TennCare officials hope to shore up ailing program with cash infusion, exclusion of high-risk enrollees
Third-largest Medicaid contractor placed into rehabilitation
With its third-largest contractor in rehabilitation and several others threatening to following suit, TennCare officials have proposed a cash infusion for the $3.8 billion program and cutting off new enrollment to high-risk members.
While conceding that the five-year-old program is underfunded, advocates say other proposed changes don’t address underlying problems with the nation’s most ambitious attempt at near-universal coverage through Medicaid managed care.
"For the uninitiated, it looks like they took on more than they could do, that you really can’t do this sort of health reform, that the state itself is finding it out now and having to quit enrolling new people. That’s the short version of the story as it appears, and it’s just not accurate," says Gordon Bonnyman, a longtime health care advocate and managing attorney of the Tennessee Justice Center in Nashville.
Rather, TennCare’s problems are those facing the Medicaid managed care industry nationally, says Mr. Bonnyman, exacerbated by a "leadership vacuum" among state officials that has allowed Medicaid managed care plans in the state to flail. Six of TennCare’s nine contractors lost money last year, and the third-largest plan, 162,000-member Xantus Health Plan of Tennessee, was placed in rehabilitation in early April. Reported 1998 losses ranged from 0.4% to 22.9%, with an aggregate loss of $36 million.
The cost of coverage for the high-risk so-called "uninsurables" provides a "quick alibi" for more fundamental, significant problems such as lack of adequate fiscal monitoring, says Mr. Bonnyman. He points out that BlueCross BlueShield of Tennessee—the largest single TennCare contractor, with almost 44% of the program’s 1998 revenue—showed a profit. He suggests that at least part of the shakeout in TennCare is part of a national trend among HMOs highly dependent upon their Medicaid line of business. In one recent national study, about 70% of HMOs with Medicaid revenues exclusively reported a loss during 1997. (See related story, State Health Watch, February 1999, p. 3.) Among TennCare contractors, BlueCross BlueShield had the highest proportion of non-TennCare revenue, about 7%, with several reporting no or negligible income outside the TennCare program.
Stabilizing the program
While all parties debate the root cause of TennCare’s problems, state officials, advocates, researchers, and consultants can agree that the program’s rates are low. In a comparison of Medicaid managed care programs published in the May/June 1999 issue of Health Affairs, only three states—California, Georgia, and Indiana—ranked lower than Tennessee’s adjusted per-member per-month capitation rate of $99.07. A recent actuarial study by PricewaterhouseCoopers suggested that a $19 boost in the capitation rate was needed to keep the program solvent.
TennCare director Brian Lapps Sr. responded to the study in mid-May with a request to the legislature for about $190 million in new funds. With Tennessee’s federal Medicaid match of about two-thirds, the funds would increase TennCare’s average per-member-per-month capitation rate by about $16.
"We have underfunded the program for years, and the doctors and the hospitals—the providers—have carried that burden. The funding brings it up to the level it should be," Mr. Lapps says.
In addition, state officials want to improve premium collections, which in fiscal year 1998 brought in $35.9 million on billings of $40.6 million. All TennCare beneficiaries except enrollees below 100% of poverty are charged sliding scale premiums.
At the same time, the state is asking the Health Care Financing Admi ni stration to suspend enrollment in TennCare to persons who are otherwise uninsurable. Enrollment now stands at about 114,000. The closure is billed as temporary, although no specific timetable for reopening it is set.
"It gives us one year to stabilize the program, to get the reforms in place, because we can’t keep coming up with that amount of money each year," says Mr. Lapps, TennCare’s director since Feb. 1.
The move is "reflexive" rather than well-considered, says Mr. Bonnyman, driven by the state’s desire to respond quickly to the financial plight of its managed care organizations.
"How is the enrollment of a few hundred or even a thousand uninsurables a month destabilizing the program? It isn’t," says Mr. Bonnyman.
Moreover, advocates say, the closure of TennCare to the uninsurable would compromise a basic premise of the program: Paying discounted provider rates under broad, nearly universal Medicaid coverage makes more sense than cost-shifting to cover the uninsured. Without insurance, high-risk residents presumably still will get care, say advocates, although the lack of insurance is likely to make the process more difficult. In addition, expenses borne through cost-shifting don’t draw down a two-thirds federal match as TennCare coverage would, notes Mr. Bonnyman.
"If I were God and they asked me about it, I would say, paraphrasing Stephanopolous, It’s the federal match, stupid.’ Why would we want to say, Don’t send the money, we don’t need it?’"
TennCare’s enrollment has met or exceeded enrollment projections almost from its inception in January 1994. The program converted about 800,000 fee-for-service Medicaid enrollees into a managed care model and grew by half again with coverage of two other kinds of enrollees: those previously uninsured and high-risk "uninsurables," many of whom were served by the Tennessee Compre hensive Health Insurance Plan.
Conventional Medicaid is extended to those up to 399% of poverty; uninsured and uninsurable coverage is available to those with incomes of 400% of poverty and above. TennCare now covers about one-fourth of the state’s population.
While the number of people eligible under conventional Medicaid guidelines actually has declined—from 766,292 at the plan’s inception in January 1994 to 759,641 in April 1999—the number of people in the other two categories has soared. In June of 1994, just six months after TennCare’s implementation, the "uninsured" enrollment was almost half that of conventional Medicaid, or about 317,000.
The uninsured category was closed to new enrollees in January 1995, just a year after the plan’s inauguration, but reopened in April 1997 to uninsured children. As of April 1999, those categorized as uninsured had grown to 429,952, the growth fueled in part by a population that likely would have been eligible for Medicaid before the 1996 welfare reform legislation that removed automatic eligibility through Aid to Families with Dependent Children.
The number of people categorized as uninsurable grew more slowly, but now totals almost 114,000, or about 8.7% of TennCare’s enrollment. Before the inception of the uninsurable category in TennCare, uninsurables were served through Tennessee’s high-risk insurance pool, the Tennessee Comprehensive Health Insurance Pool.
Tennessee has several policy options available to address the needs of the state’s high-risk population. Some options under consideration are allowing uninsurables to deplete their incomes to the Medicaid spend-down limit, as was done before TennCare; reconstituting the high-risk insurance pool; or beefing up collection efforts in a TennCare uninsurable component. As a group, the uninsurables are relatively better off than the uninsureds—about 90% are below 200% of poverty, compared to 98% below the same threshold among the uninsureds.
"If we collected adequate premiums, it could help fund that uninsurable portion," says Mr. Lapps. "The advocates are just off the wall. For example, they’ve said the solution is to open the rolls to the uninsured—don’t charge them anything, no copays, no premiums, and that’ll make the program healthy. Now, I ain’t sure how that’s going to work. The last guy that could have done it changed the loaves and fishes for the multitudes and you know they crucified him 2,000 years ago. He ain’t coming back, not in my lifetime anyway, at least not to fix TennCare."
Contact Mr. Lapps at (615) 741-0213 and Mr. Bonnyman at (615) 255-0331.
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