South Carolina has not expanded Medicaid under the Affordable Care Act, making it one of ten states still holding out. An estimated 83,000 adults sit in the resulting coverage gap, earning too much for the state’s existing Medicaid program but too little to qualify for subsidized marketplace insurance. Governor Henry McMaster is pursuing a narrow waiver that would cover a slice of that population; two bills for full expansion have been introduced in the General Assembly but remain stuck in committee.
Who Is Left Out Right Now
South Carolina Medicaid covers children, pregnant women, people with disabilities, those over 65, and parents or caretaker relatives with household incomes below 67 percent of the federal poverty level. For a family of three, that 67 percent threshold works out to roughly $17,300 a year. Childless adults are generally ineligible regardless of income.
Federal marketplace subsidies don’t begin until income reaches 100 percent of the poverty level. Anyone earning between those two points has no affordable option. The Center on Budget and Policy Priorities estimated in 2024 that 83,000 uninsured South Carolina adults fall into that gap. Fifty-two percent are people of color, 57 percent live in families with at least one worker, and 22 percent have a disability. Restaurant and food service workers and construction workers make up the largest employment sectors represented.
The Governor’s Waiver: Palmetto Pathways to Independence
Governor McMaster has consistently opposed full expansion, calling the ACA’s structure “flawed” and arguing it discourages low-income families from earning more. In July 2024, he vetoed a budget proviso that would have created a legislative study committee on expansion, writing that he remained “unconvinced that the expansion of Medicaid benefits … is necessary.”
His alternative is a Section 1115 federal waiver called Palmetto Pathways to Independence. The idea has a long path behind it. McMaster first directed the state Medicaid agency to seek a work-requirement waiver in January 2018. The first Trump administration approved it in December 2019, implementation paused during the COVID-19 pandemic, and the Biden administration revoked it in August 2021.
On January 21, 2025, McMaster formally asked the U.S. Department of Health and Human Services to reinstate the program. After a spring 2025 public comment period, the South Carolina Department of Health and Human Services submitted a formal application to the Centers for Medicare and Medicaid Services on June 23, 2025. CMS issued a completeness letter on July 8, 2025. The application remained pending as of mid-2025.
Who the Waiver Would Cover
The proposal targets a narrow slice of the coverage gap: parents and caretaker relatives aged 19 to 64 with incomes between 67 and 100 percent of the federal poverty level. Childless adults would still be ineligible. The state estimates about 17,700 people would qualify, but funding would cap actual enrollment at 11,400. Officials expect it would take five years to reach that cap, with a waiting list if demand exceeds capacity.
Enrollees would have to document at least 80 hours per month of “community engagement,” defined as employment, vocational training, higher education coursework, compliance with unemployment work-search rules, or substance use disorder treatment. People who fail to meet the requirement would be disenrolled. Those already covered by Medicaid, individuals with disabilities, pregnant women, and new mothers would be exempt. Benefits and cost-sharing would mirror the existing Medicaid state plan, with no premiums or copays.
Critics have pointed out that even at full capacity the waiver would reach a small fraction of the people in the coverage gap, and that work requirements in other states have led to coverage losses driven by paperwork rather than actual non-compliance.
Full-Expansion Bills in the Legislature
Two bills in the 2025–2026 session would expand Medicaid to the full ACA-eligible population. Neither has moved beyond committee referral.
H. 3109, prefiled in December 2024 and introduced on January 14, 2025, by Representatives Garvin and Cobb-Hunter, would make adults 65 and under with incomes at or below 133 percent of the federal poverty level (with a 5 percent income disregard, effectively 138 percent) eligible for Medicaid beginning January 1, 2026. It was referred to the House Committee on Ways and Means, where no further action has been taken.
H. 4383, introduced on April 23, 2025, by a larger group of sponsors led by Representative Jones, is titled the South Carolina Medicaid Protection and Expansion Act. It would direct the state Medicaid agency to expand eligibility to 138 percent of the federal poverty level and create a “Medicaid Stability Fund” to cushion the state against potential federal funding reductions. It also mandates biannual impact assessments on coverage, uncompensated care, and health outcomes. It sits in the same committee with no hearings scheduled.
The state legislature has never voted on full expansion. As of early 2026, 41 states plus Washington, D.C. have adopted expansion. South Carolina, Alabama, Florida, Georgia, Kansas, Mississippi, Tennessee, Texas, Wisconsin, and Wyoming remain outside.
What Full Expansion Would Mean
Under full ACA expansion, eligibility would extend to adults earning up to 138 percent of the federal poverty level, about $20,780 a year for an individual in 2024. Estimates of how many South Carolinians would gain coverage range from roughly 188,000 to more than 350,000, depending on take-up assumptions and the “welcome mat” effect of drawing in eligible but unenrolled people.
A July 2024 economic analysis by George Washington University’s Milken Institute School of Public Health, commissioned by the Cover SC coalition, projected that expansion starting in 2026 would bring $2.65 billion in net new federal revenue in the first year, growing to $2.88 billion in the second. The state’s share would be roughly $270 million in 2026, rising to $356 million by 2028, with the federal government covering 90 percent of the cost. The report projected about 28,000 new jobs in 2026 (roughly 18,000 in healthcare and 10,000 across construction, retail, and manufacturing) and $4 billion in annual economic output.
Separately, the American Rescue Plan offered South Carolina an estimated $633 million to $665 million in additional federal incentive funding if it chose to expand. As of 2026, that money remains unclaimed, and a provision of the One Big Beautiful Bill Act signed on July 4, 2025 eliminated that incentive for states newly adopting expansion after January 1, 2026.
Rural Hospitals and Medical Debt
Four rural South Carolina hospitals have closed since 2010: Bamberg County Memorial Hospital in 2012, Marlboro Park Hospital in Bennettsville in 2015, Southern Palmetto Hospital in Barnwell in 2016, and Fairfield Memorial Hospital in Winnsboro in 2018. Nationally, 74 percent of rural hospital closures have occurred in states that had not expanded Medicaid or had done so for less than a year.
A 2024 study in Cureus found hospitals in non-expansion states carried a median uncompensated care burden of 6.28 percent of operating expenses in 2019, compared to 2.55 percent in expansion states. South Carolina was identified as one of ten states with the largest gap between rural and urban uncompensated care levels. Rural hospitals in non-expansion states saw essentially no improvement between 2014 and 2019, while expansion states saw measurable declines.
The South Carolina Hospital Association warned in early 2026 that the One Big Beautiful Bill Act’s phased reductions to Medicaid State Directed Payments will create a “budget cliff” starting in 2028, with annual losses estimated at $1.8 billion in Medicaid payments once fully implemented. The association described rural hospitals as operating on “razor-thin margins” and projected that further closures could expand “maternity deserts,” defined as areas with no obstetric services within 50 miles.
South Carolina has the second-worst rate of residents with medical debt in collections in the country, behind only West Virginia, according to 2022 Urban Institute data. Eight South Carolina counties (Marlboro, Laurens, Cherokee, Dillon, Marion, Newberry, Bamberg, and Barnwell) rank among the 100 worst nationally for medical debt. Two-thirds of the state’s hospitals tracked by Kaiser Health News have sued patients to collect bills, and state law allows healthcare providers to garnish up to 25 percent of a paycheck for medical debt. Several of the high-debt counties overlap with those that have lost rural hospitals.
Federal Changes That Shift the Math
The One Big Beautiful Bill Act, signed on July 4, 2025, cut in different directions for a non-expansion state. It shielded non-expansion states from some of the law’s most disruptive provisions: the mandatory work requirements and six-month eligibility redeterminations for expansion enrollees do not apply, and non-expansion states’ provider tax rates were frozen at 2025 levels rather than being subjected to the mandatory reductions expansion states face between 2028 and 2032.
At the same time, the law made future expansion significantly harder. It eliminated the enhanced federal match incentive for states that newly expand after January 1, 2026, and imposed a nationwide moratorium on new provider taxes and increases to existing ones, constraining one of the main financing mechanisms other states have used. The Congressional Budget Office estimated the law would reduce federal Medicaid spending by roughly $911 billion over ten years.
For the pending Palmetto Pathways waiver, the law adds a new requirement: the CMS Chief Actuary must certify that any Section 1115 waiver will not increase federal spending compared to a scenario without it. State officials have said the new federal work-requirement mandate does not apply to South Carolina’s waiver because it targets expansion populations the state has not adopted. Disability Rights South Carolina has noted that future waivers could potentially incorporate work requirements in non-expansion states, depending on how CMS interprets its authority.
As of mid-2025, the Palmetto Pathways application remained pending with CMS, both full-expansion bills remained in committee, and the roughly 83,000 South Carolinians in the coverage gap still had no clear path to affordable coverage.