Governor Cuts 320,000 from Ailing Tennessee Health Care Program

Published February 1, 2005

Governor Phil Bredesen (D) announced in January he would cut insurance coverage to 320,000 Tennesseans in an effort to reform TennCare, the state’s troubled, 12-year-old health insurance program.

According to remarks made in Nashville and reported on the governor’s Web site, the cuts stopped short of being a complete return to traditional Medicaid, by sparing benefits to 110,000 children the state is not required to cover under the federal program.

TennCare uses the state and federal-matching Medicaid funding plan instead of the standard Medicaid approach. The state was given waivers from federal Medicaid laws to allow implementation of the program in 1993 while the Clinton administration was seeking to create a national health care system based on a similar Medicaid-for-all approach.

According to the Tennessee Health Care Campaign Web site, “TennCare … is for people who don’t have other insurance or who can’t get other insurance because they have a health problem. It is open to people whose family income is under 100% of poverty.”

Eligible residents enroll in a managed care organization that helps them find doctors and pays all covered medical bills.

Last December, TennCare Director J.D. Hickey testified before the TennCare Oversight Committee and estimated the program will be over its $8.7 billion budget for the 2005 fiscal year that ends June 30. Hickey told lawmakers the program, which enrolls 1.3 million Tennesseans, will be forced to spend an additional $132 million in state funds.

Bredesen’s recent efforts to fix TennCare were blocked by the American Civil Liberties Union (ACLU). Bredesen attempted to rein-in costs by increasing eligibility limits, reducing the number of free hospital visits, and lowering the number of allowable free prescriptions. Those efforts were blocked by ACLU lawsuits.

Advocates’ Objections

The ACLU and Tennessee Justice Center (TJC), a nonprofit legal agency that represents TennCare enrollees in federal court, said the state Department of Health’s efforts to reform Medicaid were casting too wide a net, hurting many innocent TennCare users. Bredesen had been negotiating with the two advocacy groups since April 2004 in an effort to garner their support for a reform plan.

Before talks stalled between Bredesen and the TJC last May, state legislators had devised a patchwork plan to fix TennCare. The bipartisan reform effort would have reduced the allowed number of prescriptions (now unlimited) to six per month, doctor visits (likewise currently unlimited) to 10 per year, and cost-free hospital stays (also unlimited) to 44 days per year.

Bredesen had planned in the final months of 2004 to end TennCare altogether, taking about 400,000 residents off the rolls, and revert to standard Medicaid. He later agreed to continue negotiations with the TJC and other health care advocates.

TJC Director Gordon Bonnyman told The Tennessean for a December 9 news story, “Reverting to the standard Medicaid plan would be worse than the current situation.” Bonnyman said he did not know how the program got in trouble so quickly. “I don’t know how we got there, and I don’t know how to get out either.”

Controversial Letters

In addition to other efforts at reform, TennCare officials mailed nearly 13,000 letters in December to TennCare beneficiaries who the state claims may have under-reported their income or may be living in other states, or whose patterns of prescription drug use appeared suspicious. (See “‘Last Chance’ for TennCare,” Health Care News, April 2004.)

ACLU of Tennessee Director Hedy Weinberg was reported by the Associated Press on January 1, 2005 as saying the letters are intimidating and ask people to turn themselves in, violating the constitutional rights of enrollees to refrain from incriminating themselves.

The TJC says the letters are difficult to understand and contain inaccurate information about whether or not TennCare enrollees may have broken fraud laws.

The letters required beneficiaries to explain their use of TennCare in writing since fraud was rampant and the plan was poorly administrated. One version of the letter stated recipients may face prosecution or jail time for failing to report back to TennCare officials.

In a public statement, state officials defended the letters by saying they represent a renewed commitment on the part of TennCare to restore faith in the $8.7 billion program.

Overuse of Services

In addition to thousands of people enrolled who are not entitled to the subsidized health insurance, TennCare investigators found over the last six months of 2004 that TennCare enrollees filled 30 prescriptions a month, compared to a national average of 10.5 and an average of just 1.5 in southern states.

The December 9 edition of the Nashville Business Journal reported investigators uncovered a prescription fraud scheme through which beneficiaries sold some of their prescriptions on the street for personal gain.

According to a survey conducted by the Kaiser Family Foundation last year, Tennessee has the highest rate of prescription drug use in the country–52 percent higher than the national average, and double that of California.

TennCare’s pharmacy program cost more than $3 billion in 2004–more than the state’s entire higher education system, which cost $2 billion.

TennCare paid out more money for the cholesterol medication Zocor and Zyprexa, for treatment of schizophrenia and bipolar disorder, than the state spent operating the University of Tennessee-Memphis. The number one prescription among TennCare users is OxyContin, a highly addictive painkiller.

Troubled History

TennCare is the largest state Medicaid program in the U.S. While universal coverage and single-payer proposals have gained some attention in states across the country, no state has embarked on an effort as extravagant as Tennessee’s.

Incorporating universal coverage and single-payer goals into the state’s Medicaid system has created a program that is now difficult to maneuver, difficult to finance, and perhaps impossible to reform. According to Dr. Merrill Matthews, director of the Council for Affordable Health Insurance, TennCare started to unravel on day one.

“In 1993,” said Matthews, “then-Governor Ned McWherter (D) rammed through TennCare, the closest any state came to implementing ClintonCare, without even a vote in the state legislature. The program was a fiasco from the beginning. A 1999 state audit found the program had paid $6 million to insure 14,000 dead enrollees. And 16,500 enrollees lived outside the state.”

“Ship that’s Full of Holes”

In a Citizen Tribune editorial published on December 8, staff writer Robert Moore noted that State Sen. Steve Southerland (R-Hamblen County) had likened legislators’ attitudes toward TennCare to those of sailors aboard a distressed vessel:

“It’s like we have a sinking ship. We have a ship that’s full of holes and here are our options: Some want to patch the holes in the boat and keep it floating; some want to get a new boat; and some want to raise taxes, get a bigger pail, and keep on bailing,” said Southerland.

Matthews suggests the good news is that it is likely the program will eventually be eliminated, if not by legislation then by bankruptcy. “The bad news is that it took state legislators over 10 years and who knows how much money to realize that McWherter had created a monster of failed social policy,” said Matthews.

Following Bredesen’s January announcement of TennCare enrollment cuts, the state filed papers in federal court to seek authority to implement the reforms. The changes should be fully implemented by 2006.

“This is not the approach to TennCare reform that I originally envisioned,” Bredesen said. “But under the legal and economic circumstances, it’s our best chance for maintaining care for as many Tennesseans as possible.”

Conrad F. Meier ([email protected]) is senior fellow in health policy at The Heartland Institute and editor emeritus of Health Care News.