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When TennCare, Tennessee’s innovative managed care program, submits a new federal waiver request in mid-December, it will seek significant changes to the program’s design that will divide it into three parts and drop an estimated 180,000 people from coverage.
In a Sept. 29 speech to the state, Gov. Don Sundquist said, "TennCare in its present form costs more than we can afford. It has more enrollees than we can pay for, and it covers more benefits than we can support."
Although state officials have said that Tennessee would be spending $40 million a year more to cover fewer people for health care had it not created TennCare seven years ago, there have been calls for radical changes to the program that is suffering more and more from budget problems.
The waiver will seek permission to divide the program into three parts as of Jan. 1, 2003. TennCare Medicaid would be for the 820,000 residents who are eligible for Medicaid. TennCare Standard would be a traditional HMO for adults under the federal poverty level, children under 200% of the poverty level, and those that an independent underwriting firm designate as uninsurable. And TennCare Assist would be a subsidy program to help low-income families buy employer-sponsored health insurance.
The level of state funding for TennCare Standard and TennCare Assist would dictate benefit levels and the number of people who would be covered.
Insurance industry representatives had urged that the program be divided into two parts, one for beneficiaries who are categorically eligible under Medicaid and one for beneficiaries eligible through the state’s expansion waiver.
Tom Wildsmith, a representative for Health Insurance Association of America in Washington, DC, testified at a legislative oversight committee hearing that the state should reduce benefits to uninsured and uninsurable TennCare beneficiaries to ensure that the program doesn’t compete with private insurers.
During that hearing, state Rep. Gene Caldwell pointed out that waiver-eligible uninsured and uninsurable TennCare beneficiaries are required to pay premiums that bring additional federal matching funds to the program, and cautioned that the federal government might not provide matching funds for a redesigned TennCare program that has slashed benefits.
Also at the hearing, TennCare Commissioner John Tighe said the number of uninsurable TennCare enrollees has jumped from 21,031 in 1994 to 163,040 this year, raising a concern that the innovative program has made it too easy for insurance companies to avoid writing coverage for sick individuals. "The 800% growth in uninsurables is a symbol of something going on," Mr. Tighe said. "We believe that TennCare has taken up 75% of the riskiest population, and the insurance companies have the remainder."
Following the governor’s announcement, advocates warned that the state’s health care safety net would be stretched thin and clients would be adversely affected. And an editorial in the Memphis Commercial Appeal said that any TennCare "cure should not add to misery." The paper said people, including the governor, appear to be using the program as a scapegoat rather than address the state’s "obsolete and unfair tax structure."
The editorial said that for those who are dropped from TennCare, the "alternatives would be to do without health care or to seek expensive, uncompensated emergency department treatment. The latter option would place huge financial pressure on hospitals [privately insured patients] and the local governments [taxpayers] that support those hospitals. The lack of balance in the revamped program is troubling."
The suggestion that TennCare be divided does not sit well with Tony Garr, executive director of the Tennessee Health Care Campaign in Nashville, an advocacy group.
"The problem we’re facing is a revenue problem," Mr. Garr tells State Health Watch. "Our state doesn’t have an income tax and relies almost exclusively on a very high sales tax. Neighboring states have an income tax and thus lower sales taxes, and sales taxes that don’t apply to food or clothing. Many of our people live near those other states and can shop there. We were having problems even before the current economic slowdown, and now we’re really in trouble."
TennCare simply needs more money to keep up with the cost of medical inflation and has "become a whipping boy for the state’s economic problems," Mr. Garr says.
Given that state officials say the state is paying less than it would have paid, even when covering more people, Mr. Garr says he sees no reason to divide the population and slash benefits for one group, especially when even proponents of the move say they don’t expect it to save any money. "We believe that TennCare is not the problem. TennCare actually has delayed the necessary discussions of tax reform because it has been able to control risk in health care."
At public hearings on the proposed changes to TennCare recommended by a blue-ribbon panel, consumers expressed apprehension about the program being broken up, and providers said they could live with reduced payments if there were less administrative hassles with pre-approvals and other elements in the program design, Mr. Garr says.
He adds that he’d rather see those changes pursued, instead of following the call of the insurers. "There’s a bias that the private sector can take care of this better than government, but that’s just not true. The state of Tennessee is our largest purchaser of health care services. We need to be the Wal-Mart of health care, insisting on the lowest possible prices. If the program is divided, the state will lose some of that bargaining power.
"Another concern is that we got a really good deal in the terms in our federal waiver, but the agency might not be as willing to give those good terms if we change the program that way. I don’t know what the motives are of those who say to divide the program since they don’t expect it to save any money," Mr. Garr says.
The financial analysis showing the benefit of TennCare was developed by comptroller assistant director Doug Wright, who compared Medicaid spending in 1993, the year before TennCare, with current TennCare spending.
He inflated the 1993 figure by the medical consumer price index of 33%, resulting in $921 million, and compared that figure to the state’s 2001 TennCare spending, taking into account inflation and other factors, resulting in $881 million. He made the same comparison between FY 1995 spending, the first full year of TennCare, and current spending. That analysis showed current spending is about $20 million more than 1995 spending when inflated by the medical consumer price index.
Mr. Wright’s analysis also indicated that in 1999, the average Medicaid spending in other southern states was $3,218 per enrollee, while Tennessee spent on average $2,611 per Medicaid enrollee on TennCare. Had the state had a traditional Medicaid program like other southern states, it would have spent $485 million more for its 800,000 enrollees, Mr. Wright claims.
Meanwhile, some hospitals, particularly in rural areas, have said that unless they receive additional funding from TennCare, they are in danger of closing and sending patients longer distances for care at larger safety-net hospitals. In 2000, the state provided $90 million to hospitals with a disproportionately high number of TennCare and charity patients, but this current state budget allocates $14 million in state funds ($40 million with the federal match). The Tennessee Hospital Association has said that many hospitals, most of them rural and psychiatric facilities, won’t get the funds they need to balance their budgets. In response, TennCare spokeswoman Lola Potter says the fate of rural hospitals is not decided by the program. "TennCare may help, but we can funnel only so much money to them. Cuts in Medicare reimbursement — not inadequate TennCare funding — are responsible" for the hospitals’ financial problems.
And as if there weren’t enough problems, at the end of September, TennCare officials notified Access MedPlus, the largest managed care organization in TennCare, that it would be dropped from the program unless it demonstrated that its finances were in order. The threat came after Access failed to file a number of mandated financial documents. Although this would be the first time that TennCare has dropped a plan, there have been years of tension between Access and TennCare.
Company officials have said they were underpaid $20 million last year and also had been given a disproportionate number of costly and severely ill patients. They said Access had given state officials an independent analysis showing the level of underpayments and had been in lengthy negotiations over the plan’s financial status.
Mr. Garr says he thinks the best solution would be for Access to pull back from its statewide coverage and consolidate its offerings in the western part of the state, where it has its greatest strength.
He also suggested that if Access were to consolidate in the western region, that area’s Methodist Hospital might be willing to develop some sort of partnership that could help save Access.
[Contact Mr. Garr at (800) 280-8682 and TennCare at (615) 532-7542.]