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TennCare's Maladies Afflict the State

by Joe Sullivan

The overarching issue facing TennCare isn't whether its costs can be contained to save taxpayers, but whether TennCare itself can be saved at any cost.

Distress signals are mounting that raise doubts about the viability of the state's managed care program that provides health coverage to 1.3 million, mostly indigent Tennesseans. And if TennCare fails to survive in its present form, federal requirements to maintain this coverage could force the state to resort to health care alternatives with far higher costs than the $1.3 billion now going into Tenn-Care.

TennCare's plight has become so intertwined with Gov. Don Sundquists's embattled plan to raise state revenue through tax reform that it's hard to separate distress signals from political smoke blowing. So much so that it may be for the better if the special session of the Legislature on tax reform adjourns to allow the air to clear. If it does, the import of the following developments may be brought into better focus:

* The decision of the nation's largest health plans to allow doctors, not administrators, to have the final say on treatments, represents a sea change away from the managed care principles on which Tenn-Care was founded. This decision follows closely on the heels of a court decree allowing TennCare enrollees to continue receiving doctor-prescribed medications that had been disallowed by managed care organizations, pending an appeal. That decree, in turn, already had TennCare's eight surviving MCO's up in arms over prospective cost increases relative to their fixed payments from the state.

* The state has notified the federal Health Care Financing Administration that it will not adhere to the terms of its contract with HCFA that allow TennCare enrollees to change their MCO's annually at year end. The reason is that allowing them to do so would produce a mass exodus from Xantus Healthplan, which is in receivership. The other MCO's are unable or unwilling to pick up Xantus' 155,000 enrollees. But keeping them locked in may just be postponing the day of reckoning since Xantus likely faces liquidation despite a valiant attempt at rehabilitation. TennCare says it has an emergency plan for dealing with such a liquidation but won't reveal it. Whatever it is, it's almost certain to be more costly than the arbitrarily-set fixed payments by which TennCare has managed to hold down its costs at the expense of MCO viability. At least three other MCO's are known to be on shaky ground.

By far the largest MCO (and the only one to show a profit), Blue Cross/Blue Shield has served notice that its continuation in the program beyond mid-2000 depends on satisfaction of a lot of concerns about TennCare eligibility and benefit levels prior to a year-end notification date, "We're waiting and watching," says Blue Cross/Blue Shield's Ron Harr. So is the State Legislature's TennCare Oversight Committee where frustration is mounting over the inability of TennCare's revolving door administration to effect an overhaul.

"TennCare as we know it is unlikely to be around in another six to nine months," ventures the committee's vice chairman, Sen. Randy McNally of Oak Ridge. To which another anonymity-seeking official adds, "TennCare I is a sinking ship, and we've got to build a life boat to TennCare II. How we do that is the big question."

An even bigger one, on which little light is being shed, is the construct of TennCare II. Given the state's inability to manage the existing program, it seems clear that the Sundquist Administration can't be relied on for the answers. Perhaps a new commission which the governor has just formed can do better; but the strongest players in the health care industry need to be involved as well.

The conspicuous absence of companies like United Health, Aetna, Cigna, and The Principal from the ranks of TennCare participation is one manifestation of the program's weakness. Instead of trying to impose a tax on them for staying out, as is now being proposed, the state should be trying to find ways to induce them to come in. The same goes for firms specialize in the administration of large employers' self-insured health plans.

In sharp contrast to the great care that went into the preparation of Sundquist's tax reform plan, last week's health care legislative proposals appear to have been hastily slapped together in response to legislative pressures. If there had been any meat on the bare-bones proposal to mandate that all employers of 25 or more workers offer them health insurance, it might have represented a bold stroke toward the worthy goal of universal health coverage. But the proposal didn't even cover such basics as employer contribution requirements and affordability to the working poor let alone the telling question of how it would affect Tennessee's economic competitiveness to join Hawaii as the only two states in the country with employer mandates.

Anyhow, Tennessee is too remiss in meeting basic state responsibilities such as higher education to attempt to become a pioneer on universal health coverage, which is a truly national issue. Not that it's as far-out or unaffordable as some national politicians, including Al Gore, would have us believe. When Richard Nixon proposed it in 1973 as a cornerstone of his second term as president, the Democrat Congressional majority looked down its nose at the level of benefits, but if Watergate hadn't become Nixon's millstone, his proposal might have become as much of an icon as Social Security and Medicare are today. According to Bill Vaughan, Democrat staff director of the Health Subcommittee of the House Ways and Committee, "Congressional Democrats would give an arm and a leg for the Nixon plan today." If Bill Bradley gets elected president in 2000 and the Democrats regain control of Congress, that day might finally come. But Tennessee can by no means afford to wait for nirvana to bail the state out of all its health care woes.

Order must be brought out of the chaos that now prevails both for the sake of stabilizing health care costs and delivery systems and in order to provide a firm foundation for assessing the extent of the state's need for raising more revenue.