High-Risk HIP Will Return to Tennessee

High-Risk HIP Will Return to Tennessee
October 1, 2001


On September 28, Tennessee Governor Don Sundquist unveiled plans to revamp the state’s troubled TennCare program, replacing it with a high-risk pool for people with pre-existing medical conditions, a managed-care Medicaid program, and a premium support program for the working poor.

"TennCare in its present form costs more than we can afford. It has more enrollees than we can pay for, and it covers more benefits than we can support," Sundquist said in a speech aired by Tennessee's public television stations and radio.

Sundquist proposes to divide TennCare into three parts beginning January 1, 2003:

  • TennCare Standard, a traditional HMO for adults under the federal poverty level, children under 200 percent of the poverty level, and those deemed uninsurable by state underwriters.
  • TennCare Medicaid, to serve the 820,000-plus Tennesseans who are Medicaid-eligible.
  • TennCare Assist, a subsidy program to help low-income families buy employer- sponsored health insurance.


Some Become Ineligible

The changes, which require federal approval, mean at least 180,000 TennCare recipients could be eliminated from state-sponsored health coverage altogether. The level of state funding will determine benefit levels and the number of people to be served.

"I know closing TennCare enrollment to non-Medicaid eligibles will impose hardships on some people in our state," Sundquist said in his speech. "I know some people who are eligible for benefits today will not be eligible in the future. None of this will be easy. But all of these actions are necessary if we are to preserve TennCare and provide health care for our children and citizens who can't get it otherwise."

Just hours after Sundquist’s speech aired, a federal judge in Nashville issued a temporary restraining order to block the enrollment cutoff. Most of the other changes proposed by Sundquist were not affected by U.S. District Judge William J. Haynes Jr.’s order. A full hearing will be scheduled by mid-October.

Sundquist plans to submit his TennCare revamp to the Centers for Medicare and Medicaid Services (CMS) by December 15. Approval appears likely, as the Bush administration has stated its goal for Medicaid reform is to give states increasing flexibility regarding how the program is run. (See “New Medicaid Reform Empowers States,” Health Care News, September 2001.)


Budget-Buster

Launched by Gov. Ned McWherter in 1994, the TennCare single-payer experiment converted the state's entire Medicaid program to managed care and expanded it to cover uninsurables and some uninsured, drawing generous federal matching funds to pay for it. In his September 28 speech, Sundquist noted the $5.6 billion program has lowered the number of uninsured in the state, increased immunizations, lowered infant mortality, and improved preventive health care.

Sundquist's revamp responds to major criticisms of the program: It covers too many people, offers benefits that are too rich, costs too much, and is draining the state budget. A legislative proposal to establish the state’s first income tax in order to fund TennCare provoked angry protests at the State Capitol in mid-July. (See “Tennessee Taxpayers Revolt,” Health Care News, August 2001.)

TennCare’s advocates say the governor’s proposal will most hurt the state’s elderly, disabled, mentally ill, and those in rural areas. Chad Miller, state director for AARP (formerly know as the American Association of Retired Persons), noted the governor’s plan "will stop the flow of hundreds of millions of health care dollars from Washington to Tennessee. These proposals will not save the state money. In fact, huge new financial burdens will be placed on local governments faced with providing health care for those shut out of TennCare."

But the demographics don't agree with activists’ claims: Of the 180,000 people likely to become ineligible for TennCare, about 135,000 are adults who earn more than the federal poverty level ($14,630 for a family of three) or who don't meet the state's current definition of uninsurability.

About 4,000 children would lose coverage under Sundquist's plan, but they are children in families whose incomes are above 200 percent of the poverty level--a group Tighe said should be able to afford private health insurance.

Sundquist's plan assumes federal regulators at CMS and the Office of Management and Budget will give Tennessee the same generous federal matching funds for the new program that it gave to TennCare in 1992. Sundquist said he projects a modest total savings of $1.5 billion in state funds over the next 10 years, and $3.5 billion in federal funds over the same period.