Fear, rather than bureaucracy, could be one of the biggest challenges the state health agency will face in overhauling South Carolina’s $4.2 billion Medicaid program, officials said Monday.

The state has asked the federal government for large-scale waivers in existing Medicaid laws.

If granted, they say, the changes will help control Medicaid’s runaway growth, give recipients more choices in their coverage and — most importantly — connect users to the reality of health insurance in today’s marketplace.

“Beneficiaries aren’t even involved in the process right now,” said Robbie Kerr, director of the state Department of Health and Human Services, which oversees Medicaid in the state.

In the waiver request sent last week to the federal Centers for Medicaid Services, Kerr contends the lack of consumer involvement is a major factor in the state’s rising Medicaid costs.

Under the waiver, most S.C. Medicaid recipients would be given a personal health account. That account would be used to select and pay for a coverage plan, ranging from those with low premiums and high deductibles to full-service programs.

Whatever is left over after paying for a coverage plan would go on a debit card that would have controls to restrict its use to purchases of medical services.

That concept is worrisome, said Sue Berkowitz, director of the S.C. Appleseed Legal Justice Center, which does advocacy work for low-income communities. She also serves on a committee set up to review proposed changes in the state Medicaid plan.

If a parent has to spend money from the card treating a child’s broken arm, Berkowitz wants to be sure the parent won’t be without money to handle a severe ear infection a few months later.

The monetary value of each personal health account would be based on a profile of the individual Medicaid recipient, including age, gender and physical condition.

Officials say health care providers, pushed by competition, will devise new options if consumer choice is part of the Medicaid system.

Beneficiaries then could use the debit cards for whatever medical expenses are most important to them — including co-pays, other office visits or extra prescriptions.

If the state’s waiver requests clear the federal government, the impact will be reflected in next year’s budget, Kerr said, and the agency will take on a new identity.

“It will be a completely different role for us,” said Gwen Power, HHS special projects director. The agency would begin the shift to quality assurance and accounting for coverages, she said, rather than administer the program.

One of the agency’s major tasks would be educating the 850,000 to 1 million South Carolinians who use Medicaid each year.

The cost of the Medicaid program in South Carolina grew by 50 percent — to $4 billion — from 2000 to 2004.

But state officials point to much slower growth — just 5.8 percent — last year.

Nationally, Medicaid grew by 9.3 percent in 2003, a rate elected leaders say the country cannot afford. Several states have offered plans to lessen the impact of growth, CMS officials said.

Gov. Mark Sanford is behind the Medicaid overhaul.

“Such change is vital to the long-term fiscal health of Medicaid and physical health of the program’s beneficiaries,” Sanford said in a statement.

While the change would offer more choice and better service, which Health and Human Services says it will ensure, beneficiaries will be asked to share costs in the Medicaid program, or more costs if the waiver program obligates them to pay in.

The waiver request would force those who use Medicaid more into managed care programs, which officials said would coordinate their care and eliminate payments for haphazard or duplicative services.

High utilizers are those who have serious diseases such as heart trouble, diabetes and cancer all at once, or those who may be thrown into Medicaid because of a catastrophic accident.

Those beneficiaries make up 5 percent of Medicaid recipients but account for 50 percent of the program’s costs, officials said.

“We’re all one step away from Medicaid,” Kerr said. Medicaid recipients “are like you and me. They think like you and me and will make choices like you and me. Why wouldn’t we give them the same choices?”

Reach Burris at (803) 771-8398 or rburris@thestate.com. The Associated Press contributed to this report.