Evolution of TennCare Yields Valuable Lessons

The old TennCare program had many flaws and detractors. Its near collapse led to a more realistic approach to providing coverage to the uninsured in Tennessee.
Cyril F. Chang, PhD
Methodist LeBonheur Center for Healthcare Economics, Fogelman College of Business and Economics, University of Memphis

TennCare is one of the most controversial Medicaid experiments in the recent history of state-level health care reform. Launched in 1994, this bold and ambitious health insurance initiative was designed to apply a managed care model to Tennessee’s traditional Medicaid program (Mirvis, 1995, Cooper, 1996). TennCare was also to achieve two additional worthy goals: to expand insurance coverage to the uninsured and to those who were uninsurable because of pre-existing conditions and to avert a pending health care budget crisis by keeping the Medicaid budget under control (Mirvis, 1996).

In the last 13 years, the total budget of TennCare grew from the initial $2.64 billion per year to over $8.5 billion in fiscal year 2005 while the total enrollment remained relatively stable, hovering around 1.3 million people or 1 in every 4 Tennessee residents. In 2005, the state’s inability to overcome numerous financial and legal difficulties finally led to painful cutbacks in both enrollment and medical services.

The program has undergone many structural and implementation changes, some initiated by the state and some forced on the state by litigation and court rulings (Chang, 2005).

This article traces the history of TennCare and describes the program’s design. It then summarizes the root causes of the various problems that have plagued the program and discusses Gov. Phil Bredesen’s current reform effort to save TennCare. The article ends with a discussion of the new state program called “Cover Tennessee” as part of a larger concerted effort initiated in May 2006 to provide insurance coverage to small businesses and uninsured workers and to mitigate the adverse effects brought on by the recent cutbacks in TennCare.