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Hospitals urge lawmakers to retain Medicaid graduate medical education funding after DHS lists cut
Summary
DSS included elimination of state Medicaid support for graduate medical education in its recommended cuts; hospital and provider advocates from Avera, Sanford and the South Dakota Association of Healthcare Organizations asked legislators to preserve GME funding, arguing residencies are critical to recruitment and retention.
The Department of Social Services listed the state subsidy for graduate medical education (GME) among items recommended for elimination in the governor’s FY2026 budget recommendation; DSS staff said the line was an optional subsidy and other payer sources exist. Committee members heard hospital and provider testimony urging retention of the funding.
DSS presentation and recommendation In the Department of Social Services FY2026 briefing, agency staff listed elimination of the state contribution to graduate medical education as a line change. DSS staff described the subsidy as an additional braided funding mechanism and said several states do not make the same Medicaid contribution. DSS estimated the general‑fund portion of the change at $1.7 million and total funds roughly $3.6 million.
Provider testimony in committee - Jacob Parsons, registered lobbyist for the South Dakota Association of Healthcare Organizations, told the committee that 44 states operate Medicaid GME programs and that Medicaid is a large secondary funder of GME nationally. He said the state’s three residency programs together host more than 150 residents and that more than 80% of those residents remain in South Dakota to practice after training. - Kim Alson Reis of Avera Health and representatives of Sanford urged the committee to preserve GME support, warning that other states are expanding residency slots and that losing state support could undermine South Dakota’s ability to train and retain physicians.
Why it matters: rural physician supply Hospital witnesses stressed that GME funding helps sustain rural residency slots (family medicine, internal medicine, psychiatry). They argued residencies are a primary pipeline into practice, especially for rural and underserved counties; testimony cited health professional shortage area designations for many South Dakota counties.
Next steps Hospital groups asked the committee to reconsider the proposed cut and asked for more time to provide data on residency counts, retention rates and the financial model behind the proposed subsidy reduction. Lawmakers did not vote on the change during the hearing and asked agencies and providers to continue technical conversations.
Ending Providers emphasized that GME subsidies are part of a braided funding picture that includes Medicare, Medicaid and health system support; they urged legislators to avoid a cut they said would risk physician recruitment and training capacity in the state.
