TOPICS > Health

The Tennessee Model for Medicaid Reform

April 8, 1996 at 12:00 AM EDT


FRED DE SAM LAZARO: For about the past two years, Christina Christy and her mother, Deborah, like all Medicaid recipients in Tennessee, have gotten their health care coverage through a private HMO, or Health Maintenance Organization.

DOCTOR: (examining little girl) Let’s have a look at the ring worm.

FRED DE SAM LAZARO: The State of Tennessee, which used to pay providers directly in a traditional fee-for-service arrangement, now pays a fixed premium to HMO companies. David Manning was the architect of the switch to an all- managed care system.

DAVID MANNING, Former Commissioner of Finance: We made a very conscious decision that it was time for government to do what large employers and large purchasers of health care were doing all over the country. And, in effect, you must be willing to use all of your leverage in the marketplace.

FRED DE SAM LAZARO: Manning was convinced the state could cut its Medicaid costs by a third with a more efficient system of delivering health care. Accordingly, he steeply discounted prices the state would be willing to pay under the new system.

ANNOUNCER: (commercial) In Tennessee, the sky is a little bluer.

FRED DE SAM LAZARO: Blue Cross/Blue Shield, the state’s largest insurer, bid to be part of the new system, unable to ignore a big customer. Blue Cross had provided coverage for the state’s public employees.

ANNOUNCER: (commercial) Under the state’s new TennCare health insurance program you can join them.

FRED DE SAM LAZARO: Other new managed care companies like Omnicare also went after a share of the 700,000 Medicaid clients. The competition yielded extra coverage in some cases for people like Deborah Christy.

DEBORAH CHRISTY: Well, this pays for a lot more of the kids’–the children’s medicines that Medicaid did not.

FRED DE SAM LAZARO: Competition also meant the state had to pay less. In fact, enough money was saved to add coverage for 400,000 non-Medicaid clients like Elizabeth Adams and daughter Stephanie.

ELIZABETH ADAMS: She is an asthmatic, and for a few years there, she was really bad, and if it hadn’t been for TennCare, I might have lost her a couple of times because I couldn’t afford the medicine on my own.

FRED DE SAM LAZARO: Many of these working poor have their premiums subsidized. Those previously uninsurable because of preexisting conditions also are included in the expanded program. Legal Aid Attorney Gordon Bonnyman thinks the expansion of the program will make it better for everyone.

GORDON BONNYMAN, Lawyer: When you segregate the poor in a program for the poor, it is a poor program and one of the most exciting things, I think, ethically and from a health policy standpoint about TennCare is that we have a way of making sure that a system that is serving primarily poor people also feels accountability to meet the standards that are demanded by people who pay premiums and expect things to work well.

FRED DE SAM LAZARO: But TennCare has met with fierce resistance from doctors, who say the cost savings have come at considerable expense to them. Nashville internist Winston Griner says the fixed reimbursement paid by TennCare HMO’s is unfairly low for a population especially costly to care for.

DR. WINSTON GRINER, Internist: The indigent, the poor, are sicker. They consume more responsibility of my time and my colleagues’ times, the hospital systems’ times, the home health agencies’ times, the pharmaceutical support, the devices to support their needs and maintain and restore health. Those patients are making up 45 to 50 percent of our patient visits, but they’re only 17 percent of our, of our revenues.

FRED DE SAM LAZARO: Doctors’ reluctance to participate often meant a shortage of specialists in some areas but TennCare’s new director, Rusty Siebert, insists the fees paid now are competitive, and he says the medical community’s initial resistance is being overcome.

RUSTY SIEBERT, TennCare Director: When TennCare was first implemented, there was less than 6 percent managed care penetration in the state of Tennessee, so it was a new ammo. The program, itself, is burning in. Physicians are, I think, much more accustomed now to a managed care approach than they were previously. And as a result of that, customer satisfaction has been way up.

FRED DE SAM LAZARO: But for some doctors and medical institutions, the new system has caused major disruptions. One of the biggest casualties is Memphis’s regional medical center known locally as the Med in one of the poorest corners of Tennessee.

DR. SHELDON KORONES, Neonatologist: We used to have about 100 babies here pretty regularly. Now we have about sixty to seventy.

FRED DE SAM LAZARO: Dr. Sheldon Korones, a pioneering neonatologist, left a lucrative private practice 25 years ago to build this intensive care unit. Most babies here are born very prematurely to poor and young mothers, often with drug- related complications.

DR. SHELDON KORONES: (speaking to nurse) So he’s improved, right?

FRED DE SAM LAZARO: The Med has had to fire 700 workers, almost a third of its staff, because it has lost Medicaid patients, people now required to go to other hospitals under contract to their HMO’s. At the same time, the Med remains the so- called “safety net” hospital, saddled with an expensive patient-load, including people still uninsured.

SPOKESPERSON: (talking to young women) So it’s important to know what’s normal for a pregnancy and to know what to expect as you go along in the pregnancy until you have the baby.

FRED DE SAM LAZARO: The Med has aggressively tried to heal itself. It has launched or stepped up several programs in prevention, trying to stave off expensive complications by providing prenatal care and advice to pregnant teenagers, for example.

SPOKESPERSON: (talking to young women) Breastfeeding is best for the baby because it provides the baby with those nutrients.

FRED DE SAM LAZARO: To better compete in the marketplace, the Med has also formed its own Medicaid HMO, using its affiliation with the University of Tennessee Medical Center to open a network of clinics across Memphis. Nobody doubts the Med will survive, but some are worried for its patients. Sharmal Jones is 16 months old and weighs 15 pounds, far from normal, but a far cry from his birth weight of one pound.

ELLEN BROWN: I’m so proud of him.

FRED DE SAM LAZARO: Sharmal was discharged by Dr. Korones four months after he was born, stable, but with a surgically- implanted shunt to drain excess fluid that was accumulating in his brain. However, complications developed that apparently went unnoticed or untreated for months by the primary care doctor assigned to Sharmal under TennCare, resulting in emergency surgery and the child’s development was slowed further says his mother.

ELLEN BROWN: We saw my first primary doctor three times. If he had really checked it out and then sent me where I needed to go, that neuro doctor would have, he would have found that, you know, something was wrong, instead of me sitting there, you know, not knowing what I’m doing and find out that if I hadn’t a been there in so many minutes, my baby would have died.

DR. SHELDON KORONES: Here’s a baby that’s got a shunt. He’s got to be seen by a neurosurgeon and followed, obviously, to everybody, uh, but no, that wasn’t the case. She couldn’t get to one, and perhaps her adeptness at manipulation isn’t as great as some other people but as a result, this baby was an emergency. That would not have happened two, three years ago.

FRED DE SAM LAZARO: Supporters of TennCare say there were just as many allegations of shoddy care under the old system. If the financial incentive under TennCare is to do less for patients, they say the incentive in the old system was to over-treat, harmful and unsustainably expensive.

DAVID MANNING: Every state is going to face that situation in the future. The federal government faces that, no matter how the debate in Washington turns out today. International economics are not going to allow us to continue to infuse huge sums of new money into a health care system that’s already spending two to three times what the rest of the world with whom we’re competing is spending.

FRED DE SAM LAZARO: Under TennCare, costs have risen at a relatively low 5 percent annually, but many analysts say the key question is whether and for how long this low inflation can be sustained.