COLUMBIA — South Carolina’s Medicaid agency announced Thursday that 65,000 children in the state’s poorest households will be automatically enrolled in the government insurance program by month’s end.

The state Department of Health and Human Services is enrolling children whose parents receive food assistance or welfare payments through the Department of Social Services, meaning their children are well under eligibility limits for Medicaid.

The agency is informing parents of the enrollment in letters, starting this week in Richland County. All 65,000 children should be signed up by month’s end.

“This is wonderful!” said Sue Berkowitz of Appleseed Legal Justice Center. Her nonprofit has been pushing for the automatic sign up since the federal government allowed “express lane eligibility” in 2009. “It’s an incredibly positive move for the state,” she said.

Legislators approved $29 million in the state budget to add the children – a designation Gov. Nikki Haley advocated in her executive budget proposal. By Oct. 31, nearly 589,000 South Carolina children ages 18 and under will likely be covered through Medicaid.

But it’s not a requirement. Parents receiving the letters can opt out by calling a toll-free number.

In 2010, South Carolina ranked fifth worst nationwide for its percentage of insured children, at 13 percent, according to the nonprofit Kaiser Family Foundation.

That’s despite a 2007 state law that expanded Medicaid eligibility for the children’s program. The change increased the cap on parents’ earnings from 150 percent of the federal poverty level to 200 percent – allowing a family of four, for example, to earn up to $46,100 yearly and still have their children covered.

Parents must make far less to qualify for welfare (50 percent of poverty) or food stamps (130 percent).

Advocates have long complained the previous administration didn’t work to sign children up. Berkowitz said a multi-step sign-up process – requiring parents to fill out separate forms in separate agencies – also purposefully created a barrier.

But HHS Director Tony Keck requested money last fall for “express lane eligibility.” He said it would help the state prepare for portions of the federal health care law, dubbed ObamaCare, set to take effect in 2014. He expects that when people are faced with the mandate of having health care or paying a penalty, all of those eligible for Medicaid will sign up. It makes sense to start paying for those already eligible, to prevent a huge increase all at once, he told lawmakers.

“It is hard to justify large expansions of Medicaid under ObamaCare when we haven’t even been meeting our current commitments to our most vulnerable children,” Keck said Thursday. “By connecting these children to a medical home we will help to ensure they get the preventive care they need to stay healthy and excel in school.”

In the automated process, Keck’s agency communicates electronically with DSS. From now on, children will automatically be enrolled in Medicaid when their parents begin receiving food stamps or welfare.

The agency initiated a similar automatic process last spring to re-certify children in Medicaid, saving employees an estimated 50,000 hours dealing with paperwork. Keck said 90,000 children were falling off Medicaid rolls each year, only to be re-enrolled within six weeks, causing hassles not only for parents but doctors trying to get paid.

That’s because parents had to re-submit their Medicaid paperwork yearly to affirm they still qualified – twice-yearly for those receiving food assistance but no welfare payment.

For keeping eligible children enrolled, the agency received a $2.3 million bonus from the federal government last fiscal year. It expects to receive about $4 million extra in 2012-13 for adding children though the automatic sign-up, said agency spokesman Jeff Stensland.

If parents are receiving welfare payments, then they too qualify for Medicaid coverage, but they’re not being automatically signed up.