The Magazine

Tried and Found Wanting

Tennesseeans are especially skeptical of Obamacare--with reason.

Aug 3, 2009, Vol. 14, No. 43 • By FRED LUCAS
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In 1999, there was more bad news. A March review by Pricewaterhouse-Coopers found that TennCare paid health care providers 10 percent below what would be considered actuarially sound.

"Most hospitals had between 10 and 14 percent of their care delivered as charity care, indigent care, nonreimbursed care, and one of the promises of TennCare was--with this everybody is going to be in the pool," Blackburn said. "Everybody is going to be participating and have some type of health care coverage. The fact is, our hospitals have not seen the rate of their indigent or uncompensated care reduced."

The state's hospitals were being paid about 40 cents on the dollar for TennCare patients, which eventually rose to 64 cents on the dollar, said Craig Becker, president of the Tennessee Hospital Association.

In the summer of 1999, a state audit showed Tennessee was spending $6 million to insure 14,000 dead people, that 16,500 enrollees lived outside the state, and that 20 percent were not eligible to be in the program. Republican governor Don Sundquist tried to impose an income tax on the state in 2002 to cover the cost of the program (which by this time had 1.4 million enrollees), but failed to get it through.

After Bredesen was elected, he commissioned a report by McKinsey & Company that estimated TennCare would consume more than 90 percent of the state's normal tax growth within five years. The biggest cost: Tennessee led the nation in prescription drugs per capita.

"There wasn't a limit to the amount of prescriptions you could have," Drew Johnson, president of the Tennessee Center for Policy Research, a free-market think tank for state issues, said in an interview. He called TennCare a "good micro-example of how poorly the government-managed health care systems work."

"As a result of that, we had by far the most expensive Medicaid system in terms of percentage of the state -budget and in terms of per capita expense as well," Johnson said.

Taking a mend-it-don't-end-it approach, Bredesen proposed to limit prescriptions to five per person per month, while also limiting the number of doctor visits and days in the hospital. The legislature passed these measures. But it wasn't enough, and by November 2004, Bredesen said it was time to scrap TennCare. That was not well received by interest groups such as the Tennessee Justice Center that were already engaged in litigation with the state over the program.

The governor negotiated a way to keep a dramatically scaled down TennCare in place, with fewer benefits and fewer people on the rolls. And this January, a federal court lifted the court order from 1996 that prohibited Tennessee from reviewing eligibility of enrollees. Thus, the state is eliminating up to 150,000 enrollees. TennCare estimates it spends $1.2 billion a year on covering people who are not eligible.

"By allowing TennCare to remove those individuals who are no longer eligible, the court's ruling will enable the state to reduce or avoid some of the budget reductions we otherwise would have had to make in the state's effort to balance its budget during this difficult economic period," TennCare director Darin J. Gordon said after the order. "This gives us hope that we may be able to realize savings that will help minimize cuts we will have to make."

Already four Blue Dog Democrats from Tennessee, congressmen Bart Gordon, Jim Cooper, Lincoln Davis, and John Tanner, have expressed skepticism about the Obama health plan.

Blackburn, meanwhile, has been working closely with Representative Phil Roe, a Republican from Tennessee. Back when Blackburn was a state legislator trying to figure out how to pay for TennCare, Roe was a physician working under the program.

"It is incumbent on us to look at what has happened with TennCare and to make that point with our colleagues," Blackburn said. "We knew it was a program that was too expensive to afford and that leads to comments that it's too big to fail."

Fred Lucas is the White House correspondent for