The Future of TennCare 

A view from healthcare consumer and advocates

Tennessee’s health care consumer advocates envision a better future for healthcare coverage for all Tennesseans and see an opportunity for improvement of the TennCare program under the leadership of the new administration. To this end, we have developed the following vision statement and platform for improvements in TennCare. 

VISION

We believe that all Tennesseans should have access to affordable, comprehensive health insurance through either private or public programs. A well-designed, well managed TennCare program will act as safety net to protect the health of those Tennesseans who lack access to affordable quality health insurance. TennCare, when properly managed, has also proven to be an effective way to provide health insurance through managed care for people who traditionally would not qualify for Medicaid and who would otherwise likely remain uninsured. It is also proven to save money and maximize the drawing down of federal funds that are critical for covering more people.

The current state of TennCare:
Many poor policy and management decisions made over the last eight years have damaged the financial health of the TennCare program and the health and healthcare coverage of thousands of Tennesseans. The problems can be broadly lumped into two groups: first, there are structural/management problems with TennCare. Second there are the problems with continued cuts in enrollment and limits of benefits for those enrolled. In some cases, these cuts result from the management problems; in some cases they result from policy changes made by the Sundquist administration. It is important to note at the outset, however, that we are facing dire cuts for tens of thousands, even hundreds of thousands, of people. We have seen the following cuts as a part of the 2002 waiver: 

• Tens of thousands of premium-paying members have been cut from TennCare due to the lowering of financial eligibility levels, 
• Tennessee has gone from first to last in coverage of kids. 
• TennCare has eliminated access (open enrollment) for non-Medicaid eligible members (except for those who are “medically eligible” and below 100% of poverty). 
• And Tennessee has drastically reduced or eliminated access to healthcare coverage for people with chronic illnesses, people who have had cancer, diabetes, HIV, or some other chronic diseases. 
• We have also seen the elimination of Tennessee’s innovative prescription drug assistance program for people who are eligible for TennCare and Medicare 
• Finally, the implementation of an unnecessarily burdensome redetermination process has been so confusing and so understaffed that it has resulted in the disenrollment of tens of thousand of people who actually are eligible for the program. 
  

Advocates acknowledge the particularly difficult time Tennessee has experienced with internal MCO financial crises such as those of AccessMedPlus, Universal and Xanthus. These implosions have seriously effected provider participation and access to care for patients. However, the reforms that were intended to solve these problems have seriously undermined the fundamental basis of TennCare: that private insurers can manage and hold down costs through market forces. 

PLATFORM FOR CHANGE:

A. Structural changes needed to restore the financial viability of the TennCare program

1. Return to primary reliance on market forces to set price and control costs, Specifically:

• Eliminate carve-outs that fragment the state’s purchasing power and reduce MCO incentives to contain costs 
• Eliminate the requirement that MCOs spend 85% of capitation rates on services; 
• Eliminate fee-for-service arrangements, such as TennCare Select; 
• End the “ASO” arrangement and return risk to the MCOs once the program has stabilized to a point where multiple MCOs exist in each grand division. 

TennCare must return to an “at-risk” model, holding managed care organizations accountable for delivering services and paying their providers. The MCO’s should manage all the care and should have the negotiating flexibility to set reimbursement rates with providers.

Many of the structural financial changes made to TennCare under the name of reform in the last eight years have seriously undermined the state’s ability to contain costs through the MCOs. Particularly worrisome are the “carve-outs” of major program areas and the “85/15” rule. These moves have satisfied providers by guaranteeing them resources but have not saved money nor enhanced enrollee care. In fact, “carve-outs” give managed care organizations less control, reduce MCOs’ options for care, and increase cost shifting. 

The requirement that MCOs spend 85% of their capitation rates on services removes natural incentives for costs to be held down. Since this rule was instituted in 2001, the lack of flexibility in negotiating contracts with providers has led to an explosion in costs. 

We recommend that the new administration consider “carving in” services that have been carved out, eliminate the 85/15 rule and returning to “at risk contracts” for all MCOs 

2. Save money on prescription drugs through bulk purchasing arrangements

In FY2002 the TennCare program spent $422 million on prescription drugs. Tennessee spent an additional $89 million on prescription drugs for the State Employee Health Insurance Plan and $16 million on wholesale drugs (for prisons, state hospitals, group homes, etc.) The exploding cost of drugs necessitates that Tennessee quickly maximize our buying power by pooling these three groups together and negotiating discounts and rebates based on the size of this pool. Once consolidated, the state can negotiate deeper discounts and rebates directly with the pharmaceutical companies. Other states have seen hundreds of millions of dollars in savings through such negotiations.

Advocates are supportive of a single formulary as long as protections are there for enrollees to get the medications that physicians prescribe. Managed care organizations should still be held accountable for the prescribing practices of their providers. The new administration should take this important reform a step further and contract with a single Pharmaceutical Benefits Manager (PBM) to negotiate and manage ALL prescriptions within TennCare. All state prescription drug purchasing programs – the State Employees Health Insurance program, wholesale drug purchasing, and TennCare should eventually be pooled into the same PBM.

3. Prompt Payment and fair rates; eliminate unaccountable state subsidies to health care providers, over and above payments made through the capitation rate

TennCare has taken great strides to ensure that providers get paid in a timely manner without hassles. Unaccountable “essential provider” payments, which are really just subsidies over and above the capitation rates, should be eliminated. These payments are vestiges of the old “disproportionate payments” to hospitals. In the early days of TennCare, they were eliminated, but they have crept back as “essential provider” payments. The main reason for their re-institution has been the failure of managed care organizations to promptly reimburse hospitals for services. Increased regulations and oversight by TennCare, insuring that hospitals are paid fair rates on in a timely basis, will eliminate the need for such payments.

4. Streamline administration and data management systems to reduce overall cost and eliminate mistakes in enrollment.

TennCare must have a 21st Century information system, something it has never had. This must happen quickly. Data is needed to evaluate the success and shortcomings of the program. For internal and external integrity of the program, this data must be collected, analyzed, and made publicly available.

5. Annual Redetermination, Not Indiscriminate Terminations

Advocates have always supported redetermination. We have asked that the administration make accommodations for the elderly, disabled and mentally ill and that enrollees be given adequate time to go through the redetermination process which would be conducted by adequately trained, adequately staffed DHS personnel. The current redetermination process is unnecessarily complex and burdensome resulting in the termination of tens of thousands of eligible enrollees through no fault of their own. Even though consumer groups are participating in an unprecedented outreach effort to get people in for redetermination, the system established has too many obstacles and barriers, which prevent people from being able to be redetermined.

The enrollment process needs to be simplified. Studies in other states show that enrollment can be simpler and still have integrity and save the state unnecessary administrative costs. Demanding a face-to-face interview, setting resource limits, and artificially deciding when people can apply complicates enrollment. TennCare, as a safety-net needs to be there when people need it and the enrollment process should flexible enough to quickly enroll our most vulnerable populations.

B. Eligibility and Enrollment reforms

The reforms mentioned above would realize major savings for the program and would free-up funds that could be dedicated to reinstatement of coverage:

1. Open enrollment for children up to limits of the waiver (200%of poverty);

Prior to July 1, 2002, Tennessee led the nation in the number of children with health insurance, thanks to TennCare. However, as of July 1, 2002, children are only able to get TennCare if they are eligible for Medicaid. Tennessee is now the only state that has no continuous coverage for children unless they are eligible for Medicaid. We have gone from first to last in the coverage of children.

2. Open enrollment for uninsurable adults; it is important to note that this population pays significant premiums;

For over 16 years, Tennessee has had a tradition of providing insurance to people with chronic illnesses who were unable to access private insurance because of their health condition. Under TennCare these people could enroll continuously, no matter what their income, because private insurers refused to cover them because of their health condition. Most of them paid TennCare premiums some of which amounted to hundreds of dollars per month. Since July 1, 2002, the only people with chronic illnesses who are allowed to enroll in TennCare are those with incomes below the federal poverty level. This limit on enrollment costs the state money in two ways: lost premium dollars that would be paid by those above the poverty level and the increased costs of treating people with chronic illnesses after they become sick enough and poor enough to qualify for Medicaid. 

This policy change is punishing thousands of Tennessee families and children who are in need of health insurance. Even though they are willing to pay for it, they cannot get it. There is nothing in the new TennCare waiver that prohibits the state from allowing continuous enrollment of all uninsurables and of uninsured children. The letter from CMS approving the waiver allows federal Medicaid expenditures to be made for uninsured individuals who meet the state-defined criteria as “medically eligible” [with no income limits] and uninsured individuals at or below 200% of the federal poverty level. The details of how the State will operate TennCare are set out in an Operational Protocol document that the state submits to CMS for approval within 90 days after implementation. The CMS waiver approval letter allows subsequent changes to be made to the protocol by the State on an “ongoing basis”. It is State policy, not federal waiver requirements, that prevents continuous enrollment of “medically eligible” people of any income and uninsured children at or below 200% of poverty. The fact that the State has the flexibility to change such policies is reflected in the State’s May 29, 2002 letter to CMS stating that, in the event the State wants to discontinue the practice of offering continuous enrollment to medically eligible individuals with incomes less than 100% of poverty, it will give CMS 30 day advance notice.

3. Reinstate benefit cuts in the TennCare Medicaid and TennCare Standard populations;

4. Open enrollment for uninsured adults up to the limits of the waiver;

An open enrollment for uninsured people (even healthy ones) would improve the program by including many healthy people into the risk pool covered by TennCare. It is important top note, of course, than many of these people would be paying premiums into the program. 

5. Create a Supplemental Prescription drug benefit for seniors, the disabled, and low-income, paid for by aggressive use of state’s consolidated purchasing power for prescription drugs.

C. Additional reforms that will improve the environment in which TennCare operates:

1. Insurance reform

High quality, affordable insurance should be available to all Tennesseans. This requires responsible practices by private insurers as well as an effective TennCare program. Tennessee currently does very little to encourage or regulate private insurance coverage, and the result is that we have private insurers who have every incentive to “cherry-pick” only the youngest, healthiest Tennesseans. Other states have effectively instituted rules which require insurance companies to expand access or pay into a pool to cover the costs of covering uninsured people, and Tennessee would be wise to use its power as a regulator to give the insurance industry incentives to cover both high-and low-risk Tennesseans. 

2. Increased FMAP payments

Without a doubt, many of TennCare’s financial problems are not unique to Tennessee. Health care costs generally, driven by a number of factors, are soaring nationwide and state governments are struggling to cope with them. We are prepared to work with the new administration and the National Governor’s Association to persuade Congressional delegation to push for increases in the FMAP to support TennCare Medicaid. 

Conclusion:

The problems presented by TennCare at this time do not allow for a status quo. Without reforms on the management side, the financial problems of TennCare will continue to balloon. And without a restoration of TennCare access to people who have been cut off, we have abandoned the idea of TennCare as a cost-effective safety net. 

If the State does nothing to change the TennCare policies and practices put into effect on July 1, 2002 it will incur the following costs:

• Increased use of emergency rooms for non-emergency care 
• Increased cost of uncompensated care for hospitals 
• A sicker population with no meaningful access to health care 
• Loss of premiums from healthy enrollees in TennCare to balance the costs of the program. 
  

- Tony Garr