Struggling to control Medicaid's growth, South Carolina officials are proposing a sweeping change in the way health care is delivered to the state's poor and disabled.

Under a plan now awaiting federal approval, most of the state's nearly 850,000 Medicaid recipients would be given personal health accounts to buy public or private health coverage and would be required to pay higher co-pays for medications, doctor visits or hospital stays.

Recipients would get a debit card to pay those co-pays or other health bills not provided by the coverage they choose.

The amount of money the state would put into these debit accounts hasn't been determined, but the amount would be similar to what people spend on private-sector health care. It also would be based on the recipient's age, gender and health status.

The purpose of the plan is to bring market principles to Medicaid by treating recipients as consumers, giving them a broad choice of health plan options for which they would pay through the debit accounts. The state believes traditional Medicaid drives up costs because there is a disconnection between the recipients and the cost of care they receive.

"We believe change is vital to the long-term fiscal health of Medicaid and the physical health of the program's beneficiaries," the state Department of Health and Human Services, which runs Medicaid in the state, said in its proposal to federal regulators.

The agency submitted its proposal to the federal Centers for Medicare and Medicaid Services last week. Typically, such proposals are followed by months of back-and-forth between state and federal agencies, so it's uncertain when the federal government might give its approval.

But with concern mounting about Medicaid's rising costs and with the massive budget deficit, federal officials have been more willing recently to listen to state reform ideas.

Robby Kerr, the state's health and human services director, said federal officials gave the plan a "favorable initial impression" but added "we're at the beginning of a very long process."

"There are more regulations in Medicaid than there are in the tax code," Kerr said. "We're asking them to waive a lot of their regulations. If there's a lengthy review process, that's why."

State and federal Medicaid spending in the Palmetto State totaled $4.2 billion last year, up 50 percent from 2000. Prompted by Gov. Mark Sanford and his desire to find a long-term solution to Medicaid's rising costs, the agency has been working on the plan for more than a year.

The proposal would require recipients to choose from a range of coverage options, some from the state, others from private insurers. These plans would include cheaper plans with limited services to comprehensive HMO coverage.

Recipients would pay for coverage with the money in their personal health accounts. Anything left would be placed on their debit cards, which they would use to pay for other health services, especially in plans that offer more limited coverage.

The debit accounts would also be used for co-pays, which would range from $5 for a generic drug or a doctor visit to $100 for a hospital stay.

Bryan Kost, a Health and Human Services Department spokesman, said that the sickest and most costly recipients would be directed into plans that help enrollees coordinate health care and, as a result, help save them money. Five percent of Medicaid beneficiaries account for half of the program's expenses.

Sanford pushed the debit-card concept in a paper he wrote for the Centers for Medicare and Medicaid Services. He said the plan would prompt consumers to spend more carefully.

"You're empowering Medicaid recipients to become more cost-conscious consumers," Chris Drummond, a spokesman for the governor, said Thursday. "Hopefully, this will provide both better quality of service and help rein in some of the cost that we've seen."

The concept is worrisome to advocates for the poor, such as Sue Berkowitz, director of the South Carolina Appleseed Legal Justice Center, who also serves on a panel that advises the state about Medicaid.

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.

PROPOSED MEDICAID CHANGES

Proposed changes in the state's Medicaid program would provide debit cards to participants to pay deductibles at hospitals, doctors' offices or pharmacies. The following co-payments have been proposed under each type of policy.

Major medical only:

Inpatient hospital procedure, $100

Outpatient surgery, $25

Medical home network plan:

Inpatient hospital procedure, $100

Outpatient hospital, $25

Outpatient surgery, $25

Emergency room, $25 for emergencies, $50 for non-emergencies.

Doctor's visit, $5

Pharmacy, $5 for generic, $10 brand name

Other proposed changes, which must be approved by the federal Medicaid program, include:

-- Ending freedom of choice that Medicaid recipients now have for their care.

-- Eliminating retroactive eligibility.

-- Allowing care providers to bill recipients for unpaid deductibles and co-payments.

-- Forcing people with high medical use into managed care.

-- Treating all pregnant women as adults regardless of age.

Source: South Carolina Department of Health and Human Services