Tennessee was home to a failed attempt at universal single payer care, and has lessons to teach a President who has promised that in pursuing his goal of universal health care, he will learn from the policy failures of the past.
In 1994, Tennessee implemented managed care in its Medicaid program, creating a system known as TennCare. The objective was to use the anticipated savings from Medicaid to fund and expand coverage for children and the uninsured. The result was a program that nearly bankrupted the state, reduced the quality of care and collapsed under its own weight.
The genesis of TennCare has many parallels to the situation in which we find ourselves today. It was a public option plan designed to save money and expand coverage. In the early 1990s, Tennessee was facing rising costs in its Medicaid program. TennCare was designed to replace Medicaid with managed care and use the promised savings to expand coverage.
By 1998, TennCare swelled to cover 1.2 million people. Private business dropped coverage for employees and forced them onto state rolls. By 2002, enrollment had swelled to 1.4 million people and forced Tennessee’s governor to raise taxes and ultimately propose an entirely new state income tax to cover the unforeseen costs.
Gov. Phil Bredesen was ultimately forced to dramatically restructure a program he has since called "a disaster." By 2006, he had dis-enrolled nearly 200,000 people and slashed benefits.
TennCare lessons challenge the Obama Administration's thinking on the benefits of a "public option" solution to assuring Americans have the care they deserve. As a Tennessee doctor who provided care under TennCare and a state legislator who had to find ways for the state to pay for it, we learned these lessons the hard way. They shaped the way we both approach health care policy. With Democrats promising to pass a similar system in the House by August, those lessons are worth sharing with the country now.
– ‘Free’ care is expensive: No matter how forthright the administration's cost estimates are; no model accounts for the rational decisions that push people to over-utilize the "free care" a public option offers.
TennCare's gold-plated coverage included every doctor's appointment and prescription. As such, patients with a cold opted to charge the state hundreds of dollars for doctor visits and medicine instead of paying $5 out of pocket for over-the-counter cold medicine. Overuse caused TennCare's anticipated savings to evaporate and its cost to explode. While TennCare consistently covered between 1.2 million and 1.4 million people, costs increased from $2.5 billion in 1995 to $8 billion by the time of TennCare's restructuring. It consumed a third of the state budget including nearly all state revenue growth.
– Employers prefer ‘free’ care to private care: If the government offers universal health care, why wouldn't businesses move employees to the plan as a sound business decision?
In Tennessee, this behavior dramatically expanded the public burden as people who had once been on private insurance migrated to the "free" option of public care, adding to the state's unanticipated cost. Studies indicate that only 55 percent of those added to TennCare came from the uninsured population, while the rest came from a decline in private coverage.
– There’s a difference between access to care and availability of care: Government-run health care advocates must over-promise on benefits to gain support for their plan, only to renege on those promises when the bill comes due. It’s a classic bait-and-switch.
To pay the TennCare bill, benefits were slashed and reimbursement rates for doctors and hospitals were reduced. Ultimately, 170,000 people were cut from the program. Since they weren't being paid; fewer physicians could afford to accept TennCare patients. So while a TennCare card guaranteed you access to care, it did not guarantee the availability of care.
– Government control puts more people in the exam room than you and your doctor: Because government health care can only provide what it can afford, a determination of cost-effective care becomes more important than doctor-recommended care.
Doctors become intermediaries between the government and patients, only able to offer suggestions on treatment. Tennessee physicians often spent more time arguing with government bureaucrats over care than they did providing it to their patients. Other actors soon inserted themselves into the process, including trial lawyers and advocacy groups who stepped in to sue the state.
The President’s new health care czar was a critical link in the TennCare story. Serving as Human Services Commissioner in Tennessee and then as a key health staffer in the Clinton Administration, Nancy DeParle should be well aware of Tennessee's health care saga. We hope that she lists the kind of universal care that TennCare embodied in the “don't try again” column.
We want to provide access to affordable basic health care for all Americans, and we're actively seeking a solution to do this. But creating a plan like TennCare is not the right answer.