TennCare, initiated by Governor Ned Ray McWherter on January 1, 1994, replaced the jointly federal- and state-funded Medicaid program in Tennessee. TennCare’s mission was twofold: to cut costs and to expand health care coverage. Twelve statewide managed care organizations (MCOs) were established to negotiate with physicians and hospitals to fund medical expenses at a level aimed to reduce cost. The previously uninsured working poor and those uninsurable because of preexisting illnesses, estimated at 500,000 to 700,000, were also brought under TennCare’s umbrella on a sliding scale payment basis.
Problems erupted almost as soon as the plan took effect. Chief culprits were insufficient reimbursement and underfunding. Reimbursement for care was distributed annually to the MCOs for each enrollee. Treatment of the poor and chronically ill exceeded reimbursement, and patients for whom hospitals received no reimbursement continued to appear at emergency rooms. Collection of premium payments lagged behind estimates, and TennCare recovered only $18 million out of $45 million owed.
Adding to its woes, TennCare was thrust upon an unprepared medical community, and many physicians refused to see TennCare patients. Over time physicians adapted to the new system, raising participation to 97 percent statewide. Physician complaints now fasten on the lack of standardization of rules and regulations among MCOs, which necessitates compliance with several lists of approved hospitals, specialists, pharmacies, and drugs.
Hopes to cover 1.3 million people statewide were dashed when enrollment was closed at 1.2 million, leaving 6.3 percent of Tennessee’s population still uninsured. TennCare, however, significantly curbed the growth of health care costs in the state. As the new century began, however, members of the public and state lawmakers grew concerned about the rising costs of TennCare, and the future of the program is uncertain.