MYTH #4:
“The Governor has reformed TennCare and brought it under sound management, just as he promised when he ran for election.”
REALITY
Over the past three years, Governor Bredesen has announced many reform plans, but about the only thing he has actually done is cut essential health care for very sick patients. He never implemented several basic reforms that were essential to TennCare’s survival.
- The Governor promised to require BlueCross BlueShield of Tennessee and the other managed care organizations to reassume financial responsibility for managing the program and its costs. In 2002, right after he was elected, the Governor said that the state was in an “untenable position” because the MCOs did not bear any financial risk and were therefore not managing care.1 He said they were being overpaid by two or three times just to process claims, rather than provide real management. Two years later, his TennCare Director admitted that the state was still paying more than it should, because the MCOs were not at risk.2 The politically powerful HMOs, who helped pay the Governor’s consultants who advised him on his TennCare policies, were still being overpaid and were not managing care.3 The federal government withheld $90 million a year because of the state’s failure to hold the plans accountable for assuming financial risk.4 The state claims to have finally returned financial risk to the MCOs in contract amendments that took effect in July 2005. In fact, however, the state has yet to return financial responsibility for medical expenses to the MCOs, and has only made minor adjustments in their administrative fees.5
- When campaigning in 2002, the Governor said that he would institute innovative programs of disease management that would save TennCare many millions of dollars while improving the treatment of patients with chronic illness. In February 2004, when announcing his TennCare proposals, Governor Bredesen touted disease management as a major part of his reform package.6 His consultants pointed out in internal documents that disease management programs were “immediately available from multiple vendors”, yet TennCare failed to implement disease management. In late 2005, the state imposed arbitrary service limits that are completely incompatible with disease management. Those limits make it impossible to safely manage the care of the chronically ill, resulting in more frequent medical crises and costly hospitalization.7 A nationally respected expert on disease management, called as a witness by the state in a federal court hearing involving TennCare, testified in June 2005 that, if the state had actually implemented disease management, along with better management of pharmacy utilization, it would have generated enough savings to avoid disenrolling many, perhaps all, of those who have been cut from the program.8
- In early 2003, the Governor promised that the state would implement retrospective drug use review (DUR) right away.9 This is the computer profiling system that is used to identify and correct overprescribing of drugs. (See Myth #1.) Because high drug use in Tennessee is a major problem and the largest single factor driving TennCare costs, complying with the federal law requiring retrospective DUR was critical. The Bredesen Administration did not institute retrospective DUR until mid-2005, and as of November 2005, the federal court found that “the State’s current DUR efforts are woefully inadequate”.10
- Governor Bredesen promised the public while campaigning in 2002, and again in 2003 when announcing his negotiation of consent decrees in several TennCare cases, that the state would develop home and community-based services (HCBS) as an alternative to nursing home placement for the frail elderly and people with disabilities.11 But he has not made good on his pledge, bowing to the opposition of the powerful nursing home lobby. As a result, Tennessee ranks 50th in the nation in the availability of such services.12 That means that TennCare continues to pay over $1.25 billion annually for nursing home care that many patients and families don’t want and would gladly exchange for cheaper home care if they could. The Governor’s budget makes things worse, by spending nearly $125 million more for nursing home care in 2007.13
- The Governor declared in February 2004 that the centerpiece of his reform plans would be pharmacy service reforms that would save hundreds of millions of dollars.14 The greatest savings would be the creation of a tiered formulary, which is a drug list that restricts the use of more costly medicines. But the state has chosen to rely on a politically influential but poorly performing contractor, a firm named First Health, to be the TennCare pharmacy benefit manager, or PBM. Court testimony and confidential Bredesen Administration documents from 2004-2005 reflect that:
- First Health managed the pharmacy program so badly that two successive TennCare Directors considered terminating its contract.
- First Health failed to process returned mail or update its address files when enrollees died, and simply shipped a ton (literally) of unopened mail back to the TennCare Bureau.
- First Health failed to put in place controls that had been required by federal law for over a decade and that are designed to prevent the improper dispensing of duplicate prescriptions, or the dispensing of drugs which, if taken together, could be dangerous.
- First Health never implemented an effective retrospective DUR program.
- First Health has never even designed, much less implemented, the tiered formulary that was announced in early 2004.
These failures cost the public, but not First Health. First Health is owned by the company that the Governor founded and previously owned, and which continues to have close political ties. Instead of firing the company, the state paid additional amounts to another firm to perform some of the functions that First Health was already under contract to provide.15 In spring 2005, the state extended First Health’s no-bid contract and more than doubled its fees.
1 “Gov-Elect outlines his agenda”, Chattanooga Times Free Press, Nov. 10, 2002.
2 Flessner, “TennCare offers few reasons to hold costs”, Chattanooga Times Free Press, Dec. 25, 2004.
3 See Todd Pack, “Not-for-profit BlueCross has $1B in bank” and “BlueCross, TennCare share long, sometimes rocky past”, The Tennessean, August 14, 2005.
4 Testimony of TennCare Director J.D. Hickey in Rosen v. Commissioner of Finance, No. 3:98-627 (M.D. Tenn.), March 31, 2005, at transcript pp. 129-130.
5 The Tennessee Journal, August 29, 2005, at p. 4; see n. 8, above.
7 Testimony of Dr. Harry Jacobson, Vice-Chancellor for Medical Affairs, Vanderbilt University, in Grier v. Goetz, No. 79-3107 (M.D. Tenn.), June 29, 2005, at transcript pp. 146 – 147, 158-159 and 164-165.
8 Testimony of Dr. Harry Jacobson, Vice-Chancellor for Medical Affairs, Vanderbilt University, in Grier v. Goetz, No. 79-3107 (M.D. Tenn.), June 29, 2005, at transcript p. 99.
9 Letter from Robert Cooper, Jr., Counsel to the Governor, to Gordon Bonnyman, Tennessee Justice Center, May 8, 2003.
10 See Testimony of Dr. Joseph Hensley in Grier v. Goetz, No. 79-3107 (M.D. Tenn.), July 18, 2005, at transcript pp. 2921-2928; WSMV-TV Channel 4 News Investigative Report: Drug Review might have saved TennCare millions (11-15-04) (available at http://www.wsmv.com/Global/story.asp?S=2780422&nav=9Tb0UxGH; Grier v. Goetz, No. 79-3107 (M.D. Tenn.) Memorandum Opinion of November 15, 2005), p. 39.
14 Governor Phil Bredesen, “Saving TennCare: A Speech to the Tennessee General Assembly”, February 17, 2004.
15 Michael Cass, “State plans raise for firm it penalized” and “Bredesen exerted no pull in contract, officials say”, The Tennesseean, March 20, 2005; Michael Cass, “Compliance with TennCare pact disputed”, The Tennessean, April 12, 2005.
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