by Joe Sullivan
Mismanagement, spiraling costs, and a near revolt on the part of health care providers have all conspired to make TennCare the whipping boy for the state's fiscal plight. Yet for all the program's flaws, it's becoming clear that dismantling TennCare will cost the state far more than shoring it up.
The next few weeks will probably be decisive in determining whether TennCare can survive the crisis posed by a threatened exodus of managed care organizations (MCOs) that serve the vast majority of TennCare's 1.3 million enrollees. The consulting firm of William M. Mercer has been working frantically on the state's behalf to come up with a package that would keep by far the largest MCO, Blue Cross/Blue Shield, from dropping out on July 1. The package includes increased payments to the MCOs and some sharing of their risk on the state's part.
According to Mercer's Steven Schramm, an additional $232 million in state funding is needed for the upcoming fiscal year. That's $100 million more than Gov. Don Sundquist had budgeted and would lift his projected deficit for the year to nearly $500 million—absent the increase in state taxes that he has also proposed. Yet for all their aversion to a tax increase, leaders of both parties in both houses of the state Legislature have pledged to support funding increases needed to make TennCare actuarially sound. (Price WaterhouseCoopers is doing the actuarial work but is known to be collaborating with Mercer.)
This legislative pledge is the clearest single signal of recognition that the costs of TennCare sinking are far higher than the cost of keeping it afloat. The pledge took the form of a letter to the federal Health Care Financing Administration in advance of a meeting next week at which state officials are being required to present HCFA with an emergency contingency plan for covering the 1.3 million enrollees in the event that MCOs and/or their provider networks go kaput. The plan would revert from monthly all-encompassing fees to MCOs (which currently average $140 per enrollee) to fee-for-service payments directly to providers. Its additional costs are believed to be more than double the $232 million recommended by Mercer.
Further corroboration that TennCare is underfunded comes from a recent report by the Washington based Urban Institute. According to this report, fees paid to the MCOs "have been very low, particularly in comparison to other states... The fundamental structure of TennCare—a huge expansion of coverage with relatively little new financing, with providers giving more services despite lower rates of compensation—is inherently unstable. It is no accident that a crisis has occurred."
TennCare officials have been so preoccupied with crisis management that little progress has been made toward implementing much-needed reform plans that the Sundquist administration announced last year. These include higher premiums and co-payments for higher income enrollees, limitations on prescription drug and home health care benefits along with standardized provider billing procedures and other procedural changes to make TennCare more "provider friendly." While progress has been made toward verifying enrollee eligibility on an ongoing basis, some estimate that as many as 50,000 individuals remain on the rolls who don't belong there.
Assuming TennCare survives the crisis immediately at hand, a Commission on the Future of TennCare is addressing whether to seek changes in the program when its current contract with HCFA concludes at the end of 2001. Until then, in order to qualify for 2-for-1 federal matching of state dollars, the program must continue to offer the same benefits to the 500,000 uninsured and uninsurable individuals on the rolls as to the 800,000 Medicaid eligible individuals whom it's federally mandated to cover. And the state must serve notice of any proposed changes by the end of this year.
Pressures to cut costs by getting rid of some or all of the 500,000 non-Medicaid enrollees continue from some quarters. But these are gradually being countered by growing recognition that such cuts could turn out to be false economies (not to mention inhumane).
In appearances before the state house and senate last month, Mercer's Schramm insisted that dumping the uninsured and uninsurables would end up costing an additional $500 million. "You would have to come up with 100 percent state money," Schramm told the legislators. "Those 500,000 individuals, their health care needs do not disappear. Who's going to provide the health care? The hospitals and physicians will be left holding the bag." But that will prove intolerable, as it was prior to TennCare, when the state offered separate, albeit limited programs for covering uninsurables and reimbursing hospitals for charity care costs.
"Our rural hospitals, especially, are really struggling, and we can't let them go under," says Sen. Ben Atchley (who nonetheless favors limiting post-2001 benefits to enrollees who aren't covered by Medicaid). According to Craig Becker, president of the Tennessee Hospital Association, the state's hospitals are already incurring $380 million in annual charity care cost and an additional $480 million in what he terms unreimbursed TennCare costs. "We're just about the only state in the country that doesn't make payments to hospitals with a disproportionate share of indigent patients, and I think we've got to go back to that," Becker says.
The co-chairman of the Commission on the Future of TennCare is one of the most venerated men in state government, comptroller emeritus William Snodgrass. While he made a career out of husbanding state resources, he's clear that the fundamental problem with TennCare isn't overspending but that "we've tried to save too much.
"Providers have to be part of a system that gives a reasonable compensation for providing care to the population as a whole," Snodgrass says.
March 9, 2000 * Vol. 10, No. 10
© 2000 Metro Pulse
| 
