Governor Haslam’s Proposed Medicaid Expansion Fails in Legislature

Medicaid expansion is not going to happen in Tennessee any time soon. Governor Haslam’s proposal, known as Insure Tennessee, was soundly defeated during the recent session of the Tennessee legislature.

Since 1994 the Medicaid program in Tennessee has been known as TennCare. It operates under a special waiver from the U.S. Department of Health and Human Services (HHS) because, unlike most state Medicaid programs, TennCare benefits are paid to health care providers by insurance companies that contract with the State of Tennessee rather than by the State itself.

The Affordable Care Act (ACA) required states to expand their Medicaid programs to cover people who do not have health insurance, who are between the ages of 19 and 64, and who earn less than 138% of the federal poverty level. In 2012 the U.S. Supreme Court ruled that this provision of the ACA is unconstitutional and that Medicaid expansion should be voluntary for each state, not mandatory.

27 states have chosen to expand their Medicaid programs. Thus far, Tennessee has chosen not to do so. While it is still possible that Tennessee will change its mind, at this point that seems very unlikely.

Since 2013 Governor Haslam has been talking with HHS officials about a unique approach to Medicaid expansion that would encourage recipients to take more personal responsibility for their health. The persons who are determined eligible for these benefits would be covered in one of three ways. Persons who are 19 or 20 years old would simply be added to the TennCare rolls. Persons between 21 and 64 years of age would be covered under one of the following two plans.

The Volunteer Plan is for persons who are employed and have access to employer-sponsored insurance, but cannot afford to pay the employee’s share of the costs. Insure Tennessee would provide a “defined contribution” that would cover the employee’s premiums and allow him to be on his employer’s plan, as well as pay a portion of the person’s deductible and co-pays.

The other plan for persons 21-64 is the Healthy Incentives Plan, which would require the person to pay a premium and co-pays for most services. The premium would be about $20 a month. The co-pays would be $75 per hospital admission, $4 per outpatient service, $8 per non-emergency use of an ER, $1.50 per generic drug, and $3 per brand name drug.

Another feature of this plan is a Healthy Incentives for Tennesseans (HIT) account, in which a person could accumulate credits by showing proof of healthy behaviors. The credits could be used to assist the person in paying premiums and co-pays.

Insure Tennessee is a pilot project which would be in effect for only 2 years, but could be renewed. The federal government would pay 100% of the costs of Insure Tennessee through 2016, but the State of Tennessee would have to pick up a percentage of the program’s costs beginning in 2017. The State’s percentage would increase each year through 2020, after which the State’s share would remain fixed at 10%.

The State’s hospitals, which strongly support the Governor’s plan, have agreed to pay the entire State’s share of the cost to implement the plan. Since 2010, Tennessee’s hospitals have been paying an assessment to fund a portion of the existing TennCare program. The assessment is currently 4.52% of a hospital’s net revenues. The assessment would be increased to a level sufficient to fund the State’s portion of the Insure Tennessee costs.

You may ask, why would the legislature turn down this federal money? There are two reasons. The Republican-dominated legislature wants no part of Obamacare, in any form or fashion. Secondly, and more rationally, the veteran members of the legislature remember the year 2005, when Governor Bredesen made substantial cuts in the TennCare program and terminated the eligibility of thousands of Tennesseans. They are afraid that the same thing will happen again if they approve Insure Tennessee, i.e., they will have to make cuts to the TennCare program in three or four years that will reverse the action of adding thousands of people to the TennCare rolls. They are not willing to run that risk.

Is it possible that the legislature will approve Insure Tennessee in 2016? It is possible, but extremely unlikely.