Tennessee’s Ailing Healthcare Plan Signals Need for U.S. Cure

The ongoing collapse of Tennessee’s innovative plan to provide health insurance to thousands of uninsured working families should send a clear message to President Bush and Congress: The mounting healthcare crisis can’t be ignored much longer.

After briefly improving in the late 1990s, all of the vital signs for America’s health system are deteriorating. The nation is caught in a debilitating spiral of rising costs and declining access -- the conditions that inspired Bill Clinton’s failed quest to guarantee universal coverage a decade ago.

Battered by four consecutive years of double-digit premium increases for health insurance, fewer employers (especially small businesses) are offering coverage -- and fewer workers can afford to buy it even when it is offered. The result: Since Bush took office, the number of Americans without health insurance has increased by nearly 5.2 million to almost 45 million, according to the Census Bureau.

Those numbers would be much worse if public programs had not provided a safety net for millions more unable to receive coverage from employers. Since 2000, enrollment has increased by more than 6 million in Medicaid, the joint state-federal program for the poorest families, and the Children’s Health Insurance Program, another state-federal partnership that covers children of the working poor.

But these public programs are cracking under the pressure of relentless increases in medical costs and the number of uninsured. That’s the key lesson from the crisis in Tennessee, where Democratic Gov. Phil Bredesen is threatening severe reductions in eligibility for the state’s path-breaking TennCare program if advocates for the poor don’t accept unprecedented reductions in benefits.

Founded in 1994, TennCare represents one of the nation’s most ambitious efforts to cover working poor families. It provided care to any Tennessee resident who did not have access to insurance at work (with premiums rising for the more affluent). And it sought to fund the expansion by shifting both the new enrollees and the existing Medicaid population -- mostly families in poverty -- from traditional fee-for-service medicine into managed care programs.

At its height, the program significantly expanded coverage. But it increasingly strained the state budget. The savings from managed care didn’t prove as large as planners hoped. And even the savings TennCare achieved were overwhelmed by the accelerating rise in overall medical inflation.

With costs soaring, Bredesen’s Republican predecessor in 2002 froze new enrollments for all but the poor families who met the traditional Medicaid eligibility requirements. Even so, costs have continued to grow: One study last year projected that by 2008 the program would demand fully 36% of state spending.

Bredesen, a former Nashville mayor, and before that a successful health maintenance organization entrepreneur whom even critics call brilliant, was elected in 2002 largely on a promise to reform the program. Earlier this year, the Legislature authorized Bredesen to impose sweeping benefit reductions, including limits on how often patients could visit the doctor or fill a prescription.

When advocates for the poor went to court, Bredesen went nuclear: In November, he said that if opponents didn’t accept his benefit cuts, he would transform TennCare back into a traditional Medicaid program that only covered the poor. That would eliminate healthcare coverage for some 430,000 people, about a third of the population the program serves.

Hoping to avoid such a crackup, Bredesen and low-income advocates led by the Tennessee Justice Center are planning to resume negotiations as soon as this week. The talks are likely to be tough, because at this point the state has no good choices.

Tennessee can’t meet other needs like education while allowing the program to grow at its current rate. Tax hikes aren’t politically viable. But dropping 430,000 people from the rolls would create a human tragedy and a financial debacle for Tennessee’s public hospitals, doctors and clinics -- all of which would be forced to provide far more care without compensation.

“In the end, these costs won’t just vanish,” says Norman Urmy, executive vice president for clinical affairs at Vanderbilt University Medical Center.

Eliminating coverage for that many people could also carry a huge political cost. As a statewide official in a red state, Bredesen is a Democratic rarity these days, and some around him believe he could possibly contend for a spot on the party’s national ticket. But it wouldn’t be easy for Bredesen to step onto the national stage with TennCare’s blood on his suit.

Some local observers believe the best option for Bredesen may be to muddle through with only enough cuts to lance the immediate financial pressure rather than more draconian reductions intended to solve the program’s long-term financing imbalance. In fact, that’s a problem too big for Tennessee to solve alone.

TennCare’s problems are predominantly national in scope: the rising number of uninsured, Medicaid’s rickety financial structure and exploding healthcare costs. Like the other 49 states, Tennessee probably can gain lasting control over its own healthcare spending only when Washington pursues fundamental healthcare reform.

In the short run, states could use an extension of the enhanced federal funding for Medicaid that expired last summer. Long term, Washington may need to assume from the states more of the bill for caring for the low-income elderly (a key factor in rising Medicaid costs). That would ease the pressure on the few states, like Tennessee, trying to cover working poor adults -- and encourage more states to follow.

TennCare’s troubles show that Washington can’t expect states to cope with the rising tide of uninsured on their own. Unless Bush and Congress step in, more governors inevitably will face the agonizing choices confronting Bredesen.

Ronald Brownstein’s column appears every Monday. See current and past columns on The Times’ website at www.latimes.com/brownstein.