The NewStandard ceased publishing on April 27, 2007.

Tennessee Medicaid Cuts Stir Fear Among Stateâ€TMs Poor

by Kari Lydersen

With one of the nation’s most progressive state Medicaid programs about to be gutted, over a million Tennessee residents face a threat that may spread as states look to the poor for places to tighten the budget belt.

Jan. 27, 2005 – Lori Smith is scared to death. Once Tennessee Governor Phil Bredesen’s proposed cuts to the state’s TennCare medical assistance program go through, the 39-year-old Nashville resident does not know how she will obtain health care for lupus and multiple sclerosis, both of which she suffers from. And activists say other states may take Tennessee’s lead in determining ways to cuts to their own Medicaid programs in order to save money.

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TennCare is Tennessee’s version of Medicaid, the federally mandated program to provide healthcare to low-income people. Each state carries out Medicaid in its own way, in keeping with certain federal requirements. TennCare, created in 1994 and covering one in four state residents, has been known as one of the most generous Medicaid programs in the country.

But now budget cuts and management problems mean the state has to slash spending, and many of the "optional" parts of TennCare -- the coverage not mandated by the federal government -- is slated to go, cutting off 323,000 adults and also significantly curtailing benefits for the estimated 396,000 adults and over 600,000 children remaining in the program. A December article published by the American Medical Association’s AMNews says the cuts could make TennCare "one of the smallest and most restrictive Medicaid programs [in the country]."

The changes in Tennessee are being watched closely by public health advocates nationwide, who fear that cuts to low-income health care programs in that state are part of a national trend to balance state budgets at the expense of medical care for some of society’s neediest.

Even though no children will be cut from TennCare, even those still covered by the program will see their benefits restricted.

When she worked full time in the corporate world, Smith had good health insurance.

But her health problems made it impossible for her to keep working a rigid full-time schedule. She left her corporate job for a small advertising and graphic design business with seven employees. There she tries her best to work full time.

"But they understand if I need to go upstairs and lay down for a while or not come to work on certain days," Smith said. Her current employer would like to give her health benefits, but the exorbitant premiums the employer would have to pay simply make it impossible. "It’s not their fault," she added. She can’t buy private insurance on her own, since she is considered "uninsurable."

TennCare, which Smith has received for over two years, seems to be her only option.

"It saved me," she said. "I have no idea what I’ll do now."

Like Smith, many of those who will be kicked off TennCare are "uninsurable," and many have terminal illnesses. They earn too much to qualify for federally mandated Medicaid, but not enough to afford insurance on their own. They do not receive TennCare for free; they pay monthly premiums like someone with private insurance.

Without insurance, most people with serious health problems simply will not be able to pay for health coverage. Their only options would be to go to already overburdened public hospitals and clinics, or, if they become economically destitute enough, to start receiving public aid including food stamps and Medicaid.

"That’s a road I don’t want to go down," said Smith.

The governor originally proposed eliminating 430,000 people from TennCare, including 120,000 children. After receiving thousands of complaints, on January 10 he announced a revised plan to cut coverage for the 323,000 adults and impose limits on care for the remaining 396,000 adults. The proposal still must receive approval from the federal Department of Health and Human Services. State officials have said some cuts could take effect as soon as this spring, with most cuts implemented by 2006.

Hardly anyone denies that TennCare is a mess. Costs have ballooned to $8.7 billion annually, absorbing 26 percent of the state’s annual revenue. At current levels the state would be spending about $650 million more next year, according to an analysis by the Center on Budget and Policy Priorities released in November.

Most people say changes clearly have to be made. But critics of the governor’s plan say there are other ways to control costs besides cutting coverage: for example raising taxes, implementing better care coordination plans or buying prescription drugs in bulk.

"[The cuts are] so unprecedented and so destructive," said Gordon Bonnyman, executive director of the Tennessee Justice Center, which filed several lawsuits against the state regarding their implementation of Medicaid. The lawsuits resulted in a series of consent decrees, court-approved agreements in which parties agree to abide by certain conditions.

"I think once the magnitude of [the cuts] hits people, [the governor] will have to reconsider," Bonnyman said.

Critics note that the cuts are likely to cost the state even more in the long run. Tennessee will lose over a billion in matching federal funds, since it currently gets $2 from the federal government for every state dollar spent on TennCare. And even with service cuts, per capita costs could go up if people delay or forgo needed medical care in the short term and end up needing costlier emergency services and hospitalizations later on.

"It’s penny wise and pound foolish," said Bonnyman.

An analysis by the Center on Budget and Policy Priorities (CBPP) looking at the original plan to remove 430,000 people’s benefits estimated that the cuts would result in a loss of $1.2 billion in federal funding and uncompensated care would rise by $230 million to $450 million. Uncompensated care is treatment performed without charge to the consumer usually at free clinics or public hospitals, or in emergency situations where providers are legally required to at least stabilize any patient who arrives at the door.

"Most of the individuals who would be dropped from the TennCare program would become uninsured," reads a November press release from the CBPP. "But they still would need health care… Health care providers could be hit hard, as they would lose the direct reimbursements from TennCare and also have to provide uncompensated care for the newly uninsured patients."

A 2002 study by the Center for Health Services Research at the University of Tennessee found that if 160,000 people were to be cut from TennCare -- less than half the number slated for dismissal under the current plan -- it could lead to an average increase of up to 221 premature deaths per year. This is based on longitudinal statistics showing people without insurance are 25 percent more likely to die in a given year than people with similar ethnic backgrounds, economic situation and other factors but have insurance. Smith notes that if she is forced to go to public hospitals, she will not have access to the network of specialists that she needs for her conditions.

Bredesen’s office has placed blame for the TennCare crisis on the Justice Center and "public interest lawyers" who filed lawsuits against the state resulting in the consent decrees, which the governor’s administration describes as preventing them from making needed reforms.

The governor’s office did not return calls for comment, but said in a press statement, "Cost containment is necessary due to continually rising utilization of prescription drug and medical benefits fueled in part by longstanding legal constraints as well as a recent change in the formula for federal funding that will result in fewer dollars from the federal government."

The statement says the consent decrees prevented the government from passing proposed cost containment measures: "Lawyers with the Tennessee Justice Center refused to lift legal roadblocks to reform."

But Bonnyman maintains that while the Justice Center refuses to negate the decrees completely, they have offered to make compromises including temporarily suspending parts of the decrees.

"They refused our offers to negotiate," Bonnyman said of the governor’s office. "Anyway the magnitude of this crisis far outstrips the effects of the consent decrees."

Meanwhile even though no children will be cut from TennCare, the 612,000 of them covered by the program will see their benefits restricted by changes in the way the program’s guidelines are interpreted.

A statement from the Children’s Defense Fund accuses state administrators of "water[ing] down the state’s definition of ‘medical necessity’ in a way that would enable state bureaucrats to deny needed health care services." Among other things, the reforms would limit the number of appointments and prescriptions one can access per year.

Gregg Haifley is deputy director of government relations for the Children’s Defense Fund. He pointed out that many children have long-term health care needs that require numerous doctor visits. For instance, a child with spina bifida -- a relatively common, permanently disabling birth defect affecting the spinal cord -- will need lifelong, extensive physical therapy. "But under the new program," he said, "their visits will be limited. When you have state bureaucrats instead of doctors making medical decisions, you’re really putting children at risk."

The Children’s Defense Fund alleges that the state’s attempts to modify the implementation of Medicaid to offer children the cheapest available treatment violate federal Medicaid statutes requiring "Early and Periodic Screening, Diagnostic and Treatment" services.

Haifley said he fears for the safety of the approximately 25 million children on Medicaid nationwide if more states follow Tennessee’s lead. "They’re effectively undermining care without being up front about what they’re doing," he said.

Public health advocates around the country are watching the TennCare situation closely and with great concern, since they see it as a harbinger of things to come. Many states are experiencing budget crunches and are looking for relief by reforming their implementation of Medicaid programs. Florida Governor Jeb Bush recently announced the start of a plan to privatize insurance for low-income people by giving them vouchers to buy private coverage. In New York, Governor George Pataki also has announced a $1 billion cut in the state’s Medicaid program.

"There’s a great deal of concern nationally," said Bonnyman. "What’s underlying all of this is medical inflation -- there are higher medical costs for families, higher premiums for employers and more uninsured people."

Syd Bild, a doctor and activist with the Chicago group Metro Seniors in Action, said he fears similar situations around the country. "TennCare was touted so heavily in the ’90s," he said. "But so many of these things fall apart. It’s difficult to move the power structure to recognize the seriousness of the situation… It’s an unrecorded tragedy."

Smith participated in a "die-in" protest in Washington, DC on January 12 while the governor was holding a meeting there. She said she still hopes Bredesen will change his mind and look for other alternatives to cut spending.

"It’s not just a money issue, it’s a human rights issue," she said. "This is about human lives… We’ll see the fallout later."

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The NewStandard ceased publishing on April 27, 2007.

Kari Lydersen is a contributing journalist.

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