On New Year's Day, 1994, Tennessee made history by withdrawing from the Medicaid program and implementing an innovative new health care reform plan called TennCAre. TennCare required no new taxes and extended health coverage not only to the nearly 800,000 Tennesseans in the Medicaid population, but also to an approximately 400,000 uninsured or uninsurable person using a system of managed care. Enrollment was open in 1994 to eligible persons in the uninsured, uninsurable, and Medicaid-eligible categories. However, as of January 1, 1995, TennCare reached 90% of its target enrollment and closed enrollment in the uninsured category. Enrollment remains open to persons who are Medicaid-eligible or who are uninsurable as determined by an insurance company which denied health insurance to the individual due to medical reasons.
Without radical change, the uncontrollable growth in the cost of Medicaid threatened the financial stability of state government and the quality of Tennessee's health care delivery system. Simply maintaining the previous level of Medicaid services would have required annual tax increases and/or annual reductions in services that were unacceptable, while the working poor and other uninsured Tennesseans would have remained without coverage. It was determined that fundamental reform of the Medicaid program was the only acceptable alternative.
In order to implement TennCare, the State of Tennessee was granted approval by the Health Care Financing Administration for a 5 year demonstration project under Section 1115 of the Social Security Act. l State rules were also promulgated to assist in administering the statewide program.
TennCare replaced the existing Medicaid program with a program of managed health care. Recipients now choose between Preferred Provider Organizations (PPOs) and Health Maintenance Organizations (HMOs), and (in the HMO Model) choose a "gatekeeper" primary care provider to personally manage their health care.
TennCare services are offered through PPOs and HMOs under contract with the state. These organizations, spread out over the twelve regions of Tennessee, are paid a fixed amount per recipient per month for the services. This amount currently averages $112. (Supplemental capitation rates are available for persons with certain health problems.) The managed care organization then negotiates payment rates with individual providers. Enrollees have a choice of managed care plans in their geographic area.
TennCare services, as determined medically necessary by the HMO or PPO, cover inpatient and outpatient hospital care, physician services, prescription drugs, lab and x-ray services, medical supplies, home health care, hospice care and ambulance transportation. Excluded from TennCare are long-term care services and Medicare cross-over payments which are continuing as they were under the former Medicaid system.
TennCare is financed by pooling current federal, state and local expenditures for indigent health care which include $2.2 billion the federal government would have provided Tennessee for the Medicaid program in 1995-1996. Pooled resources total $3.3ll billion, which is reduced by $l.053 billion to continue the funding of long-term care programs, Medicare cross-overs through the Medicaid system and administration of the total program. The remaining $2.26 billion has been used to fund the current year of the TennCare program. Fifty-six million dollars are expenditures incurred at the local level for eligible but unenrolled individuals. In the future, competition among managed care networks, combined with the enrollment cap, should enable TennCare to grow at a predictable rate not exceeding the annual rate of growth in state spending.
Administrative changes were necessary to make the transition from the Medicaid program to TennCare. These changes, consisting of (1) organizational (2) systems and (3) quality measurement changes, are important in insuring the success of TennCare in delivering comprehensive managed care in a planned and cost-effective manner to persons who are indigent and uninsured in the State of Tennessee.
Architects of this innovative health care reform plan are confident that the program developed can provide quality health care for all recipients at a substantially less cost than would be spent on the Medicaid program alone. TennCare should prove beneficial to efforts on a state and national level to reform existing health systems.
