There have been a lot of headlines lately about the Medicaid reform proposal. I welcome many of these reports because they increase awareness of both the importance of Medicaid to our state and the challenges facing the program. Unfortunately, some confusion exists that a little background and a few facts may help clear up.

Like other states, South Carolina has experienced explosive Medicaid growth. In a little over a decade, the number of recipients have more than doubled and the total annual budget has almost tripled to over $4 billion. Close to one million of our citizens will be enrolled in Medicaid within a 12-month period. That's about one-fourth of the state's total population. The numbers are staggering, and they go on. Medicaid pays for almost one-half of all births in the state and provides health coverage for about 40 percent of all our children.

The staff at Health and Human Services has worked diligently to maintain services and control program costs. In the five years prior to 2003, the agency growth rate averaged around 11 percent. We held growth to just under 6 percent in 2004, one of the lowest in the nation. A pharmacy growth rate of more than 20 percent has been cut in half. With the help of the Attorney General's Office, fraud collections have risen from an annual average of less than $1 million to $14 million in 2004. We have stabilized the budget from previous deficits, and the General Assembly has responded by replenishing a large nonrecurring funding problem.

Yet, it does not seem to be enough. Despite recent level enrollment, the growth rate at the close of this fiscal year was creeping back up to the national average of 9 percent. The vast majority of this year's growth was attributable to the increased demand for services as opposed to price and enrollment pressures.

The good news is that the program is adequately funded for the current fiscal year. However, the near future appears ominous. Currently, Medicaid accounts for 19 percent of state general fund spending. Based on current estimates, it will comprise 24 percent in 2010. By 2015, that amount will rocket to almost 30 percent. It's the miracle of compounding working against us. Unfortunately, we cannot continue to sustain these projected growth trends. I believe our state, or any state for that matter, simply does not have the financial capacity to deliver the program in its current form.

You see, the delivery system used by Medicaid has operated roughly under the same structure since its inception 40 years ago. It is a system without restraint that often provides too much care for some and too little for others. It has evolved into a complex morass of federal requirements that results in ridiculous requirements such as the mandating coverage of Viagra.

The governor recognizes the imminent crisis before us and has instructed the agency to develop a plan to transform the antiquated program. The proposal, at its core, incorporates the concepts of beneficiary responsibility and ownership with effective coordination of care.

Beneficiaries will be provided personal health accounts administered by the agency. Those accounts will be funded with amounts sufficient to purchase health-care plan coverage from approved insurers and provider networks. Plans will be allowed certain flexibility in their benefit design, but premiums must be actuarially equivalent to the package offering. Any excess balances in the account can be spent on noncovered medical services or potential co-payments.

A limited number of adults may even be able to use the account to direct their own care when accompanied with major medical coverage. This approach has two distinct benefits. First, it allows us to demonstrate the effectiveness of different health-delivery systems. Second, with proper counseling, it allows the beneficiary to determine for themselves the best method for receiving their health-care coverage. It transforms the program from a government determined one-size-fits-all to one that is more individually tailored.