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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At the Biloxi, Mississippi, gathering of the National Governors Association in mid-July, Tennessee's Democratic governor, Phil Bredesen, told the New York Times he feared the Obama-backed health system overhaul would be the "mother of all unfunded mandates." He was speaking from experience. Bredesen was elected governor in 2002 to fix TennCare--the state's public option, launched in 1994 to replace Medicaid and cover the uninsured. Now, well into his second term as governor, he's still struggling to tame the monster.

You'd think those crafting the federal reform of health care would be interested.

A government-run insurance plan to compete with private insurers, after all, is a central plank of the health care bill sought by President Obama and congressional Democrats. While there has been no shortage of dire predictions of what will happen if a public option is established at the national level, there is already clear evidence of what did happen at the state level.

There are two New England states now experimenting with universal health care--Massachusetts (starting in 2006) and Maine (starting in 2003), both of which are having financial problems--but their programs are too young to be assessed as national models. Rather, it's the southern state of Tennessee that offers the most relevant experience. Its track record goes back to 1994, when TennCare was launched by Democratic governor Ned McWherter on the promise that it would save the state money, reduce costs, and increase coverage. Instead, in a decade, the program went from a budget of $2.5 billion to nearly $8 billion, became mired in litigation, and was forced to make major cuts.

Congresswoman Marsha Blackburn was a Tennessee state senator back when many of the problems began to materialize in 1999. "There is not a credible example of having brought about a cost savings and insured everyone. We have seen that in TennCare," Blackburn told me. "I just find it unconscionable that they are not talking about the lessons that they learned from the TennCare experience, the lessons that are still being learned every day from the TennCare experience."

Blackburn, a member of the House Energy and Commerce Committee, one of the committees that have reviewed health care legislation, had a simple enough question for Health and Human Services secretary Kathleen Sebelius. "I would like to know what lessons the administration has taken from Tennessee's experiment with 'public option' health care; a program known as TennCare," Blackburn wrote.

Sebelius wrote back tersely, "We have learned many lessons from the TennCare experience and recognize its goals, but TennCare is not a traditional public option." The brevity of the response could be chalked up to the fact that it's not in the administration's interest to engage in a dialogue about what happened in Tennessee.

TennCare was conceived primarily as a budget measure, to address the rising cost of Medicaid, the federally funded, state-administered health care program for the poor. McWherter received a Medicaid waiver in November 1993 that allowed the state to leave Medicaid but use the same federal funds for its own managed care plan. The happy McWherter said after the waiver announcement, "For the first time we have the chance to provide affordable health coverage to every Tennessean without bankrupting our state." The plan pulled in the nearly 800,000 people then on Medicaid along with more than 300,000 deemed uninsured or uninsurable.

Initially nine managed care companies participated in the program, essentially as state contractors. In this sense, there was at least a private market (though not exactly a free market) component to Tennessee's experiment. That's by contrast with Obama-care, where the government would likely own and run the public option, which would only accelerate the problems, in Blackburn's view.

On January 1, 1994, the day TennCare was born, the Commercial Appeal in Memphis announced, "The $2.5 billion TennCare program replaces Tennessee's ballooning Medicaid program, promising more care for less money." The article quoted McWherter as saying, "Hundreds of thousands of Tennesseans who are on Medicaid or who are unable to get health insurance will have access to affordable health care under TennCare."

In a costly blow to the program, a federal court in 1996 prohibited Tennessee from reviewing the eligibility of enrollees. By 1998, enrollment had grown by 100,000, as employers moved employees into the TennCare system, which cost them less. "It was a gold plated plan and everything was covered," Blackburn said. "You had people that would leave private insurance and go to the public plan because it was free or very low cost."