Long Shadow of TennCare Cuts Creeps into Medicaid Expansion Debate

There’s worry among critics of Obamacare that the federal government can’t be trusted long-term to faithfully fund its share of expanding state-run medical insurance programs for the poor, as presently advocated by the president.

This concern perhaps looms larger in Tennessee than in other states. It was not that long ago that Gov. Phil Bredesen, faced with ballooning health care costs, starting cutting Tennesseans from TennCare, the state’s Medicaid program.

In the first wave, 170,000 people were cut from the rolls. Over the course of Bredesen’s administration, the state eliminated coverage for another 100,000 people with disabilities. When you add the state’s eligibility restrictions that were put into place, ultimately 350,000 people in Tennessee were cut from TennCare.

Some state elected officials, such as House Minority Leader Craig Fitzhugh, D-Ripley, have said that embracing President Obama’s call to expand the TennCare/Medicaid program is the moral thing to do.

“It would be frankly nearly irresponsible — certainly, morally irresponsible — not to expand the Medicaid population, especially because it is in fact going to be cost effective to Tennessee and Tennesseans,” Fitzhugh said recently.

But others remember the long shadow of cutting so many people from TennCare. If Medicaid is expanded in Tennessee and, once again, the program becomes unaffordable, will state officials have to rip hundreds of thousands of people off the rolls again?

“We believe it’s immoral to expand,” said Justin Owen, president of the free-market Beacon Center of Tennessee. “If history is any indication, TennCare will become so bloated, people will have to be cut from the program.”

Owen fears making so many Tennesseans dependent on a program and then “pull the rug out from under them when they can least afford it,” he said. “Go talk to the several hundred thousand people who had to be removed, about the strife they went through. It’s not like we’re speaking about a theoretical.”

And even with the federal government footing the bill with the taxpayer dollars it collects, costs still may be an issue.

Gov. Bill Haslam told reporters last week that despite those who argue that expanding Medicaid seems like a “no brainer” given that the federal government is currently promising to to fund the lion’s share of the expansion costs, there is still the issue of how the state will pay its share.

“The problem is that our budget is slowly getting eaten up by TennCare,” said Haslam. “Prior to (Gov. Phil Bredesen) cutting the rolls, the TennCare budget was about 30 percent (of the state budget.) He did everything he could to try and reform the program, couldn’t, so he just had to cut the rolls. That process took it down to about 24 percent of the budget.”

“We’ve already crept back up to where it is 26 or 27 percent of the budget,” Haslam added. “When you do that, things get squeezed out.”

Haslam said $900 million to $1 billion the state will have to dig up for its share of of Medicaid expansion to match the federal government’s $10 billion will result in belt-tightening in other areas of state government, such as higher education, prisons and childrens’ services.

“I want to find out how much it’s going to cost the state,” House Majority Leader Gerald McCormick, R-Chattanooga told TNReport. “I know for the first three years the federal government is supposed to pay for it all and if we can trust them to do that, that would be helpful.”

And President Obama’s expansion plan may not be the last.

History shows that Congress has expanded Medicaid in ways large and small since 1967 that required states to broaden and deepen coverage.

For example, in the 1980s, expansions included:

+ Medicaid covering children whose low-income families did not receive direct federal cash assistance. Pregnant women and their infants would get covered.

+ Undocumented immigrants and the homeless getting emergency care through Medicaid.

+ The Medicare Catastrophic Coverage Act, an expansion of Medicaid to cover long-term care for the elderly and disabled not already covered by Medicare.

Some expansions in the 1990s included:

+ Making it easier for nursing homes to recover payments from the estates of Medicaid beneficiary’s estates.

+ Requiring states to cover families under higher eligibility thresholds.

+ Allowing states to cover working disabled individuals with incomes above 250 percent of federal poverty level.

But it will be rural hospitals that will likely on the front line in the 2013 debate over Tennessee Medicaid expansion.

A University of Memphis health care study released last winter argued that Obamacare will produce an economic windfall to the state. Medicaid expansion advocates like Fitzhugh say more federal Medicaid dollars are needed to help financially sustain health care facilities outside urban population hubs.

“You’re talking about rural hospitals,” said Fitzhugh. “An expansion of Medicaid will allow people to have insurance, will allow them to know that if they get sick, they have some kind of coverage.

Haslam said he’s asking hospitals in Tennessee to estimate the costs and benefits of expansion — and of sticking with the status quo — to the operation of their facilities.

“Right now, if somebody walks into a hospital and they don’t have TennCare and the hospital takes care of them, they get reimbursed to a degree for that uninsured person,” said the governor.

Haslam said he isn’t likely to make a decision on whether support expanding the state’s low-income health insurance program, TennCare, until after his administration has more thoroughly investigated the pros and cons of the matter — and that decision may come after the legislative session.

“One of things that we want to do is make a thoughtful decision about the impacts,” Haslam said.

Trent Seibert can be reached at trent@tnreport.com, on Twitter (@trentseibert) or at 615-669-9501.