Health & Human Services

Tenncare Tensions

Governor Bredesen aims to save TennCare, but one of his fixes flies in the face of a cherished national notion.
by | July 2004

He didn't have to do it. Tennessee Governor Phil Bredesen, armed with zeal to tame TennCare's costs, could simply have sent proposed reforms of his state's version of Medicaid directly to the federal government. Instead, he sent them first to his legislature for its endorsement.

It wasn't just a nicety. Federal approval of a Medicaid waiver is never a sure thing, and Bredesen wanted to strengthen the state's hand with the Centers for Medicare and Medicaid Services, the federal agency that has the ultimate say over TennCare. Delivering the proposal with bipartisan legislative support seemed like just the ticket--particularly considering what's at stake.

TennCare is poised to bring Tennessee to its fiscal knees, and Bredesen has a lot of history and national attention to deal with. TennCare, which was introduced 10 years ago, was then-Governor Ned McWherter's gift to the working poor of Tennessee who could not afford health insurance coverage. His idea was to replace Medicaid with a state-run health care program that qualifies for a federal match but covers a broader base of people. In order to bring TennCare into being, McWherter established the program by executive order. He then sent lawmakers a two-page, highly technical bill asking for minor legislative changes that, in effect, let him pursue a waiver from Washington to rewrite Medicaid.

McWherter's ambitious experiment was big news in Tennessee--and around the country. Ever since it won federal approval, attention has been focused on the program--and its many ups and downs. Despite its difficulties--and there have been many, both fiscal and managerial-- TennCare has gone a long way toward taming the rate of uninsured in the state. Where the national rate is slightly more than 15 percent, Tennessee comes in at 10.8 percent. Many of its neighbors--Arkansas, Georgia, Mississippi and North Carolina--are above 16 percent.

That's TennCare's good news. Unfortunately, the fiscal problems have been almost insurmountable. If left unchanged, TennCare, which currently costs $7.3 billion a year to cover 1.3 million people, will eat up 90 percent of the state's revenue growth in the next five years.

Several of Bredesen's predecessors tried to tackle the problem by proposing tax reforms to raise more money for the program. Bredesen is not going that route. He is looking for ways to trim TennCare, and for that he needs federal permission.

His plan, if it gets the feds' go-ahead, would save $2.5 billion over four years. The legislature has endorsed Bredesen's calls for co- payments and limits on prescriptions, doctor visits, hospital days and lab work. Most of these moves would, as Bredesen correctly points out, bring Tennessee in line with what many other states are doing.

One other thing he is suggesting, however, taps into one of the most volatile discussions now taking place in health care circles: the definition of "medically necessary" as it applies to treatments. Bredesen wants to tie that definition to cost, the idea being that physicians would utilize the best care available at the least cost-- that is, treatment that is safe, effective, reasonable and the cheapest alternative that is adequate.

TennCare officials say 13 other states use cost-effective language in their Medicaid standards. But the TennCare proposal goes further. Tennessee would incorporate language that requires that "adequate" care also be the "least costly alternative." Not surprisingly, the definition has raised alarms among those who are advocates for the poor and infirm.

The cost-related definition, in effect, undermines a cherished notion in America: that cost should be no object when it comes to treating the ill. The issue is presently roiling the Medicare waters. That's because a provision in the recently passed Medicare drug bill explicitly forbids the government from using information about costs and benefits of new technologies--information that is being developed by the federal Agency for Health Care Research and Quality--to determine whether Medicare should pay for these new products. The pressure to leave cost out of the equation comes, in part, from unlikely allies: producers of the new technologies, who want to maintain strong prices for their devices, and the American Association of Retired Persons, which doesn't want treatment of AARP members subjected to cost considerations.

Given recent breakthroughs in the analytical tools for measuring costs and benefits, costs and adequate care are likely to be linked in the near future to a definition of what is "medically necessary"--even as that definition leads to a form of rationing. After all, some insurance companies are already talking about a de facto approach to the issue: creating different tiers of coverage with higher co-pays for less cost-effective treatments.

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