MYTH # 9:
“As the Governor has assured us, ‘Our state and our people will come through this just fine.’”1

REALITY

TennCare affects human lives.  TennCare funds the safety net for both medical and mental health care, and when TennCare cuts fray that safety net, real people suffer.2 The U.T. Center for Health Services Research has analyzed the impact on death rates of taking away TennCare coverage and leaving people without insurance. According to that analysis, cutting 200,000 adults from the TennCare program would increase the statewide death rate by as many as 275 deaths per year, or an additional death every 36 hours.3

Unfortunately, that estimate is probably conservative, since those cut from TennCare include people who are particularly sick and vulnerable. Also, the estimate is limited to the effects on those being removed from the program, and does not take into account the additional risks of cutting services for those who remain. Physicians warn that the five prescription limit, for example, will endanger many elderly patients who suffer from multiple chronic illnesses and who require twice as many medications as will now be available.

The harm will not be limited to TennCare enrollees. Cutting $1.8 billion in public funding will have serious consequences for a health care system on which all Tennesseans rely. The Tennessee Hospital Association has predicted that at least forty hospitals, mostly in poor, rural communities, are at risk of closing due to the loss of TennCare funds. The closure of those hospitals will mean the loss of major employers, an inability to recruit or retain physicians, and a permanent blow to the vitality of those communities and their economies.4 The withdrawal of funds will cripple communicable disease control efforts by limiting, for example, access to drugs needed to treat HIV/AIDS and hepatitis. The loss of funding for the chronic care of people with serious mental illness will have widespread social and medical consequences, as these individuals become homeless, and they are left to fall back on local jails and emergency rooms.

Tennessee’s economy loses in several respects. Employers can expect to see their group insurance premiums rise as health care providers shift to private patients the costs of caring for former TennCare patients who now have no means of paying for their own care. Hospitals were expected to raise their rates by 17% in the first year to offset the effects of the TennCare cuts.5

Job loss caused by the reduction in federal funds will occur throughout the entire state economy.6 In fact, the number of jobs lost due to the TennCare cuts offsets most of the state’s gains in new job development over the entire year.7  Because a disproportionate share of lost federal funds would have been spent in poorer communities that had high TennCare enrollment, their loss will be felt most in those counties that already have the weakest economies.

Most strikingly, state government appears to be a loser. McKinsey & Company warned in 2004 that returning to Medicaid would involve a loss of the federal funding advantages associated with TennCare’s broadened coverage: “A move to Medicaid would therefore require Tennessee to contribute additional money from state funds, largely offsetting the savings from reducing enrollment.”8 That warning has been vindicated by subsequent events. For, although the cuts relieved immediate pressures on the state budget, they did not address the underlying inflation.

The cuts did not even eliminate increases in state expenditures for TennCare, for the massive savings accrued to the federal government, not the state. Total state spending on TennCare in 2004-2005, prior to the implementation of the cuts, was $2.539 billion. Despite the cuts, state spending will rise by $110 million in the current fiscal year. The Governor’s budget projects growth next year to $2.673 billion.9

The state has eliminated almost all Medicaid benefits and eligibility categories that are not either required by federal law or, like nursing home and prescription drug coverage, are impossible to eliminate for practical reasons. Worrying projections of medical inflation create the specter of the state facing new pressures within the next few years, but without much left to cut. Tennessee faces this daunting prospect without the aid of the massive federal funds that it just forfeited when it returned to Medicaid.10

Close This Window