methodology for critical access hospitals. Critical access hospitals are small, rural hospitals that offer 24/7 emergency services.

“The intent is to make this better for hospitals,” Petermann said. “It had to be their buy-in and to make sure everyone was on the same page.”

The department received letters of support from LifeScape, Avera Health, Sanford Health, Monument Health and the South Dakota Association of Healthcare Organizations, Petermann said.

SDAHO President and CEO Tim Rave said the new methodology shifts money from out-of-state hospitals back into South Dakota facilities.

“While this does not bring our hospitals to a rate that covers what it costs to care for Medicaid patients in South Dakota, it does provide a much-needed boost to the rates as they are today, for which we are grateful,” Rave wrote in a letter to the department.

Critical access hospitals have not had a full review since the designation was established in 1997. Hospitals reimbursed below 100% of their allowable costs will be brought to 100% under the new rules. Hospitals already paid above that threshold will see no change. The changes carry an $8.6 million price tag, included in the state’s fiscal year 2027 budget.

“We want to thank the department for working with our members to come up with a solution that will keep hospital services open in rural South Dakota and not risk losing those services or hospital closures,” Rave added.