SUSAN DENTZER: Let's start by talking through the major components of the Governor's plan for restructuring TennCare. What has the Governor proposed to do now as far as restructuring TennCare?
GORDON BONNYMAN: The Governor proposes to both cut the eligibility very sharply, cut off a large number of people, but also cut the benefits for those who remain. He's going to reduce the adult population that's in the program by 323,000 adults. That includes not only the people that we had covered through the expansion when we started TennCare, but it also includes much of the Medicaid population itself, most notably a group that's called medically needy spend-down, which, as the name implies, these are people who have spent their incomes down because they've become catastrophically ill and incurred major medical expenses, to the point where they're pauperized. Their income, for example, for an individual must be as little as $250 a month after deducting their medical bills.
So this is a very, very vulnerable core population that's going to lose their coverage as well, and we will be one of the few states in the country at this point that does not cover that population.
For those who remain, there are going to be very deep benefit cuts. We will also have a hard limit of four prescriptions per month, and some other states have limits that are very low, but none has any that is that low. And those that have--ones that approach that have some mechanism for overriding that in cases of extreme medical need, which Tennessee will not have.
So we will be plummeting from the top rank of states in terms of covering people and meeting medical needs to being at the bottom of the states.
SUSAN DENTZER: And additionally there would be limitations on number of days in the hospital.
GORDON BONNYMAN: Yes.
SUSAN DENTZER: Let's talk about those.
GORDON BONNYMAN: Yes. There will be a 20-day limit on hospital inpatient care for the Medicaid population, and for--if we ever should sign up additional people in the future, they will be limited to five days in the hospital, although I think as a realistic matter, no one really expects that to ever happen, that those people will be off forever, probably.
SUSAN DENTZER: And then for the pool of people known as the so-called dual-eligibles, people both on Medicare and Medicaid, let's talk about what happens to them.
GORDON BONNYMAN: Well, there's--there's one group of them, 37,000, who within the next couple of months will lose their prescription coverage. Keep in mind this isn't just any population. Really, these people have hung on for two years paying significant premiums in many cases, specifically to get the prescription drug benefit, and they have been hoping desperately to be able to hang on until the Medicare prescription drug benefit took effect--takes effect next year, and that's not going to be permitted.
In addition, there is a population of Medicaid duals who are eligible for both Medicare and traditional Medicaid, and they will be subject to a four-prescription limit and to the other limitations on their benefits.
SUSAN DENTZER: Until such time as the Medicare benefit comes into effect?
GORDON BONNYMAN: Correct. Correct, until the Medicare prescription drug benefit takes effect. If you actually look at who the people are in those groups, it's quite frightening. They have said that 1,500 people who are now in nursing homes will come out, with no place to go
SUSAN DENTZER: Meaning what? That just Medicaid coverage stops?
GORDON BONNYMAN: Yes, they will be ineligible, and they are in nursing homes now and, of course, Medicare does not--does not provide a long-term nursing home benefit. So these people will have no coverage for the long-term care that they're getting right now.
I can't think of any state that has done that. That's particularly troubling in Tennessee because we're 50th in the country in terms of home- and community-based alternatives to nursing homes. In fact, this Governor promised many of us when he was running for office that he would do something about that 50th standing and help bring people out of nursing homes into home- and community-based settings. We hadn't anticipated that he would do it this way.
SUSAN DENTZER: By just not paying for anything.
GORDON BONNYMAN: Yes, right. By simply cutting people off and leaving them to fend for themselves.
There are other groups, there are 30,000 people who carry the strange acronym SPMI, which stands for severely and persistently mentally ill. These are people who have been screened by the Department of Mental Health and Mental Retardation, primarily on the basis of having multiple psychiatric hospitalizations. This is a core group of severely mentally ill, chronically ill people. Thirty thousand of them are going to lose their coverage, and local sheriffs are very much concerned about this because they know that the local jails will become the default safety net, a cruel term in this case, for that population.
One thing to understand is that Tennessee doesn't really have much outside of its Medicaid program because when we created TennCare, we folded almost all other programs that provided health or mental health services into TennCare. So when you're off of TennCare, there's no place else to go. The Governor has made much of the fact that we spend more on Medicaid than other states, which is true, but that only tells part of the story because we don't spend much on anything beyond that. So if you look at our neighbors like Georgia or North Carolina, they spend less on Medicaid but they spend more in aggregate on health and mental health services because they complement Medicaid with a whole array of other state-funded services which we don't have.
So people who fall out of TennCare are going to be falling onto a very hard surface. There is no safety net to catch them.
SUSAN DENTZER: Now, why have things gotten to this pass from your perspective?
GORDON BONNYMAN: Well, I think you have to go back several years. The former Governor sought to enact an income tax in Tennessee. We're one of the few states that doesn't have a personal income tax.
The former Governor, Don Sundquist, became embroiled in an effort to enact an income tax, personal income tax in the state. We're one of the few states that doesn't have that. It became very politically charged. TennCare became sort of a hostage in that fight for reasons that had more to do with the politics of the tax issue than it did with the actual merits of the TennCare program.
As a result, the management of the program sort of was neglected in favor of political posturing, and what happened was that some critical errors were made. We negotiated a new waiver agreement with the Federal Government in 2002, which cost us hundreds of millions of dollars. The Federal Government basically took advantage of the fact that this was a weakened Governor who was desperate to get a new waiver so that he could use that to try to sell his income tax. And the result is that Tennessee is now paying for that dearly, and 300,000 people are going to pay for that dearly.
The other thing that happened was this was all based on managed care with the managed care organizations carrying the financial risk and having responsibility for really managing care. The state took that financial risk back in the last administration that took out the discipline, the financial controls that went with managed care. So both on the revenue side and on the expense side, the program sustained enormous damage in terms of structural underpinnings being removed several years ago. And it just made it inevitable that at some point there would be a day of reckoning. So the costs began to balloon even faster than the rate of national medical inflation, and we went from having the lowest per enrollee cost in the country of any Medicaid program to having one of the most rapid rates of Medicaid inflation of any plan in the country.
So those things made it inevitable, I think, that we would get to this day if those things weren't corrected before now.
SUSAN DENTZER: In that sense, is Governor Bredesen paying the price for errors made under the prior administration?
GORDON BONNYMAN: I think that's correct. He inherited this situation. He did not create it. There are things that I think should have been done before now to attend to the management, and I think it's been allowed to stay in that unstable condition longer than I would have hoped it would have. But certainly the damage itself was done when he inherited it. It's no reflection on him.
SUSAN DENTZER: Now, stepping back from this, this is a remarkable turn of events for a program that, when it came about in 1994, was certainly a novelty but also quickly seized upon as representing a great ray of hope in nationwide efforts to cover the uninsured.
GORDON BONNYMAN: Yes, and I think it's an enormous tragedy. It's a personal tragedy, I think, for the Governor because I think he's disappointed to get to where he's gotten. But, more importantly, it's going to be a personal tragedy for hundreds of thousands of people in Tennessee who are going to be directly affected by it.
I think it's a national tragedy. I hope that's not too parochial, but it really was a success, and it--it's very painful to see the epitaph being written that, well, this is what happens when you try to deal with the problem of the uninsured, when you try to deal with addressing what I think is one of the major social and political challenges facing the country.
This is not the inevitable outcome, and, in fact, if you look at all the studies that were done of the program until those fatal errors that I described--taking back financial risk from the plans and the fatal renegotiation of the waiver in 2002--up to that point all of the studies that had been done independently and one that was done by our state comptroller showed that it had saved hundreds of millions of dollars at the same time that it had extended coverage to hundreds of thousands of uninsured people and actually improved health status in the state. I mean, it doesn't get better than that.
If it had never been successful, we might could just chalk it up as learning experience, but I'm afraid the lessons that are going to be taken are the wrong ones. It was not the design, it was not the feasibility, but it was basically the program falling victim to extraneous political forces that didn't have anything to do with its merits.
So I'm still hopeful that the program can be salvaged. I think when people in Tennessee begin to understand what this means, that no state has ever cut so deeply, so radically in such a short period of time, at such cost to its health care system and its health care infrastructure. And as I say, with Tennessee being more vulnerable because all of our health care resources are invested in this program, I think that people will begin to look up and say we can't permit this to happen.
SUSAN DENTZER: Let's go back and tell me in your own words what you thought was happening in 1994 when TennCare was created.
GORDON BONNYMAN: I thought that it was--and I still believe that it was one of the great health reform efforts of the past decades. And the reason why I say that is that if you look at most expansions of coverage to the uninsured, they have come to grief because--and begun to be eroded, as we're seeing now with SCHIP and the Medicaid programs, because they were inherently inflationary. They bought into the fee-for-service model that we know is inherently inflationary. And this was begun by former Governor McWherter with a view toward reining in what was then an unaffordable Medicaid program. That's one of the great ironies of the tragedy that's unfolding now. And, in fact, I served on a committee that the Governor appointed with then-physician Dr. Bill Frist, who, of course, now is the Senate Majority Leader, but who at that time was a transplant surgeon at Vanderbilt Medical Center.
The Frist Commission was charged with studying what was then ironically a $600 million crisis. We now have a $650 million crisis. The parallels are very uncanny. And out of that came the TennCare program with managed care and the financial discipline of that first and foremost in the design. And there was a recognition that expanding to cover the uninsured would reduce the cost shifting, would make explicit the care of people who were still going to get sick, but had been getting care by hook and by crook and too late and too ineffectually, let's bring them into the health care system, let's create an explicit way of paying for them, and let's provide them preventive care that will ultimately reduce overall costs. And, again, it succeeded for the first six or seven years until that design was fatally altered and politics began to intervene in the way the program was actually managed.
So I was--I've been dealing with Medicaid for 25 years, and I've been dealing with trying to get health care for poor people and uninsured working people for 25 years. And it was the most exciting thing in my life when it started in 1994 because I and other people who had been either literally or figuratively sitting at the bedside of people who were dying without health insurance knew immediately that this was not just about saving the budget; this was about saving lives. And it was--it was extraordinarily exciting.
SUSAN DENTZER: One of the things the Tennessee Justice Center has done is go into court to litigate against the state on several occasions, out of which have come these four consent decrees.
GORDON BONNYMAN: Correct.
SUSAN DENTZER: Briefly, let's describe what those were.
GORDON BONNYMAN: Yes. A consent decree is just a form of an out-of-court settlement where the parties agree and then make their contract and ask the court to endorse the contract and make it an order of the court. That's what a consent decree is. And there were four different lawsuits that had--one of which had started back in the days before TennCare, when it was the old Medicaid program, and the other three that started in that period when the program began to unravel.
One thing to stress is that when the program started in the first years, it was--there was lots of turbulence getting it off the ground and lots of problems, but there was a strong sense on the part of advocates, those of us who dealt with the program every day, that sort of the old saying, Don't shoot the piano player, he's playing as fast--playing as fast as he can. There was no point in going to court. The state was acting in good faith. The state was trying to comply. And--and our efforts were just to put our shoulder to the wheel and help that happen.
At some point the state no longer became interested in that and began to use the program for grand-standing purposes--various political figures did that--and made a point of violating agreements or laws or court decisions, almost as an act of defiance to show that they were tough on TennCare or they'd be tough on an income tax or whatever. And at that point we were forced back into court--I'm talking about in the last administration.
The current Governor, Governor Bredesen, came into office with these four cases pending, and one had to do with appeals when the HMOs denied medical services that had been prescribed by a doctor, your basic Patient Bill of Rights sorts of issues.
Another had to do with appeals when the Department of Human Services cut people off erroneously, and there are federal regulations that say you're entitled to be given an explanation of why and an opportunity to get review of that. The state wasn't doing that.
Another had to do with something called EPSDT, which is an acronym for early and periodic screening, diagnosis, and treatment, which is a broad federal health mandate that covers all children in the United States who are Medicaid, and basically incorporates and makes law of established American Academy of Pediatrics health quality standards for children. And the state had not been complying with that, and so there was a case to try to enforce those standards, with special attention to children in the foster care system. Tennessee's foster care system is very troubled, and we produced all sorts of evidence in the case that children had actually died as a result of not receiving the care that they should have received.
And then the fourth case had to do with home health care and abuses by the managed care organizations of steering young adults with disabilities into nursing homes, which raised the state's costs, in order to get them off their own rolls, even though they were being paid to provide home health for them, and it would have been much cheaper for the system as a whole.
All of them had to do with holding the state accountable and its contractors accountable for compliance with constitutional safeguards or federal laws that apply in literally every state Medicaid program. When the current Governor came in, we made overtures that were well received, that we said, look, we--we didn't want to be in court about these things; we don't think that's the best way to proceed; that's a last resort; let's sit down--it's a new day; let's sit down and see if we can resolve these. And over a five-month period in 2003, culminating in August, which was the first year of this Governor's term, we negotiated a global settlement to settle all of those cases. They were basically contracts, mutual promises made, and then at the request of the state as well as our office, those were approved by the federal courts.
At the time, Governor Bredesen thanked me personally, thanks the federal judges for approving these changes, and said specifically that they would put him in the driver's seat to reform the program. It was a great step forward and that it should save the state $300 million.
We were very gratified by that. We had made enormous concessions. But we felt that the tradeoff in terms of working with the Governor who we believed was intent on reforming the program and having it live up to its early proven potential was worth those concessions.
SUSAN DENTZER: So the Greer consent decree, what specifically was that one? And why does the Governor--the Governor now targeting that one as the chief obstacle in carrying out these reforms?
GORDON BONNYMAN: The--the Greer consent decree was one that dated back actually prior to TennCare, and it enforces Medicaid due process standards, appeal and notice standards that apply in every state and ultimately are rooted in the U.S. Constitution, in the phrase in the Constitution that says you can't deprive someone of life or liberty without--or property without affording them due process of law, which is just another way of saying when the HMO and TennCare says that we don't care what your doctor ordered, you're not going to get it, that there's some opportunity to get review of that and that they have to justify what they're doing. That's what Greer enforced.
And, in fact, that was the case--of the four cases that were settled, that was the one that the Governor--in which we made concessions that the Governor at the time said we worth $300 million of savings to the state. That was the decree that was pretty radically rewritten in 2003 to give back more power to the state, specifically to regulate pharmacy, because we always recognized that pharmacy costs were too high and they need to be reined in. And we had an agreement that the state would use the new flexibility to adopt a preferred drug list and to do what's known as retrospective drug use review, which is all states have been required since 1993 to use computer profiling to identify instances of overuse or misuse of prescription drugs. Tennessee has never done that, still doesn't do it, and we have the highest drug use in the nation.
And so those of us who advocate for enrollees have to be budget hawks because if the state does not control the budget the right way, it will be forced to do it the wrong way, which is to go after--what it's doing now, go after the weak people, the politically marginalized people, and that's the enrollees, and within the enrollee population, those who are the sickest and most debilitated.
So our feeling was always if we give up some--some flexibility in--give the state some flexibility in Greer, we had a commitment that they would use it to bring down pharmacy costs the right way, and in the papers that were submitted to the Federal Government, the state represented that this would enable them to manage the program without either cutting eligibility or cutting the benefits package.
SUSAN DENTZER: Why then is the Governor now saying that all of these consent decrees are blocking him from making needed changes in the program, number one? And, number two, why is he singling out the Greer consent decree as being the chief obstacle?
GORDON BONNYMAN: I don't really know. There's--in Tennessee there are all sorts of urban myths that I've heard circulating about Greer, and when we've tried to pin them down, there's nothing there--numbers that the Governor continues to use about the volume of appeals; stories about people getting ridiculous services, and when we plumb the depths and find that out, we find there's nothing to that.
I really don't know why the Governor has characterized Greer, which he was characterizing before as something that would save the state $300 million, as something that is now costing the state literally billions of dollars and will cost 323,000 their coverage altogether, and additional thousands of people vital services that they need. Even though they're still on the program, they won't be able to get them. It simply doesn't make any sense to me. This transformation in the effects of this decree, according to the administration, occurred in a matter of about six or eight months. And we wrote to the Governor as soon as he started making these charges saying we're willing to talk about any of this, and with increasing sense of urgency, as the attacks became more virulent, more tinged with--with personal antagonism, saying, look, tell us what it is that you want changed. We could never get an answer to that and still haven't gotten an answer to that.
It's--I think it's tragic because I believe the Governor's sincere. I think that he is very, very concerned about the consent decrees. And I've been around the program enough and know enough about its design to know that we're basically going after the wrong problem. I mean, we've continued to say--and we said to the court in November, but he turned it down. We were willing to unilaterally change these consent decrees, not even bargain, just--just suspend as much of it as you have to in order to implement reforms, and that was turned back, which I think suggests that maybe at some level the administration realizes that that's not really the cause.
But, in any event, it continues to be a mystery to me as to why that has become such a focal point when it's so clear that there are things that apply in every other state. These are the same laws that apply in every other state. No other state is doing anything like this. We have medical inflation that every other state is contending with. We know that we gave back hundreds of millions of dollars in 2002 that destabilized the program in the last negotiations with the Federal Government. And we know that taking the plans back from risk--and when the Governor was running for office, he said this program's in a completely untenable position because the plans are not managing care and they bear--bear none of the financial risk.
Those are the real issues, and I'm afraid the consent decrees have become an enormous distraction.
SUSAN DENTZER: So the Governor has said and the state has gone or will go into court now to set aside, ask that these consent decrees be set aside. First of all, tell me what they're doing and what you think the effect is going to be about.
GORDON BONNYMAN: The Governor has hired five national law firms to supplement the Attorney General's Office, State Attorney General's Office, to go into court and, as he says, very aggressively attack these consent decrees, which the consent decrees are only reflecting the rights of 1.3 million Tennesseeans, so that's who's going to be the brunt of this. And our position has been we don't want to be in court. We offered to change the consent decrees. This is such a red herring. The consent decrees, which merely enforce the same rights that every other state has to respect, are not the cause of the problem, and by continuing to focus on them, we divert the attention away from the real issues, which, again, this Governor inherited. We're--you know, we're not trying to point the finger of blame at him, but we're just saying, you know, the patient has a chest wound and we need to quit talking about x-raying the ankles, let's focus where the problems are, the fact that the federal funding was stripped out to a great extent and the fact that the plans are no longer managing the care and are not being held accountable for keeping down the costs.
So our position is we want to avoid being in court. We may end up there simply because, as he said, he's--he's telling the lawyers to be very aggressive about going there.
I think kind of where we ended up, how we ended up in this, that this is--this is a person who's very, very--referring to the Governor, who's very smart, knows a lot about the health--the business side of the health care industry, and has said--he's approaching this as if it were his personal business, his personal HMO, and it's not. It's the health care infrastructure of the state, one that affects not only the people who are on the program, but all the rest of the people in the state who going--who are going to have to rely on a health care system that's going to be very much damaged by the massive withdrawal of federal funds that's going to result from these cuts, because it's a matching program and for every dollar that the Governor states in his HMO business, it costs the infrastructure two dollars in federal funding. And I think that that's an enormous difference between managing one's private HMO and running a big public health system that's very, very complex. It pays for nursing home care. It covers the severely and persistently mentally ill. It covers a lot of medically fragile children. It covers people who are receiving private-duty nursing--these extremely vulnerable populations that you don't encounter in the private HMO industry. And I think what we're seeing is a good-faith effort to reform a program based on the wrong business model. It's a business model of a private money-making enterprise as opposed to an understanding of the fact that it's a very complex public system.
SUSAN DENTZER: Let's pick up two points about the Governor's proposal.
GORDON BONNYMAN: There's a small group of adults, around a hundred statewide, who are receiving nursing care much of the time, generally 24/7. The typical profile is someone who's on a ventilator, they're being cared for by their family, the entire family activities, the life of the family revolves around the care of that loved one at home, but they can't do it because the person is so medically involved they need the help of professional nursing care. A typical case, $100,000 a year.
The problem with eliminating that--the care for those people as a cost-saving measure, aside from the obvious human toll, is that the alternative for those people, as doctors explained to us, when that nurse doesn't show up, you don't just patch along; you call 9-1-1. And they aren't taken to a nursing home. They're taken to a hospital, and not just a regular hospital bed but to an intensive care unit bed. That is how medically fragile these people are, and the staffing even in a regular hospital bed is not adequate to meet their needs. We're talking about people with Lou Gehrig's disease and the final stages of other illnesses. And I've known some of these families, and they are absolutely heroic, and the nursing staff become attached and are--and are very dedicated. These are very compelling stories, and these people together are saving taxpayers a lot of money.
I think that's really telling, not only because of the human tragedies that are about to befall this group, but because I think it shows how people with a different framework have come into this looking at this as if it were a business, and it's not. These are people you'd never encounter in the typical commercial HMO. So I think--I think the difference between people like me and the doctors that I talk to who are concerned about the Governor's proposals and the Governor's business consultants, is that they are well intended but don't understand the purposes of this program and who it serves, and they don't understand how totally--
I think the Governor, while well intended--well intended, and his private business consultants are very smart and know a lot about the business side of health care. They don't realize the fundamental differences here, which are in terms of the importance of the federal funding to the whole health care system, but also that this program serves populations that a private HMO or private insurance company wouldn't touch with a ten-foot pole. And, in fact, Medicaid is the safety net for people whom the commercial insurance system doesn't work. So to say, as the Governor and his consultants frequently say, we need to make it look more like commercial insurance is a little bit like saying we need to make the trapeze at the circus and the safety net look more alike. We need to make the safety net look more like the trapeze.
Well, that really is a pretty profound confusion about the different purposes that are served by the safety net and the thing that it's trying to protect people from. So I think the private-duty nursing is just an illustration of the kinds of mistakes that can be made when you're just tracking numbers in a--in a tally sheet somewhere and says, well, these people cost $100,000 a year, let's eliminate them, and not realizing, A, what the human cost of that is but, B, that the downstream costs of that are going to be enormous to the system. And one of the most telling weaknesses of the Governor's analysis is that his consultants admitted that they had never analyzed those offsetting costs.
For example, why is it that other states don't have a hard four-prescription-per-month limit? It's because they understand that unlike a commercial insurance company, Medicaid pays for three-fourths of the nursing home care in our state and in many states. And so if you deny an elderly woman her hypertension medications and she has a stroke, it's a 75-percent chance that you're going to end up picking up through your Medicaid program the cost of her long-term care. You can buy a lot of blood pressure pills for what three or four years of end-stage care in a nursing home costs.
But, again, private insurance doesn't cover that kind of expense, and so I think there's been a fairly simplistic and unsophisticated approach to even the numbers.
SUSAN DENTZER: Another change that the state has already made, though not yet implemented, is this new definition of "medically necessary." Explain what it is, if you would, and what the possible effect would be.
GORDON BONNYMAN: It is a--it is a radical definition of medical necessity, and medical necessity is the linchpin that connects what your private--what your insurance policy says you're entitled to and your actual ability to get that. For example, my insurance policy says I'm entitled to X number of days in the hospital per year, but I can't just show up at the hospital and say I'm ready to cash in my insurance. It's got to be medically necessary for me to be there. And both in Medicaid and in Medicare and in private insurance, that's the standard which determines whether, in fact, you will be able to get the care that your coverage says that you should get.
And typically, in TennCare until recently and in other states, as in private insurance, medical necessity is based on what are accepted medical standards within the professional medical community. And there are ways of wording it, and typically there is some sort of consideration of cost effectiveness. In other words, if there are two competing ways of treating a disease, then the one that will produce an equivalent outcome but for less money is the one that's deemed to be medical necess--medically necessary. And that's been the law in Tennessee for many years.
The changes that are being proposed now would say that the only services that are medically necessary are those that are the cheapest, not the most cost-effective but the cheapest, as determined in the sole discretion of the TennCare Bureau or its HMO contractor, without regard to any medical standard. It goes on to say that services must also be--even if they can meet that standard, they must be supported by scientific, empirical data regarding their efficacy, which as a lay person sounded reasonable to me until it was explained to me that that would mean that they had to be validated through clinical trials and that much of accepted medical practice has evolved through trial and error, through peer--being written up in peer-reviewed journals, but without formal clinical trials. And this is particularly serious for women and for children because historically the subjects of clinical medical trials were men. And even now usually they do not include children, for obvious reasons having to do with legal and ethical constraints on getting informed consent. And so pediatricians that we've talked to have been particularly concerned because they say, Much of what we do we have to extrapolate from trials that are done on adults, and we will not be able to meet those standards.
So it's very, very troubling. As one person I know said, this looks like the kind of definition of medical necessity that an HMO entrepreneur would write. It basically says we're only going to cover what we, the HMO, says should be covered, without regard to what the doctors or any doctors may say is necessary.
SUSAN DENTZER: Now, the state has said, in effect, don't take this all that literally, we're going to be reasonable in the implementation of this language.
GORDON BONNYMAN: Well, I've been a lawyer for 32 years, and I used to counsel people who were dealing with used car salesmen. And they would come in and show me a contract which was terrible. And it said, But the guy told me that if it didn't run, I could bring it back in 30 days, and they'd just cash in. I got two blocks down the street and the motor fell out, and now they won't take it back.
And I said, well, unfortunately, you shouldn't have paid attention to what was being said. You should have been paying attention to what the legal documents said. And the legal documents which have been written by a very high-powered, very knowledgeable team of lawyers that the Governor brought in have been written explicitly to strip out any kind of control or influence by treating physicians or anyone else. And, in fact, the Governor has said that the purpose is to take away the current provisions in one of the consent decrees that reflects the general rule in Medicare and in other plans that says before an HMO can deny care, it has to give significant consideration--not controlling weight but significant weight to the determination of the treating physicians of the patient's actual physician team that there's with them. They can override that, but they have to have a substantial basis for doing that. And he has said the intent is to write medical necessity so that that would no longer be the case.
So I don't take much comfort in what some people are saying that this doesn't--it may say that but we're really not going to apply it that way. I mean, this Governor is not going to be there forever, and, more importantly, he's not going to be making those decisions or applying that for 1.3 million people or the 800,000 or 900,000 that will remain on the program after the cuts. It will be HMO bean counters, with all due respect, and we've seen before what happens when, even with a reasonable definition medical necessity, one of the consent decrees, the Greer consent decree, evolved into its present form by agreement of this administration out of an acknowledgment of terrible, in some cases life-threatening abuses by the TennCare HMOs that had denied care totally arbitrarily, ignored the pleadings, vivid stories of medically fragile children with treatment teams of several specialists pleading, literally, over the phone to some clerk at an HMO who said, well, this isn't in the--my computer profile, so I don't care what the medical records say.
So I think that's where this is going to drive it, and if you are an HMO entrepreneur with supreme self-confidence that--that the insurance company is always right, and with the world view that doctors and patients are always out to beat the insurance company, then this is the kind of definition that you would write, and that's the definition that has been written.
SUSAN DENTZER: Is it fair to view this as the biggest of all the benefit cutbacks at all that has been proposed as part of the current slate of reforms?
GORDON BONNYMAN: Well, if you analyze the definition of medical necessity, it--it literally--the literal effect is we will--there is nothing that you can go to a hearing about in terms of Patient Bill of Rights. You could have a hearing, but it will do you no good because the ultimate standard that is applied is you only get what we determine to be the cheapest that will be adequate. And it actually goes so far as to say we have the right to say that that's no care at all or it's observation or it's lifestyle changes. Lifestyle changes for somebody with metastasized breast cancer? That is possible under the law.
Now, will they apply it that way? They say that's an outrageous statement, but that literally is what the law applies. So if you're looking at what will be available to people on paper, not much on paper, and we are left totally with the good will of whoever it is that's actually making these decisions on an individual basis. And it will be unique in the country in that respect.
I think this whole--whole package of so-called reforms is profoundly radical. I mean, taking away any kind of standard of medical care as the touchstone for what people get or don't get in the definition of medical necessity is perhaps the most fundamental. But then if you look at these other things, like elimination of coverage for the most severely impaired mentally ill people in the state, with no safety net to fall back on, taking away care for people who are now in nursing homes with nothing to fall back on, no state's ever done that. No state's kind of--no state has tried to take this volume of money out of the infrastructure ever, much less in such a short time frame.
So these are things that I think are being done with a good intent, but proceeding from a profound misunderstanding of the nature of the program and, therefore, a lack of appreciation for both the human and ultimately the fiscal consequences of what's being done.
SUSAN DENTZER: Let me ask you to address the fact that the Governor has proposed spending no more than 26 percent of state revenues on the program.
GORDON BONNYMAN: The Governor has said that we're currently spending 26 percent of state revenues on this program, and he intends to lock it in at that level. In effect, we're accepting a block grant-- a state block grant, which is a fixed amount and it doesn't make any difference whether we have a new communicable disease like HIV or SARS appear on the scene. It doesn't make any difference whether the economy gets soft and more people become unemployed and lose their insurance. Those things don't make any difference. We're going to lock it in at that level and that's where it's going to be. And he's asked for pre-approval from the Federal Government so that the Governor, either he or his successor, would have sole personal discretion to cut whatever benefits or eligibility is necessary to stay within that limit.
Now, the cuts that are occurring now are so deep that it's unlikely that there will be much place else to cut as a practical matter. But the principle, I think, is very disturbing. He would propose to create some sort of commission that would give advice, but still the Governor would have the ultimate say as one person, with little scrutiny and no checks or balances within the state or from the Federal Government. And as the proposal says rather euphemistically, each year there would be adjustments to stay within that amount. In some years, they would be substantial; in others, less so.
Decoded in a world of medical inflation, that means each year we're going to make cuts into the indefinite future because medical inflation continues to rise more rapidly than personal income or state revenues, both in Tennessee and in the other states. So you're really locking yourself into a policy of cannibalizing this program and, by extension, the health care infrastructure which it props up indefinitely into the future.
SUSAN DENTZER: Why does the governor single out the work of the Tennessee Justice Center, the existence of these consent decrees, as the obstacle?
GORDON BONNYMAN: I don't know. He's very popular. He received an overwhelming vote from the legislature that gave him carte blanche. And he's very, very determined and very self-confident, and I think he sees, as many people with that--that level of power and that type of temperament, he sees people who ask questions or who have good-faith disagreements as somehow attacking him personally, certainly as being not helpful, and being obstructionist. And that genuinely has not been our concern. I think--I respect the Governor. He's--he knows an awful lot about the health care business. I think what I and other advocates bring to this is the lengthy lifetime experience of dealing with the untidy realities of--of a very imperfect program that operates in a deeply flawed health care system, and which people love to complain about but which is absolutely vital. And this is a very, very smart person who's used to solving abstract intellectual problems, and this is--this is a program which both in Tennessee and at the national level is beyond the ability of any state to resolve. I mean, medical inflation is a factor that applies across the board and that no state can control. There are things you can do to try to reduce the costs, but ultimately you're on an escalator that's related to the costs of medical care.
And so there are a series--when other states for 35 years and other Governors across 50 states have looked at this issue, they've looked at--and many of them mean-spirited, which I don't believe this Governor is--have looked at it and undoubtedly been tempted to cut the program, but none has done--done anything as radical as this because they've been aware of the fact that it was--it would be punishingly costly in terms of the loss of federal dollars and that so many of the services that it buys are services that the state or local government or the private sector ultimately are going to have to pick up anyway because people will get sick whether they are insured or not.
And so I think he's just feeling as if those of us who have raised these questions are--are willfully obstructionist, and we're not. We're trying to be the loyal opposition, if you will. We want the program to succeed. We want him to succeed. But we can't in good faith endorse, for example, the elimination of private-duty nursing because we know who those people are. We know who the severely chronically mentally ill people are. They're not just a statistic, and we know what the realities are when they don't have an assured means of access to care.
So I know that it's deeply frustrating to him, and I regret that, and I regret that I have not figured out a better way to communicate our honest disagreements without antagonizing him.
I mean, much has been made of our differences, but, in fact, there's a large area of agreement. I mean, we agree that the program is unsustainable, that it's without any financial discipline right now, and that its costs need to be brought under control. It can't be allowed to eat up other important initiatives in state government such as education. We agree on that, and we agree specifically that pharmacy is an area which is very costly. Our utilization rates are very high as an artifact of prescribing patterns that cut across the population and have been in existence long before Tennessee--TennCare was created. We agree on a lot of those things.
What we disagree about is the details of how you respond to that, and our--our approach, that is, that of the experts that we talked to, and, in fact, the experience of other states is that because of the sensitive nature of this program, its importance to the infrastructure of the state and the vulnerability of the patients that it cares for, you have to approach a clinically sound--you have to use a clinically sound approach to cutting those costs. You can't just do it arbitrarily.
And so, for example, he's proposing a four-prescription limit. We have forever proposed and urged the state to come into compliance with the 1993 federal law that all other states obey but Tennessee has never obeyed which requires drug use review, which is using computers to identify overuse or misuse or mis-prescribing of drugs. We have advocating for holding the [managed care organizations] accountable to actually manage the care. We have advocated more aggressive pricing initiatives for pharmacy.
Again, we have to be budget hawks because if the state doesn't do it the--the right way, it will ultimately rein in the costs the wrong way. And that's what we're seeing right now.
It's been very frustrating that the Governor has continued to accuse me of--me personally of refusing to put any kinds of proposals for reform on the table. I mean, we've had them on our Web site for six months. We've written letters. We've proposed to alter the consent decrees if they could identify what it was that was causing--they thought was contributing to costs. These are the same consent decrees that were negotiated by the same Governor only a little bit over six months before he started attacking them.
But, you know, we're looking for solutions because we understand if it doesn't work for the Governor, as powerful as he is, it's not going to work for our clients. There's nothing in it for our clients, for me, or the Justice Center or my colleagues to be alienating the Governor, and we have tried very hard to avoid doing that, and obviously we have not been successful.
SUSAN DENTZER: The Governor has said that the consent decrees stand in the way of--of the program creating a new drug formulary and that specifically would strip away the ability to control drug price--or control drug utilization in that way as opposed to a retrospective review.
GORDON BONNYMAN: Well, a drug formulary is a variant on a preferred drug list. I mean, there are both lists of approved drugs with certain rules about which ones you can access and what prior authorization you have to go through to access those drugs.
We've indicated, since he announced he wanted to do a new drug formulary, that we supported the concept but we needed to know what specifically they were going to put in which categories. For example, there's a category he refers to as Class A where you could get those drugs without prior approval. Class B would require a special authorization. And Class C, in effect, you would probably never be able to access.
We said, well, in concept that works, but if all you have in Class A is aspirin and all you have in Class B is amoxicillin, that's a totally different matter from if you take the current preferred drug list, or PDL, which was developed only a year ago, with our strong support, by a panel of doctors and pharmacists who owe nothing to the pharmaceutical industry. This Governor appointed them. It saved--it's exceeded the $150 million savings that was projected.
If you start with that PDL and you work out from that and become more aggressive, which we have suggested there's potential to do, particularly in behavioral health drugs, that's fine. But, please, tell us beyond the concept what specifically you're talking about. We've never been able to get that.
Ironically, the Governor asked us to agree to a new Greer consent decree with the commitment that it would enable him to--to create a preferred drug list and to do retrospective drug use review. And, in fact, that wasn't just something he wanted to do. Before we negotiated the global settlement, as a precondition we said you must immediately do something about pharmacy; you can't afford to wait to do something about it because the costs are rising too quickly; you've got to start a PDL, and you've got to start doing retrospective drug use review. And I have a letter from the Governor's counsel committing to do that in 2003.
They launched the PDL. The Governor thanked us for making that possible with changes to the consent decree. The tiered formulary is a variant on that same thing. They've never done DUR, and we have--we are paying a terrible price for that right now because our utilization is so high.
SUSAN DENTZER: So does anything stand in the way of them actually doing the formulary at this point?
GORDON BONNYMAN: I don't think so. We want to see the details. But I think the fact that they can't produce any of those details nearly a year after he announced it suggests that there are management problems within the administration that go much deeper than what's on the surface, and that make it necessary to blame management problems on the consent decrees. I mean, this program has been unstable for years because of the mistakes made in the earlier administration, and it has been burning resources at a rate that couldn't be sustained, and it--we're now two years into this administration. We pled with him two years ago to do something about pharmacy specifically in those two areas, both with regard to price and with regard to utilization, that that had to happen. Two years later, we're still waiting to hear the details, and they did launch the PDL at our urging and with the changes made in the consent decree to facilitate that. But now they're saying they can't even operate that because of the consent decrees. It just--it baffles me.
SUSAN DENTZER. We've spoken with people in Tennessee who think that this is all massive game of chicken, that the Governor really doesn't intend to cut 323,000 people from the program, that this is all about getting the courts to sanction the modifications in the consent decrees that he thinks are needed to put these other controls into the program like a formulary, at which point he'll back off from all of these cuts--limitations on benefits, the 20-day inpatient limit on hospital stays, which obviously would affect places like Memphis Regional, et cetera--and that this will all be somehow dealt with short of the draconian cuts that the Governor has already proposed.
Is that a plausible explanation of how this will play out?
GORDON BONNYMAN: I don't believe so. I take the Governor absolutely seriously. I don't think he's bluffing. And as far as playing chicken in order to get the courts to back off or get me to back off, I mean, in mid-November we took his threats so seriously that in mid-November we went back to federal court and asked the court, unilaterally asked the court to suspend the consent decrees to the extent necessary to permit the Governor to implement whatever changes he was able to convince CMS to approve. Within three days, the Governor had rejected that. We did that not because we believe the consent decrees are at all the cause of the problem, but because we took the Governor so seriously in his threats that we--we didn't want the consent decrees to continue to be either a sincerely held though mistaken notion of what the problem was or the political pretext, however you interpret that; we wanted to remove the consent decrees as a reason for our clients to lose coverage. And that offer was rejected by the Governor.
SUSAN DENTZER: What do you think the likelihood is that the Centers for Medicare and Medicaid will approve the Governor's plan?
GORDON BONNYMAN: Well, actually, I think the likelihood of CMS approval is quite high for the major parts of this because it's a deal that they can't turn down just in terms of the financial aspects of it. As the waiver says on its second page, for every dollar of state funds saved by these cuts, the Federal Government will save two dollars. That's very persuasive to a federal administration that's trying to figure out how to bring down the federal deficit and specifically figuring out--trying to figure out how to block grant the Medicaid program.
This is a self-imposed block grant with enormous savings in it for the Federal Government. It's totally contrary to what other states are trying to do. I mean, other states would like to bring down their own costs, but not in this way, not at this--at this level of expense in terms of loss of federal dollars.
Total loss just next year will be $1.2 billion in federal funding. Total medical services cut will be $1.7 or $1.8 billion. And to put that into a frame of reference, almost all of that will come out of hospital, doctor, pharmacy services, so-called acute medical services, on which we now spend $4.5 billion in the current fiscal year. So we're going to see enormous cuts.
Now, this is out of--some of this is out of projected growth, but, again, we are going to see a body blow to the core medical services for the most vulnerable, sickest population in the state.
SUSAN DENTZER: Staying on that theme you raised a moment ago, essentially you're suggesting that the Governor's bowling right up the Bush administration's alley on this.
GORDON BONNYMAN: This is a wonderful opportunity for the Bush administration because you have a Democratic Governor with a legislative mandate from a Democratic legislature that is coming forward with a proposal that most other states would run away from, but that establishes a precedent that is very much in sync with the Bush administration's priorities for reducing Medicaid expenditures at the federal level and trying to lock the states into some sort of permanent federal cap on spending that in a world of medical inflation means the indefinite erosion of the health care safety net across the country. I'm not saying that's the goal of the Bush administration is to erode that safety net. Their goal is to lock in federal dollars. But in a world of medical inflation, that's--that's the effect of this.
So what we have, I think, is the old "Come into my parlor, said the spider to the fly." I believe that--I believe that Governor Bredesen is truthful when he says he's been well received at CMS. I don't doubt it.
SUSAN DENTZER: Finally, the Governor says even if these cuts proceed, many things will be done to ameliorate the effect on various populations, that they will look at constructing some kind of alternative care system for the severely and persistently mentally--mentally ill, that they will put in place some disease management programs that will help certain other populations. He's appointed now a commission to look at the safety net and examine the safety net within the state and what needs to be done to shore it up. So that lots of things will be done so that this will not have the cataclysmic outcome that you describe.
GORDON BONNYMAN: Well, the math doesn't work. You can't take one--one-point-seven billion dollars of medical care away from this population and expect to make it up through emergency rooms and volunteer church-run health centers. It just--it doesn't work. In fact, if you go and talk to those centers now, they will tell you that they're already stretched just trying to take care of the people that are not now covered by TennCare, and you dump 323,000 new people. And, again, it's not just any people. It's really sick people, many of them, who are on this program because they're too sick to qualify for any commercial insurance plan, and they're not on Medicare.
So with all the good will in the world, you--you can't--I mean, it's sort of like we're going to shut down the Pentagon and then we're going to finance the national defense out of--out of, you know, bake sales and car washes and--and cookie sales. It just doesn't work that way. The math will not work.
The University of Tennessee Center for Health Services Research did a calculation based on an epidemiological model of--that assesses the risks associated with being uninsured, and if you--if you use that model and you use their calculations, we can expect the death rate to go up in the state within this population that's going to lose its coverage by 440 deaths, preventable deaths a year. That's an additional death every 20 hours that is preventable. That's just looking at the effect of taking those people off the program and rendering them uninsured. And that doesn't look at the fact that this is a very sick population. That's using sort of the standard national data about the risks of being uninsured, but we know that this population is particularly sick. I mean, just look, for example, at the people who are going to be coming out of nursing homes.
So I think that's a conservative estimate. That's an additional death every 20 hours, and it doesn't take into effect what's going to happen when you limit someone who's got several chronic illnesses, who's elderly and frail, to four prescriptions with no limits--I mean, with no way to override that limit.
One thing that we know is that about 5 percent of this population accounts for 50 percent of the medical expenses, and that's typical of most health insurance. It's the people who get really sick that account for the great amount of expenditures. I think those of us who heard the Governor's speech nearly a year ago and the aggressive numbers that he wanted to take out of the program immediately were frightened because we knew you would have to take that money out of the really sick people. That's where the expenditures are. You don't save any money taking--setting a four-prescription limit on someone who doesn't need any prescriptions, but you save it on the person who needs five, and you save a lot more on the person who needs 10 or 12.
So these cuts are going to all focus on the really sickest part of this population.