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TennCare is the Stumbling Block

by Joe Sullivan

TennCare has become the stumbling block, the scapegoat and the whipping boy on which Gov. Don Sundquist's tax reform plan is getting beaten to death in the state Senate.

At the Senate Finance Committee's initial hearing on the Sundquist plan, legislator after legislator weighed in with proclamations that escalating TennCare costs must be brought under control before a state income tax (the cornerstone of Sundquist's plan) can be justified.

Yet, for all of TennCare's excesses and abuses, it's a safe bet that the legislature is no more prepared to approve the one change that might really relieve the state's financial plight than it is to walk the plank for an income tax. That change would be to eliminate TennCare coverage for the 500,000 otherwise uninsured and uninsurable persons now on its rolls in addition to the 800,000 Medicaid-eligible enrollees whom the state is federally mandated to cover.

Simple arithmetic suggests that dropping the non-Medicaid enrollees, for whom Tennessee is one of only a handful of states to provide health coverage, would save the state close to 40 percent of the $1.3 billion it's now spending on TennCare. That adds up to more than $500 million—enough to cover the $384 million budget deficit that Sundquist is projecting for the fiscal year ahead (though by no means a long-term solution to the inequitably and inadequacy of the state's tax structure).

A good case can be made that a backward state like Tennessee never should have become a pioneer in pushing further toward universal health insurance than virtually any other state. But former Gov. Ned McWherter got his arm twisted into doing so by federal bureaucrats when he went to them almost hat-in-hand in 1993 for a dispensation that would allow Tennessee to cut its run-away Medicaid costs by imposing managed care. The presumption then was that President Bill Clinton's national health care plan would soon supersede the state's. But that Rube Goldberg plan got kiboshed; and even as we enter the 21st century, only one presidential candidate, Bill Bradley, is advocating universal health insurance, which begs to be implemented nationally rather than state-by-state.

Nonetheless, taking away what the state hath given is something else again. Does anyone seriously think state legislators are going to vote to take away 500,000 people's health insurance—200,000 of whom are children? The Tennessee Hospital Association will also inveigh against it out of fear that dumping these people will overload hospital charity care costs. Besides, the state couldn't get them off the TennCare rolls until the end of 2001 anyhow. That's when the state's obligations under a contract with the federal Health Care Financing Administration run their course.

In the meantime, legislators will continue to seize on TennCare's myriad muck-ups as an excuse to avoid facing up to the state's harsh fiscal realities. Raking this muck is easy enough to do. Even for governments, it's hard to imagine a more poorly managed program than TennCare has been over its six years of existence. Revolving door administration, lack of procedures for verifying eligibility, benefits that exceed what even HCFA prescribes have all contributed to a shambles. And the crafty, including some insurance companies and employers, have exploited it with subterfuges if not fraud.

Still, there's no basis for believing that fixing everything that's been broken will go very far toward solving the overall financial crunch that's keeping vital state missions like higher education on starvation rations. At the Senate Finance Committee hearing, Finance Commissioner John Ferguson estimated that getting rid of eligibility and other discrepancies might save $30 million and that benefit reductions to permissible levels could save another $45 million. As for when, Ferguson said, "I'm embarrassed, but we're working on it as hard as we can." To which Sen. James Kyle of Memphis responded, "It's not good enough to say we're going to fix it. We've got to see results."

Any savings that result are likely to get more than swallowed up by the need to increase TennCare outlays to keep its managed care organizations and their networks of health care providers from disintegrating. While a recent 5 percent increase in payments per enrollee to the eight MCO's has temporarily alleviated these concerns, several of them are still losing money and participating doctors seem to be getting ever more disgruntled. The possibility of a pullout on the part of by far the largest MCO, Blue Cross & Blue Shield, has been compounded by a recent court decree that strengthens the basis on which enrollees can appeal managed care decisions.

Knoxville's Sen. Ben Atchley may not be hyperbolic when he warns that, "We don't have the resources to continue to sustain TennCare growth even if we pass an income tax...It's not a matter of whether, it's a matter of when we're going to bankrupt the state." To which his Oak Ridge colleague, Sen. Randy McNally, adds, "TennCare is not down the tubes yet, but it's certainly circling the drain."

Instead of squaring away the legislators' fix on TennCare, this week's attempts at remedial action on the part of state officials have seemingly contributed to circular effects. Ferguson called on Monday for "play or pay" legislation that would subject health insurance companies and HMO's doing business in Tennessee to additional state taxes if they don't participate in TennCare. But he declined to estimate how much revenue they might yield, thus creating another element of uncertainty over how TennCare fits into the state's overall financial picture.

At the same time, Ferguson announced the creation of a commission on the future of TennCare. Along with assessing its "cost, efficiency and effectiveness of service delivery," the commission is charged with examining "the state's options with respect to continuation of the TennCare Waiver [i.e. extension of the HCFA contract] or adoption of an alternate plan." While such assessments are needed for the long term, in the short run they would appear to hand legislators yet another rationale for holding off on basic tax reform decisions until after the commission has made its report that's not due until next September.

Sundquist's tax reform plan is compelling and his resolve not to settle for less is commendable. But until he can get the state's TennCare house in order, he'd better be prepared for something less than the legislature's seal of approval.