‘Last Chance’ for TennCare

Published April 1, 2004

In what may be the defining moment of his term in office, Governor Phil Bredesen (D) told state legislators on February 17 he would save Tennessee from the clear and present danger of unchecked TennCare spending by acting immediately to limit benefits and impose copayments on some beneficiaries.

What Bredesen called the “last chance” to overhaul TennCare is expected to stem the program’s out-of-control growth, saving $2.5 billion over four years while continuing to provide services to 1.3 million Tennesseans who are poor, disabled, or otherwise not able to get insurance.

Bredesen aims to keep TennCare spending at roughly one-quarter of the state budget over the next five years. Without the benefit limits and copayments, program spending was expected to reach 36 percent of the state budget in 2008.

Bredesen would exempt from the cost-controlling measures 859,000 children, pregnant women, and people who are disabled, a category that includes people with HIV/AIDS and some with mental illness. Fifteen percent of TennCare enrollees currently represent about 75 percent of the program’s cost.

Cutting Back

Bredesen’s proposal will affect about a third of TennCare’s current enrollees by limiting doctor visits to 10 a year and requiring copayments that range from $1 to $40. TennCare beneficiaries currently are permitted an unlimited number of doctor visits.

Bredesen also would limit TennCare beneficiaries to six prescriptions a month. On average, according to the Centers for Medicare & Medicaid Services (CMS) TennCare enrollees currently fill 30 prescriptions a month, compared to a national average of 10.5 and an average of just 1.5 in the South as a region.

TennCare’s pharmacy program cost $2.3 billion in 2003–more than the state’s entire higher education system, on which Tennessee spent $1.9 billion. TennCare paid out more for two drugs–Zocor for cholesterol and Zyprexa for schizophrenia and bipolar disorder–than it spent operating the University of Tennessee-Memphis.

TennCare will no longer pay $5.47 per pill of Zyprexa, but instead will buy a 33-cent generic alternative. Most enrollees would be required to purchase the lowest-cost prescription drugs, although some–particularly those being treated for certain mental illnesses–would be permitted to continue current drug regimens.

TennCare will no longer cover antihistamines, such as prescription Claritin Rx, and gastric-acid reducers, like Nexium, except in rare cases, because effective remedies are available over the counter. Antihistamines and gastric-acid reducers currently represent about 12 percent of TennCare’s pharmacy spending, totaling $280 million in state and federal funds.

The TennCare program has had eight directors in 10 years–further evidence of a program out of control.

Devil’s in the Details

Bredesen’s plan was greeted with enthusiasm by lawmakers weary of the TennCare burden. Senator Rosalind Kurita (D-Clarksville) told the Nashville Tennessean, “We have ached for this governor. This is a seasoned, reasoned plan. He touched on everything we need.”

While doctors, hospital spokespersons, enrollee advocates, and other TennCare stakeholders said they like what they see on the surface of Bredesen’s proposal, they cautioned the devil is in the details. Explained Gordon Bonnyman, a Tennessee Justice Center attorney who has sued the state on behalf of TennCare recipients, “There are details to be worked out about who is going to be protected, what the protections consist of, how will the mechanics of the various safety provisions work.”

Dr. Subhi Ali, president of the Tennessee Medical Association, said he looks forward to working toward reform with the administration, but he has some concerns about enrollees paying for their own allergy and heartburn medicines. Even those available over the counter are expensive, Ali said, and that “is going to financially inconvenience the core Medicaid population in TennCare.”

Nearly all the changes proposed by Bredesen will require approval from CMS. While negotiations have begun, Bredesen asked enrollee advocates not to slow things in the courts. “I am not your enemy in this,” he told legislators.

Bonnyman said he does not plan to slow the process and looks forward to working with the governor. “Lawsuits are things you do when nothing else works, when people are backed in a corner,” he told the media.

Five Options

Bredesen, who has a background as a health care executive, was himself the principal author of the TennCare reform proposal. His plan relies on work done by independent consultants McKinsey & Co., which concluded a two-part report by finding the state simply cannot afford TennCare in its existing form.

The consultants estimated TennCare would absorb 90 percent of all state revenue growth between 2003 and 2008, threatening other state government priorities. They projected more than $2 billion could be saved over five years by limiting enrollment and benefits and making other changes.

Bredesen used some of the consultants’ recommendations as well as his own ideas to come up with the reform plan. The consultants’ options were modeled on 25 specific initiatives under broad categories of benefits, enrollment size, case management, pharmacy, and the structure of managed-care organizations. Among the options they presented (not all of which were incorporated into Bredesen’s proposal) :

Evidence-based health care. Benefits would be reduced to levels in states with similar programs, and fewer benefits would be provided to TennCare enrollees not on Medicaid. Providers would be required to standardize care. Managed care organizations would take on more financial risk. Enrollees would be required to use the lowest-cost drugs available. Projected savings: $940 million – $1.125 billion.

Tailored TennCare benefits and care. Benefits would vary based on need. The uninsured would get the state employees health insurance plan. Most enrollees would share more of the cost, and enrollees in rural areas would be required to pay for their services on a fee-for-service basis. Drug prescriptions would be restricted. Projected savings: $680 million – $815 million.

Predictable growth. The state’s ability to predict and control growth would be improved by adjusting coverage and enrollment periodically. Benefits would be reduced to levels in states with similar programs, and benefits could change from year to year. Projected savings: $945 million – $1.135 billion.

Shared financial responsibility. The state, beneficiaries, and employers would share program costs. Benefits would be reduced to levels in states with similar programs. A “play or pay” mandate would be adopted requiring medium and large employers to offer insurance. Projected savings: $930 million – $1.045 billion.

Improved traditional Medicaid. This option would restrict enrollment to the Medicaid-eligible, removing 260,000 people from the rolls. Benefits would be reduced to levels in states with similar programs. Insurance companies would be required to cover applicants with pre-existing medical conditions, instead of reviving the state’s high-risk insurance pool. Projected savings: $810 million – $945 million.

Left alone, Bredesen warned, TennCare will drain the state’s resources for other services and require a return to traditional fee-for-service coverage in the near future. The governor said his plan is “TennCare’s last chance,” adding, “I want to save TennCare, not dismantle it.”

Conrad F. Meier is managing editor of Health Care News. His email address is [email protected].