“I am committed to try to keep people who genuinely qualify on the rolls - to save TennCare rather than just cut the enrollment.” 

-Gov. Phil Bredesen, Address to the General Assembly. February 17, 2004.

1. Money Follows the Person:
   This proposal is budget neutral. Currently, people eligible for nursing home services have few alternatives than expensive institutions. Money follows the person allows someone eligible for nursing home services to instead get home and community based services to keep them out of expensive nursing facilities. Diverting just 6,000 people, already identified by the state as wanting out of nursing homes, would save about $138 million. Cutting the nursing home population in half would save the state about a half-a-billion dollars. More importantly, Tennesseans would much rather live in their own homes. Good ideas to save money have been ignored by Governor Bredesen.
2. Retrospective drug use review (DUR)
   Tennessee has never implemented an effective DUR program. Without such a program, TennCare prescription drug use remains much higher than in TennCare programs in other states. Excessive prescription drug utilization is a problem of long standing that is not limited to TennCare, but affects all insurance plans in Tennessee. Former Pharmacy Director Leo Sullivan recommended a Retro-review program to monitor all TennCare prescriptions. This addition to the TennCare pharmacy program could save the state up to $500 million a year, but Bredesen would not accept the cost-savings; his administration only disputed the figures.
3. Disease Management
   The sickest 15% of TennCare enrollees account for 75% of costs; the sickest 4% incurs 43% of costs. Because so much of TennCare's budget is spent on a relatively small population of chronically ill patients with multiple diagnoses, intensive clinical management of those high cost patients offers a major source of potential savings. 
   Governor Bredesen’s proposal does just the opposite from managing disease. The burden of the proposed service limits and cost-sharing policies will fall most heavily on the very population who would most benefit from disease management. By creating barriers to needed care, the proposals would make it more difficult to manage their health in a cost-effective way. 
4. Preferred Drug List for Behavioral Health
   Adding behavioral health drugs to the PDL, and using the same careful selection process that was used last year for medical drugs would yield savings conservatively estimated in the range of $35 million in state funds.
5. Payments to Managed Care Organizations
   This year TennCare will pay its managed care contractors $245 million, or nearly 5% of the $4.96 billion in health services which they administer. Those rates are relics of a past when the contractors were true HMOs that accepted financial risk. They are now only administrative services organizations (ASOs). They do not manage care.
6. Fraud and abuse enforcement against pharmaceutical manufacturers.
   In the last two years, the federal government in cooperation with some states has begun to pursue Medicaid fraud and abuse litigation against drug manufacturers. Some manufacturers have reported false pricing information for purposes of calculating the rebates they must pay to the federal government and states as required under Medicaid.
7. Price disclosure to calculate more accurate pharmacy reimbursement rates. 
   The Office of Inspector General (OIG) at the U.S. Department of Health and Human Services has released numerous reports finding that states are likely paying too much for drugs, particularly brand name drugs with competitors and generic drugs.
8. Use of clinically appropriate fail-first or step therapy requirements.
   Under these policies, an individual must first use a drug that is likely to be as effective but is lower cost than other alternative drug therapies. If a physician concludes that the lower cost drug ends up being ineffective or clinically inappropriate for the individual’s medical needs, the physician can then prescribe a more expensive alternative therapy. According to a recent national survey, about two-thirds of states used fail-first or step therapy policies in 2003, more than twice the number of states in 2000.