Bad Policy, Inept Performance: TennCare’s Management Track Record

Alone among all of the states, Tennessee has aggressively pursued a federal waiver that would convert the state’s Medicaid managed care program, known as TennCare, into the nation’s first Medicaid block grant. The state demands the removal of what it describes as the “unnecessary administrative burdens” of federal regulation and oversight. Tennessee claims that, with the necessary flexibility, it can be trusted to design and run its Medicaid program “in a way that better meets the needs of its members.” To that end, TennCare has sought a blank check to “Modify enrollment processes, service delivery system, and comparable program elements without the need for a demonstration amendment.”

To justify its sweeping demand, the state points to “a demonstrated history of effective administration of its managed care program” that is claimed to prove that federal oversight and regulation are superfluous and wasteful. Unfortunately, Tennessee’s record demonstrates just the opposite. For many years, TennCare has been noteworthy for its damaging combination of poor policy and inept administration.  The program’s “demonstrated history” proves the need for more, not less, federal oversight of TennCare’s enrollment processes and service delivery system.

Tennessee’s administration of its Medicaid eligibility and enrollment processes has set it apart from other states in three ways:

  • Tennessee’s unusual degree of difficulty reliably performing essential administrative functions;
  • Tennessee’s unwillingness to respect the due process rights of applicants and enrollees; and
  • Tennessee’s erection of eligibility barriers to enrollment, especially for people with disabilities.

Tennessee’s Poor Management of Enrollment and Eligibility Functions

The Affordable Care Act required all states to update their automated eligibility systems by October 2013 in order to implement new eligibility rules and procedures. The federal government funded 90% of the costs of developing new IT systems to meet the law’s requirements. Tennessee was one of a number of states whose systems were not ready by the deadline. Other states collaborated with the federal Centers for Medicaid and Medicaid Services (CMS) to develop work-arounds that would accommodate applicants and enrollees until their new systems came online.

Tennessee did something no other state did. In late 2013 and early 2014, the federal health insurance exchange, also known as, was having well publicized computer and start-up problems of its own. Tennessee officials were vociferous in disparaging the ACA and the FFM. But in an act of callous indifference to its own residents, Tennessee stopped accepting all but a small category of applications and told the public to apply through the troubled FFM. As a federal court found in 2014, “The Federal Exchange was not designed to replace the State’s Medicaid application process, and it is not particularly surprising that the system has had operational problems and difficulties in handling that task.” Those problems resulted in tens of thousands of applications being lost or delayed for many months. The court record documented numerous stories of eligible individuals suffering without care – in some cases with life-threatening conditions – because the state refused to process their applications. To make matters worse, the state deliberately defied federal law and refused to let anxious applicants appeal the delays, relenting only under order of the federal court.

In 2013, Tennessee assured CMS that its TennCare Eligibility Determination System (TEDS) would be operational in 2014. CMS put in place a temporary “mitigation plan” to try to lessen the harms to applicants and enrollees until TEDS came online. CMS tried in vain to get the state to take steps to comply with federal eligibility and enrollment rules, steps that were immediately available without waiting for TEDS’ completion. In a June 2014 letter, CMS warned that Tennessee was not meeting several “critical success factors” for the implementation of eligibility and processing changes to Medicaid. CMS noted that it had asked the State to implement several additional mitigation options, including creating an “in-state mitigation plan that would allow people to apply for coverage … directly to the Tennessee Medicaid agency,” as required by federal law, but the state refused. CMS warned that TN’s use of the Federal Exchange to process nearly all applications “was approved as a short-term measure, not a long-term solution.” Id. at 3. Like other states, TN could have created a manual in-person process to accept and process applications when TEDS was not ready. But TN refused to do so, and its “temporary” use of the Federal Exchange extended to more than five years.

In 2015, the state terminated its contract with the original TEDS developer, and auditors hired by the state found that Tennessee officials were incapable of drafting a new request for proposals. With federal assistance, a new developer was hired. CMS updated the mitigation plan, which remained in place until 2019, long after every other state had updated their eligibility systems, when TEDS finally came online. At that point, the original price of $38 million had ballooned to over $400 million, more than twice the amount spent by any other state. Federal taxpayers were saddled with 90% of the cost.

Unfortunately, TEDS was seriously flawed. Tens of thousands of eligible — and extremely vulnerable — children and adults lost their coverage in 2019-2020, as a result of defects in the new eligibility system and unlawful state policies.  As extensively documented in a lawsuit filed in March 2020, the state continued to terminate families without notice or explanation, and many only learned that they had lost coverage when they tried to use their TennCare cards at a pharmacy of doctor’s office. The state lost or ignored documents submitted by enrollees that proved their eligibility, then terminated their TennCare for failing to submit the documents. When families contested their wrongful termination, they were summarily denied appeals without a hearing, in violation of federal law. (Like all other states, Tennessee has temporarily suspended Medicaid terminations during the pandemic in order to qualify for enhanced federal funding, but the state continues to defend its policies in the pending lawsuit.)

TennCare’s administrative failures have been enormously costly to eligible Tennesseans. Over the past three years, Tennessee’s eligibility redetermination process has terminated TennCare or CHIP coverage for 238,000 children, most of them without an actual finding that they were ineligible. The same problems resulted in thousands of elderly and disabled Medicare beneficiaries mistakenly losing coverage or their Medicare Savings Program benefits without notice, and without effective recourse. In other instances where families received the renewal forms and returned them to TennCare, they lost coverage because TennCare failed to process documentation submitted by the families proving their eligibility. As a result of the flawed redetermination process, Tennessee is among the states with the largest increases in uninsured children, with about 83,000 Tennessee children having no health insurance in 2018 according to Census data. TennCare officials have refused to take any responsibility for the loss of children’s coverage, or what might be done to restore it.

Tennessee’s Failure or Refusal to Respect Due Process

Tennessee has compounded the problems it has created for applicants and enrollees by its persistent refusal to provide an appeal process by which to challenge erroneous eligibility determinations.

Due process has been a fundamental requirement of Medicaid for half a century. Guaranteed by both the Constitution and the Medicaid Act, an individual’s right to appeal the denial or termination of coverage is an important accountability mechanism for the program, and an essential protection for the health and safety of individuals. Tennessee’s chronic refusal to respect due process is documented in a series of class action lawsuits successfully challenging the state’s eligibility policies and processes. The first court orders were entered in a case filed in 1979. Subsequent orders were entered to reinstate tens of thousands of individuals with disabilities whose coverage was terminated without notice or ability to appeal. The 2014 injunction requiring the state to provide appeals for those whose applications had been lost or delayed was only lifted in 2019. Within 15 months, Tennessee was back in court in the massive new case challenging its refusal to allow appeals to families whose TennCare coverage had been wrongfully terminated.

TennCare’s Barriers to Enrollment for People with Disabilities

TennCare has a long record of administering its eligibility process in ways that have created gratuitous barriers to enrollment, and especially for those with disabilities. By sending almost all applicants to the federal exchange for over five years, the state relegated them to a process that lacked an in-person portal and required that all communications be conducted by phone, in writing or online. The process effectively screened out individuals with communicative or cognitive disabilities, and who needed in-person assistance. During the redetermination process that cost 238,000 children their coverage, the state required enrollees to complete 49 pages of a 98-page paper packet (half in English, half in Spanish) in order to retain their coverage. Many people with mental or cognitive disabilities were simply overwhelmed when they received the packet.

Tennessee has received national media attention for implementing other uniquely onerous enrollment policies that impact people with severe disabilities. Until 2004, Tennessee was like most states in covering individuals with catastrophic medical expenses who qualified for Medicaid in the Medically Needy Spend-Down category. In 2004, the state restricted eligibility so that only pregnant women and children retained an entitlement to Spend-Down coverage. For disabled adults, the state substituted a block grant program whose enrollment was capped at 2,500 at any given time. Rather than allocate the limited slots by instituting a wait list, lottery or triage system based on need, the state enrolled people twice a year by opening a telephone process for a few hours and accepting the first people to get through on the phone. See A. Goodnough, “Tennessee Race for Medicaid: Dial Fast and Try, Try Again,” New York Times (March 25, 2013). By creating a “race goes to the fittest” application system, the state effectively screened out those whose mental or physical disabilities prevented them from winning the desperate competition. After the process received negative national attention, the state responded not by reforming the enrollment process but by abolishing the coverage.

Tennessee has also instituted what are perhaps the most onerous eligibility criteria in the nation for frail adults seeking long term services and supports. See N. Bernstein, Pitfalls Seen in a State’s Turn to Privately Run Long-Term Care,New York Times (March 7, 2014). The state has continued to make eligibility for these disabled individuals ever more stringent, leaving individuals with severe disabilities unable to navigate the enrollment process and therefore without any care at all. See T. Wilemon, “’God Almighty’ boarding house struggles to help needy: Unlicensed Nashville nursing home caters to those who have nowhere else to go,” The Tennessean (February 17, 2014).

The pending lawsuit filed in March 2020 against TennCare documents the state’s ongoing failure to comply with the Americans with Disabilities Act, and its maintenance of eligibility procedures that continue to screen out people with cognitive and physical disabilities.