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Health Care Advocates Agree With Governor: TennCare System Is Being Gamed

Health Care Advocates Agree With Governor: TennCare System Is Being Gamed

Posted: Friday, October 3, 2008 10:28 pm

Nashville, TN (Oct. 1, 2008) –  At his news conference on Tuesday, September 30, Gov. Bredesen said that “the [TennCare/Medicaid] system is being gamed”  (albeit legally), and this is the reason that costs to nursing services have dramatically increased between 2001 and today. The Tennessee Health Care Campaign agrees that the system is being gamed, but not by the people who need services. A medical doctor has prescribed the services they are receiving.
The gaming has been happening throughout the governor’s tenure, as his administration has not protected taxpayers by wisely using good fiscal management when it comes to contracting with managed care companies.  Since 2001, managed care companies (MCCs) have contacted with state on a fee-for-service basis and no-risk basis rather than on a capitated rate basis and at-risk basis thereby causing costs to balloon.  Managed care companies were supposed to have been put back on risk on January 1, 2003, but the Bredesen Administration failed to do this. As a result, MCCs have profited heavily over the last seven years without risk. Now that they are being returned to risk, they want to minimize risk to maximize profits.  TennCare cutting expensive patients means fewer expensive patients for the MCC’s to manage, thus, easier and greater MCC profits. Forcing people into nursing homes saves MCCs not taxpayers. In short, the administration has been putting MCC profits over people.
“Governor Bredesen continues to manage TennCare to make sure that the managed care companies make profits,” explains Tong Garr, Executive Director of the Tennessee Health Care Campaign. “We forget that this is how Bredesen made his millions before he became Governor. Not by making sure that people got the medical care that they needed, but by investing in managed care. He knows how MCCs make profits. He has not changed."


Brief History of TennCare/Medicaid Nursing Benefit:
1.     The nursing benefit has been the same since the beginning of TennCare in 1994. It began changing in 2001¾not because of the change in benefit¾but because of the change in the payment system.

2.     Before 2001, the managed care companies were paid on a capitation rate, and as the administration’s own data show, costs were kept in check. This is a set payment paid at the beginning of each month by TennCare to a managed care company for each person depending on their age, sex, geographical location, and eligibility category. This payment per member per month could vary between $60/member/month to over $600/member/month (compared to fee-for-service that could be, say, $10,000/member/month—see #4). The managed care company took the risk to care for these members at a set rate. If the managed care company kept its members out of the hospital and emergency rooms, they generally did well and made a profit. The managed care companies got to keep the capitation payments for its members even if its members did not seek medical care during that month.

3.     The advantage for the state is that the state’s Medicaid budget is more predictable when it pays on a capitated payment system as opposed to a fee-for-service system.

4.     In 2001-02, the capitated payment was discontinued and payments for enrollees care went back to the fee-for-service system, where costs can range into the hundreds of thousands per individual. This was the beginning of the rise in the costs of home nursing care for adults.

5.     In 2007-2008, the managed care companies began signing at-risk contracts returning to a capitated payment system, but the contacts will not be in full effect until January 1, 2009. Once this happens, we will see a huge reduction in state nursing costs because TennCare expenditures will once again be properly controlled.

The type and amount of nursing care Tennesseans are using:

6.     TennCare says that there are approximately 900 people who will be bumping up against the new nursing limits. However, this does not mean that TennCare is correct when it says that 900 people are currently receiving 24/7 or that $300,000 will be spent on each person each year. Many of these 900 are getting 12 or 16 hours a day, not 24.  In fact, when asked such details by the TennCare Oversight Committee on September 30, TennCare Commissioner Darin Gordon admitted he did not know and could not give accurate figures.


With the beginning of the new capitated rates, the administration needs to answer these questions:

1.     Under the capitated payment system that all the MCCs will be using, what is the maximum monthly payment that the state will pay out for a member in any eligibility category?

2.     Considering that capitation rates are based on age, sex, place of residence, and eligibility category, what capitation payments will managed care companies receive?

3.     Capitation payments are about MCCs spreading the risk among all 512,000 TennCare adults, not just the 1,000 adults who are bumping up against the new nursing limits. One might ask the question: On the average, how many enrollees do not go to the doctor each month, allowing the MCCs to keep all the TennCare payment for that month?

4.     Which high-cost enrollees will be next? People who have been diagnosed with COPD, diabetes, transplant patients, patients with hemophilia. These types of patients are expensive and will remain expensive.

5.     What is the solution? Many families are making great sacrifice taking care of their loved ones at home. They have quit their jobs, modified their homes, put off careers, and neglected their own medical care.  They are not asking for a handout, just a hand up.

Advocates have never said and are not saying that the current poor management of TennCare nursing services should continue, that costs shouldn’t be reigned in, or that families shouldn’t have more and better choices to keep loved ones with special needs at home rather than in a nursing home. The Tennessee Health Care Campaign has been and continues to advocate for humane, effective, and efficient home-based medical care.

There are reasonable solutions:
1.     With capitation payments, costs for the state will go down and then level out for adults in 2009 at a much lower rate–not go up as the TennCare Bureau has painted.

2.     The current 900 families who are bumping up against the limits and are being impacted by these cuts need to be grandfathered-in. It is one thing to make new arrangements for a new enrollee needing nursing services and it is entirely something else to force new benefits on people who have already made great sacrifice to keep their loved ones at home. For example, the 97,000 Medically Needy enrollees who were grandfathered-in on April of 2005, through attrition had decreased by almost half by January 2008.

3.     If these cuts and reductions are to go forward, they need to be postponed until the new Long Term Care Community Choices act is fully implemented. By then, because of changes in the Nurses Practice Act and other options and choices, families will have many more alternatives for care that they currently do not have.

THCC sees the following guiding principles as critical to adopt as TennCare moves forward.
1.     Families need more time. They have modified their homes, are about to quit their jobs, have stopped their education, and have put their own health at-risk.

2.     Families need more flexibility, choices, and individualized care. However, to do this, the implementation of these new rules need to be postponed until the full implementation of the Long Term Care Community Choices Act is fully implemented.

3.      Points 1 and 2 are in harmony with the bi-partisan Long Term Community Care Choices Act enacted this year and what Governor Bredesen said, “My job is to open more doors to alternatives here in Tennessee. If you want to stay in your home, it is makes sense to do so, this is the year we’re going to start making it easier.” 
Posted 10.3.08

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