January 14, 2005

Officials await new TennCare’s possible impact

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Vice Chancellor for Health Affairs Harry Jacobson, M.D., talks about the year ahead for VUMC.
photo by Mary Donaldson

Officials await new TennCare’s possible impact

It may be too early to assess the full impact on health care providers such as Vanderbilt University Medical Center of the announcement this week that Tennessee is drastically altering the scope of its TennCare program, but Medical Center officials said impact is inescapable.

“We are glad that the governor was able to continue protecting the health needs of the state's children,” said Norman B. Urmy, executive vice president for Clinical Affairs. “Still, we're disappointed that he had to abandon his previously proposed reform package, which we supported. We don't know the full details of these new changes yet, but we suspect they will negatively impact the hospital and Vanderbilt Medical Group.”

During the last fiscal year VUMC's TennCare volume stood at approximately 25 percent, with more than 19,000 Emergency Department visits, 206,000 outpatient visits and nearly 10,000 hospital admissions. Those numbers, especially the Emergency Department visits, could change significantly following TennCare's restructuring as patients will continue seeking health care, regardless of whether they have insurance.

“When people lose their insurance benefits they tend to use hospitals as safety nets,” Urmy said. “We expect to see a surge in ED visits.”

According to the Tennessee Hospital Association, state hospitals already provide nearly $1 billion in uncompensated charity, care of the medically indigent, bad debt and unreimbursed TennCare costs.

On Monday, Tennessee Gov. Phil Bredesen announced plans to restructure the state's TennCare program — which, until now, provided health coverage to 1.4 million people in the state who are poor, disabled or otherwise unable to obtain health insurance. He pointed to TennCare's spiraling costs, reduced federal funds and litigation brought on by patient advocacy groups, which have until now stymied efforts to reform the program and trim its cost, as the primary reasons for the move.

The new restructuring plan includes reducing the number of enrollees and limiting benefits, but it stops short of a return to a Medicaid program.

Approximately 323,000 adults who are not eligible for Medicaid will be removed from the TennCare rolls and the state plans to reverify everyone who is scheduled to be removed from TennCare to ensure they are not Medicaid-eligible. Removing enrollees is expected to begin in the spring with conversion to the new TennCare program expected to be complete by 2006.

Coverage for all 612,000 children currently enrolled in the program will continue to be provided and their benefits will not be limited.

In addition to cutting the number of enrollees, the new plan also trims benefits, limiting enrollees to four prescriptions per month, 12 physician office visits per year, 10 lab occasions per year and 20 inpatient hospital days per year.

The changes are expected to generate at least $575 million in savings for the state in the upcoming fiscal year, with the new program expected to require only $75 million in new revenue — a dramatic decrease from the $647 million in additional state revenue that would have been required to maintain TennCare in its present form.

Currently, TennCare is an $8.7 billion-a-year program, with Tennessee taxpayers funding approximately one-third of the cost and the federal government covering the rest.

The governor's plan is currently under review by federal regulator agencies.