Government
Tennessee Medicaid may be headed for a fall
■ TennCare offers a striking example of the struggle states are facing in containing growing health care spending.
By Joel B. Finkelstein — Posted Dec. 13, 2004
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Washington -- After 10 years, Tennessee's expanded Medicaid, which serves one in four residents, is teetering on the brink of extinction -- a victim of the financial pressures that are forcing many states to reconsider who is covered by the program.
TennCare is one of the most generous Medicaid offerings in the country. It is also the most expensive, consuming 26% of Tennessee's annual revenue. It has periodically been beset by financial troubles. But the latest problems threaten to force changes that would make it one of the smallest and most restrictive Medicaid programs. This would drop hundreds of thousands of dollars of uncompensated care in the laps of Tennessee's hospitals and physicians.
The state no longer can afford TennCare in its current form, according to a January report commissioned by Gov. Phil Bredesen but funded privately. Based on those findings, he proposed a plan designed to cap spending at the current level. But once the plan was submitted to the Centers for Medicare & Medicaid Services, it faced legal challenges from the Tennessee Justice Center, which represents a TennCare watchdog group that has proposed its own reform agenda for the program.
The Justice Center has since relented and placed a self-imposed two-year moratorium on pending lawsuits. But, according to the governor's office, his reform plan cannot go forward under the threat of new lawsuits.
Bredesen has said he still hopes that negotiations will reveal a third way to make TennCare work.
"We need to step back from the brink, and I need to try again," he said in a statement. "This thing is over-lawyered, it is too personal, it is rushing too fast to a conclusion."
But he has set the wheels in motion to end TennCare, a process that will take six months if it is not stopped. The basic and expanded Medicaid program currently serves about 1.3 million people. The shutdown would leave an estimated 430,000 of those residents without coverage.
"These patients would have continued to receive health care under the governor's reform plans, and now they are faced with starting over without health insurance," said John J. Ingram III, MD, president of the Tennessee Medical Assn. "We would like to assure these recipients that the dedicated physicians throughout Tennessee will continue to provide for their care."
Spending is a growing problem
Medicaid is not an entitlement program, and states are not required to offer it to their residents, but every state does. It is generally considered good public and fiscal policy: Federal matching funds bring hundreds of millions of dollars into the states every year.
Tennessee currently gets $2 from the federal government for every $1 of state funding devoted to the program. Any reduction in the state's share of the funding means twice the drop in federal aid.
Medicaid recipients fall into two groups -- a mandatory population meeting federal eligibility criteria and an optional one decided by each state. As long as a state offers Medicaid, the mandatory population will be eligible for benefits.
So far, no state is considering dropping Medicaid altogether, but coverage for these optional groups, usually working poor residents, is in trouble in some places.
Forced by diminishing reserves, states have been cutting Medicaid spending in recent years. They have reduced or frozen payment rates to physicians and others, scaled back covered benefits or even trimmed at the edges of eligibility.
"The low-bearing fruit is gone," said Nancy Atkins, chair of the National Assn. of State Medicaid Directors. "We are now making the deep cuts that hurt people."
Texas was the first state to make sweeping changes to expanded Medicaid coverage, reducing its rolls by nearly 190,000 beneficiaries.
And in Tennessee, the plan would impose some significant restrictions on the services provided to TennCare's population.
The Tennessee Medical Assn. supports Bredesen's proposed changes, if for no other reason than the alternative of completely dropping a huge number of recipients is so much worse.
"We want to see these reforms implemented. While the reforms may be far from perfect, it's the best chance we've got," Dr. Ingram said.
The loss of TennCare would mean potentially tens if not hundreds of thousands of patients suddenly seeking uncompensated care. This would put additional strain on already thin resources in both hospitals and physicians' offices, said TMA spokesman Russ Miller.
An analysis by the Center on Budget and Policy Priorities estimates that reverting to basic Medicaid would save the state $650 million but also would mean a loss of $1.2 billion in federal funding for the program. Uncompensated care would rise by somewhere between $230 million and $450 million.
The state would prefer not to cut the optional Medicaid recipients, but it doesn't have the financial wherewithal to provide that full $650 million in state funds necessary to maintain their current level of services, said TennCare spokeswoman, Marilyn Elam.
If there were no changes to TennCare, the state would stand to lose $132 million in federal funding next year anyway. That's because the federal matching rate is adjusted to state per capita income, which rose in Tennessee this year.