MYTH #3:
“Other states don’t have these problems, and Tennessee wouldn’t either, if we had never established TennCare to begin with.”

REALITY

Tennessee is not alone. Since Medicaid’s founding in the 1960s, all states have had to deal with budget pressures that are caused by the fact that the cost of medical care in the United States has consistently risen faster than the general economy and state tax revenues. Because of management errors and poor policy choices made since 2000, TennCare costs rose more rapidly than some, but not all, other states.1  The National Association of State Budget Officers reported in 2004 that, “Even with extensive cost containment efforts and the federal fiscal relief, states’ Medicaid expenditures have exceeded the amounts budgeted for the program. Twenty-three states experienced Medicaid shortfalls in fiscal 2003 and 18 states anticipated shortfalls in fiscal 2004. States continue to be squeezed by Medicaid spending pressure.”2 

Although all states face the same Medicaid budget problems confronting Tennessee, our state differs from the rest of the nation in two important respects:

  • The 1993 TennCare waiver gave Tennessee the advantage of hundreds of millions of dollars of additional federal funding, which made possible the expansion of coverage to the uninsured. A study by McKinsey & Company, the corporate consulting firm hired by the Governor in 2003, found, “TennCare’s broad enrollment has multiple advantages for the state, including, most important, maximizing the benefit of federal match and facilitating health coverage for as many citizens as possible.”3 McKinsey & Company warned that, “A move to Medicaid would therefore require Tennessee to contribute additional money from state funds, largely offsetting the savings from reducing enrollment.”4
  • No state has ever cut its program so deeply, or at such great cost in federal funds, as Tennessee. Some states have made small reductions in enrollment or benefits, but most have avoided cuts that would hurt patients. Other states have cut administrative costs, expanded the use of home and community-based services (HCBS) as alternatives to more costly nursing home care, and frozen payments to managed care contractors or providers.5

1 McKinsey, Part 1, p. 26-28.

2 NASBO, 2003 State Expenditure Report, p. 46 (November 2004).  http://www.nasbo.org/Publications/PDFs/2003ExpendReport.pdf.   See also Kaiser Commission on Medicaid and the Uninsured, State’s Respond to Fiscal Pressure:  A 50-state Update of State Medicaid Spending Growth and Cost Containment Actions, p. iii(January 2004) http://www.kff.org/medicaid/loader.cfm?url=/commonspot/security/getfile.cfm&PageID=30453  Kaiser Commission, “Fact Sheet:  State Fiscal Conditions & Medicaid” (April 2004) http://www.kff.org/medicaid/loader.cfm?url=/commonspot/security/getfile.cfm&PageID=34498.

3 McKinsey & Co., Achieving a Critical Mission in Difficult Times – Illustrative Strategic Options for TennCare, p. 18 (February 11, 2004)(“McKinsey, Part 2”). http://www.sitemason.com/files/iLtSyA/Illustrative%20Strategic%20Options%20part%202%20of%20a%20report%20by%20McKinseyCompany.pdf

4 Id. pp. 12-13; McKinsey, Part 2, p. 84.

5 Kaiser Commission on Medicaid and the Uninsured, The Continuing Medicaid Budget Challenge: State Medicaid Spending Growth and Cost Containment in Fiscal Years 2004 and 2005; Results from a 50-State Survey  (October 2004) available at: http://www.kff.org/medicaid/upload/The-Continuing-Medicaid-Budget-Challenge-State-Medicaid-Spending-Growth-and-Cost-Containment-in-Fiscal-Years-2004-and-2005-Results-from-a-50-State-Survey.pdf.

 

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