NASHVILLE -- The federal government's failure to pay back $82 million it owes TennCare is sending shudders through some segments of Tennessee's health care industry that now face 4.25 percent cuts in their Medicaid reimbursements.
Nursing homes warn that the reductions could lead to layoffs in at least some of the estimated 325 facilities in the state.
Tennessee Health Care Association Executive Director Jesse Samples called the prospect of cuts a "real possibility."
"I think that what facilities will do or organizations will do, they'll look at that, and they'll start with positions that are not direct-care types of positions and then work their way down," said Samples, whose group represents nursing homes.
TennCare managed care organizations such as BlueCross BlueShield of Tennessee also would be affected.
Roy Vaughn, vice president of corporate communications for BlueCross, said determining the effect on the state's largest insurer will take some time.
"We're working closely with the TennCare Bureau to fully understand the possible implications of the decision," he said in a statement. "We certainly understand the pressures forcing state reductions, and we'll do what is necessary to live within the budget. As always, we'll work to deliver the most value to the program and our members."
In balancing this year's budget, Gov. Bill Haslam's administration originally planned for 8.5 percent rate reductions for some providers. The list includes nursing homes, TennCare managed-care organizations, intermediate care facilities, dentists, lab and X-ray providers and home-health providers.
But half the cut was delayed this year and next year, contingent on federal reimbursement of $82 million for the state covering a group of disabled people under TennCare.
Officials with the federal Centers for Medicare and Medicaid Services later said they couldn't return the money without congressional authorization.
So now, absent state or federal action, the cuts are scheduled to take effect Jan. 1.
"We were really disappointed," Haslam told reporters earlier this week. "They [federal officials] had told us ... 'We owe you that money.' There was no question about that. The question was how they were going to refund it to us."
CMS still acknowledges it owes the money, Haslam said, but notes the agency maintains "we can't pay it back to you without some specific legislation."
Haslam said it "doesn't seem right to me."
While he plans to take the issue to the state's congressional delegation, Haslam said he isn't optimistic.
"I think in today's Washington, specific legislation to send money away out of the federal government to us, even though it's owed to us, will be difficult."
Todd Womack, chief of staff for U.S. Sen. Bob Corker, R-Tenn., said in a statement that Corker's office has "just been made aware of the CMS decision and have contacted Governor Haslam's team to determine the best course of action."
Nursing homes and dentists plan to talk to state and federal officials as well.
"If we move forward with a 4.25 percent cut to nursing home rates, that's going to result in better than $6.50 [per patient per day] in cuts," Samples said.
Noting that about 70 percent of a typical nursing home's expenses are for employees, Samples said, "I don't know how a typical facility would endure those type of cuts" without layoffs.
Samples said nursing home officials intend to discuss options with TennCare and plan to fly to Washington next week to talk to members of the state's congressional delegation.
"Maybe there's something that could be done even at the congressional level," he said. "I think this is going to be certainly something we need to discuss."
Tennessee Dental Association Executive Director David Horvat, whose group represents dentists, agreed.
Horvat noted that about 900 of the estimated 2,500 to 2,700 dentists in Tennessee accept TennCare patients. The state already has imposed one round of 4.5 percent cuts on TennCare reimbursements and saved another 4 percent by cutting payments for tooth restoration.
"Right now with the economy where it is, I think dentists are staying in the program," Horvat said. "I have some concerns about what will happen when the economy gets better and dentists have more paying patients [through private insurance or self-pay], whether as many will stay in the program."
Most of the expected $82 million repayment -- about $66.8 million -- would have gone to offset the 4.25 percent reduction to TennCare providers over the two-year period. The remainder was to go to higher education.
The state was planning on using the money to draw down additional Medicaid funds, which are matched on a 2-to-1 basis.