TennCare budget increases could swallow most new state revenues

photo Bill Haslam
Arkansas-Tennessee Live Blog

NASHVILLE -- Increased costs next year in TennCare, the state's Medicaid health program, threaten to gobble up to 60 percent of all new revenue in the state's upcoming 2015 budget, according to Gov. Bill Haslam and other officials.

To deal with the projected $173 million increase, TennCare Director Darin Gordon this week outlined up to $118 million in potential cuts, including a worst-case 5 percent reduction that slashes payments to hospitals, doctors and other providers by 2.5 percent.

"Left alone we'd see $180 million out of a total increase overall of new money of about $300 million?" Haslam said during Monday's budget hearing.

TennCare cost drivers include $78 million for 52,000 Tennesseans who under latest projections could wind up in the program becasue of President Barack Obama's health care law.

During his budget presentation, Gordon said his agency originally projected 45,000 currently eligible-but-not enrolled Tennesseans would come onto the program as a result of the Affordable Care Act.

That's now pegged at 52,000, although he noted the figure could change. The new enrollees are expected to come aboard as a result of the law's mandate to most Americans that they be covered by health insurance.

Other low-income Tennesseans with incomes between 100 percent to 400 percent of the federal poverty level are expected to go into the online health care markets known as exchanges.

But those applying for that coverage will be checked first to see if they qualify for TennCare and diverted there.

At last count, only 1,000 Tennesseans have been able to get signed up for the exchanges because of a botched rollout of the federal government's online site.

Meanwhile, Haslam is still struggling with a decision on whether he will push expansion of TennCare to Tennesseans with incomes up to 138 percent of the federal poverty level. If he decides to do that and can get fellow Republicans in the Legislature to agree, which won't be easy, it would cover an estimated 181,000 people with the federal government paying the entire costs for the first three years, then scaling that down to 90 percent after that.

But the bills for people already eligible to enroll in the TennCare health care program for the poor but aren't will be paid for by the state as well as the federal government.

And Tennessee's share of support is expected to rise to 35 percent next year because of residents' increase in average income relative to other states, Gordon said.

That will cost the state an additional $32.86 million, he said. And health care inflation and utilization are projected to add on another $62.7 million in new costs to the overall $10.3 billion TennCare program, which covers about 1.1 million Tennesseans. The state now funds $3.2 billion of that.

The state's total current budget is about $32 billion, including state and federal money.

While grappling with TennCare, Haslam is also trying to make room in his budget for his own priorities, including funding the state's K-12 education formula at a projected $57.4 million.

And that doesn't even count money he wants to provide in the form of raises to teachers and state employees. There are other needs, as well.

After Gordon's presentation, Haslam told reporters "the big agency that obviously dominates the budget is TennCare." All agencies have been ordered to draw up plans to cut as much as 5 percent, but the governor said those reductions are largely "nickels and dimes" compared to TennCare.

As to what cuts will be made in TennCare, Haslam said he and finance officials will go through proposed reductions "line by line." It's "hard to know which of those we'll take and which ones we won't," the governor said.

Gordon said he sees the 2.5 percent cut in provider reimbursements as a worst-case scenario, something to be avoided if possible. It would save the state $46.2 million but probably put the hospital industry, which now provides $450 million for TennCare to attract additional federal funds to offset previous cuts, into a swoon. The $46.2 million attracts $136 million from the federal government.

Haslam said he also doesn't want to cut the reimbursements, but he noted that to avoid it, "you've got to put a lot of other things on the table."

Other potential cuts include eliminating $8.7 million in discretionary grants to hospitals in Memphis and Nashville and $2.5 million in perinatal grants.

Contact staff writer Andy Sher at asher@timesfreepress.com or 615-255-0550.