THE TENNCARE MELTDOWN CONTINUES

With buckpassing all round

The state is paying too much to the managed care organizations that administer services under TennCare, says the chairman of the committee that oversees the troubled program. "We're paying a high price to stabilize this program," said state Sen. Roscoe Dixon, D-Memphis, chairman of the TennCare Oversight Committee. "In my view, they are ripping off the state to get paid this much money to push paper with no real risk."

Former Gov. Don Sundquist shifted the financial risk of providing health care to TennCare recipients from private insurers to the government in July 2002. He said the change was needed to help stabilize TennCare after two of its biggest plans collapsed. Last year, the insurers that administer TennCare, known as managed care organizations, or MCOs, were paid $263 million to administer most of the $8.7 billion program for the state. After taxes paid back to the state, the seven plans ended up with $211 million to pay claims for most of the 1.3 million poor, disabled and uninsurable Tennesseans on TennCare.

TennCare administrators say they are doing more than just paying claims and, according to a Kaiser Foundation study, are paid far less than administrators in states such as Illinois, Florida and New York. BlueCross BlueShield of Tennessee, which handles the biggest TennCare plans, operates at an after-tax reimbursement rate of under 7 percent, according to company vice president Ron Harr. For that, Blue-Cross and other TennCare plan administrators must perform a variety of tasks that go beyond typical claims payments for self-insured employers, he said. "We handle 1.4 million calls a year at BlueCross for TennCare, and there is certainly a much higher level of intensity of services we provide than what we do for the state employees' plan, for instance," Harr said. "We are very proud of our administrative efficiency."

When TennCare plans were at risk, BlueCross barely broke even, and most insurers lost money. The state was forced to take over two of the biggest plans - Access MedPlus and Universal Care of Tennessee - when they collapsed and were unable to pay their bills. Most of the major health insurers such as Cigna, United Healthcare and Aetna declined to participate in TennCare.

For now, Gov. Phil Bredesen is focused on getting relief from court orders to allow more limits and preauthorization of benefits and enrollees in the state health program. Bredesen said the court decrees restrict the ability of TennCare plans to deliver managed care. Without such relief, the governor said he is considering replacing the TennCare program with a more traditional Medicaid plan to help save money.

TennCare officials say they hope to eventually pare what is paid to the managed care organizations that deliver health care to one of every four Tennesseans. "We couldn't do everything at once," Finance and Administration Commissioner David Goetz said. "The MCOs are needed to manage the changes. We consciously delayed the idea of restructuring the MCOs until next spring because we wanted to get the reforms in place and up."

Under the original TennCare program, managed care organizations were paid a flat fee for each enrollee and were responsible for managing the health care of each of their subscribers. As administrative service organizations, the TennCare plans pay hospital and doctor bills and submit their expenses to the state for reimbursement. "There is no doubt today we are suffering the ill effects from not being under some type of risk arrangement," TennCare Director J.D. Hickey said. "We are seeing expenses on the managed care side that we would not see otherwise."

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For greatest efficiency, lowest cost and maximum choice, ALL hospitals and health insurance schemes should be privately owned and run -- with government-paid vouchers for the very poor and minimal regulation.

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