TennCare expected to absorb most of new revenue

NASHVILLE - Gov. Bill Haslam says he expects to have about $369 million in new revenues for his proposed 2013-14 budget, but expected cost increases in TennCare will swallow most of the money.

That will put pressure on him and lawmakers to look at cuts elsewhere to pay for increases in key areas ranging from education to prisons, the Republican governor warned last week.

Of the expected new revenue, $350 million -- or 95 percent -- is going to TennCare -- the Republican said.

"You can't do anything [else]. I mean, you can't do anything in higher education. You can't give anybody a raise. ... It's literally sucking up all the money in state government, and we have to have a different approach to health care."

Earlier this year, Haslam directed agency chiefs to prepare for cuts of up to 5 percent.

Department budgets have been cut repeatedly since the Great Recession struck in 2008 and the mild recovery that so far has followed.

House Minority Leader Craig Fitzhugh, D-Ripley, a former House Finance Committee chairman, is skeptical of the governor's estimates.

"To say we have $369 million in new revenues before the State Funding Board meets, that's kind of hard to figure," Fitzhugh said.

The funding board, which sets ranges for revenue growth estimates, will meet this week. Haslam spokesman David Smith said $369 million is the funding board's preliminary estimate.

Fitzhugh said Republican officials earlier this year refused to acknowledge much-larger-than-anticipated revenue increases for the 2012 fiscal year that ended June 30.

And so far this year, revenues were already $72.9 million higher than projected in the $31.5 billion state budget.

"I think it's a bit premature to say how much we got there and that 95 percent of it is going to be consumed by TennCare," Fitzhugh said.

More health care costs

TennCare and associated state programs do face higher costs because of health care inflation and other needs as well as the anticipated impacts of the federal Affordable Care Act, according to the TennCare Bureau.

Increases in TennCare and the state's Cover Kids program for low-income children will require about $164.81 million in new spending, according to figures TennCare Director Darin Gordon gave Haslam in October.

Arkansas-Tennessee Live Blog

The federal health care reform law will impose two other increases even if Tennessee doesn't agree to expand TennCare to more low-income residents.

The program now covers about 1.2 million people. It and related programs cost about $9.27 billion, with the state paying $2.93 billion and the federal government picking up the rest. TennCare accounts for about 96 percent of spending by the state's Health Care and Finance Administration, according to state figures.

Under federal health care reform, TennCare is expected to enroll 47,000 to 60,000 people in 2014 who already are eligible for the program, Gordon said.

That's because of the federal law's individual mandate, which requires everyone to have health insurance. Everyone seeking insurance through the federally subsidized health insurance exchanges established under the law "must be checked" for Medicaid eligibility before they may buy from the exchange, Gordon told Haslam in October.

Others who are Medicaid-eligible will join TennCare because of "increased outreach efforts," he added. Those people will cost the state an estimated $56.5 million in the second half of the 2014 fiscal year, Gordon said.

The federal law also levies an excise tax on insurers nationwide. While Tennessee hoped companies involved in TennCare would be spared, they won't, Gordon said. That's expected to cost the state another $55.9 million, he said.

Add in regular cost increases and the state is looking at an added $277.21 million, according to a document on TennCare's website.

It's a big figure, but it's still about $72.8 million less than the $350 million figure cited by Haslam last week. It's about 75 percent of the $369 million in new revenue.

Efforts to clarify the discrepancy between TennCare's budget presentation and Haslam's figures were unsuccessful Friday and Saturday.

Other needs

Other areas in state government also are looking for more money.

Public colleges and universities are seeking $33.5 million in new state funds to partially offset tuition hikes. K-12 officials are seeking $45 million more because of enrollment growth and cost increases.

The Department of Children's Services is asking for more than $8 million to hire new staff and other improvements at an agency engulfed in controversy over children's deaths. The state is going to have to cough up an additional $20 million in the current budget to offset unexpected increases for housing state felons in local jails.

Haslam also has cited increased costs for state employees' health insurance, although no figures were provided. And increasing pay for state employees can be costly. This year's 2.5 percent increase cost an estimated $36 million. The governor has alluded to another increase in the upcoming budget he presents to state lawmakers early next year.