TennCare to Tap Reserve Fund to Cover Budget Shortfall, Additional Funds Not Needed Yet, TennCare Director Tells Lawmakers

Although TennCare, Tennessee's Medicaid managed care program, is expected to overrun its budget by $329 million by June 2003, the end of the current fiscal year, Director Manny Martins last week told the Legislature's Fiscal Review Committee that the deficit will be covered by the program's reserve fund and will not require additional funding, the Tennessean reports (de la Cruz, Tennessean, 8/23). The budget shortfall was caused by higher-than-expected prescription drug costs and the state's uncertainty about how many beneficiaries will be dropped from the program after a reverification process. State budget projections estimated that 159,000 people will be dropped from TennCare over the next five months because they no longer qualify for the program. If the program does overrun its budget as expected, the state will spend all of $132 million in the reserves to fund the program through the current fiscal year (Kaiser Daily Health Policy Report, 8/23). Most of the reserve fund is made up of money from budget surpluses in earlier years (AP/Knoxville News-Sentinel, 8/22). Martins said that using the fund to cover shortfalls is not uncommon. However, the Tennessean reports that using the fund to cover the TennCare budget shortfall this time will leave it with a $2 million deficit. Although Martins said he does not anticipate needing additional funds, he added that if necessary he would issue a request for more funding as part of the budget process at the end of the year (Tennessean, 8/23).

Court Ruling Increases Drug Costs
Martins last week also told lawmakers that a court agreement has contributed to an increase in use of brand-name pharmaceuticals by TennCare beneficiaries. In 1999, the state settled a lawsuit by agreeing to allow beneficiaries to appeal any care denials or delays. Under the agreement, pharmacists are required to provide beneficiaries with a 14-day supply of medication during their appeal of a decision not to provide a drug. Since the agreement took effect in November 2000, use of brand-name medication has increased from 49% to 61% of all prescriptions. "It's my judgement that the pharmacy costs centered around (the ruling) are conservatively $50 million a year," Martins said. "Use of generic drugs is reduced and name-brand drugs are increasing. I very honestly believe this is a drain on the TennCare program that needs to be corrected," he added. Tony Garr, executive director of the Tennessee Healthcare Campaign, said the court agreement was "an important decision for patients" because beneficiaries could access drugs even if their managed care plan denied coverage. But he added, "I think what's happened is that the pharmaceutical companies have taken advantage of that" (Park, Chattanooga Times Free Press, 8/23).

Gubernatorial Candidates Must Explain Plans for TennCare
Tennessee gubernatorial candidates Phil Bredesen (D) and Rep. Van Hilleary (R-Tenn.) must offer specific plans for reforming TennCare, columnist David Kushma writes in the Memphis Commercial Appeal. Earlier this month, both candidates "argu[ed] by anecdote" during their first debate about the need to strengthen enrollment verification, tighten eligibility standards and limit benefits under TennCare, Kushma says. They did not, however, say what services they would cut or eliminate or what they would do differently to verify eligibility. Instead, the candidates need to offer specific proposals, Kushma writes. Given that both candidates said they support funding TennCare through the current tax system, "It would be useful to voters to know more about what Hilleary and Bredesen would do differently [to make TennCare operate more efficiently] -- not just what they would do the same," Kushma concludes (Kushma, Memphis Commercial Appeal, 8/25).