TennCare--Medicaid managed care in Tennessee in jeopardy

TennCare, the statewide Medicaid managed care system implemented in Tennessee on January 1, 1994, sought to reduce state and federal healthcare expenditures while enhancing access to and quality of care. TennCare currently covers 1.32 million enrollees (25% of the citizens of Tennessee), including more than 520,248 citizens previously not covered by health insurance. It is one of the largest Medicaid managed care enterprises in the nation and the only program to cover uninsurables regardless of income. Utilization of preventive and primary care services has increased, and selected measures of quality of care have improved. Program costs from 1994 through 1998 rose at a rate below that of overall US Medicaid costs during the same period, resulting in modest savings. However, managed care plans, hospitals, and individual providers continue to report substantial fiscal losses, and managed care organizations--including the 3 largest plans in the program--have closed, been placed under receivership, or threatened to withdraw from the market. Furthermore, safety net hospitals, academic medical centers, and community mental health programs have fared financial cutbacks that have limited their ability to serve the remaining uninsured as well as the insured. Because of these fiscal difficulties, the TennCare program is now in significant jeopardy despite its important clinical successes. Major structural and fiscal changes will be required if the program is to continue to enhance services and remain financially viable. This report focuses on TennCare's successes and failures to offer lessons for Medicaid managed care programs nationwide.