State Seeks to Minimize TennCare Budget Cuts by Seeking Relief from 21-Year Old Court Order

Wednesday, January 07, 2009 | 3:46am

NASHVILLE - Facing mounting revenue shortfalls, the State of Tennessee today provided updated information to the U.S. District Court in Nashville concerning potential budget cuts that TennCare faces as a result of the deepening economic recession. The state is seeking relief from a long-running lawsuit known as Daniels that, if granted, could minimize the planned cuts that are needed to help balance the state’s budget.

“Tennessee faces a revenue shortfall this year and next, and TennCare will have to share the burden in reducing state expenditures,” TennCare Director Darin J. Gordon said. “We’re asking for this relief so we can use these funds to minimize some of the planned cuts that are needed to balance our budget.”
A court order entered in the case in 1987 prohibits the state from redetermining the eligibility of a special class of TennCare enrollees and removing those who no longer qualify for TennCare.  The class includes people who were originally enrolled in TennCare Medicaid when they became eligible for Social Security (SSI) benefits but then later no longer qualified for SSI. Under the court order, the state is barred from reviewing their eligibility and disenrolling those who do not qualify for TennCare.
“Relief in this lawsuit will lessen the effects of cuts TennCare will have to make, and it’s only fair to the people who are eligible for the program that we preserve it by working to remove people who no longer qualify,” Gordon said. “By saving this money, TennCare should be able to avoid or minimize some of the cuts that will otherwise be necessary.”
The state has asked the court to lift the order so TennCare may check the eligibility of the Daniels class members and disenroll those who do not qualify for TennCare. TennCare received approval from both the federal Centers for Medicare and Medicaid (CMS) and the U.S. Court of Appeals for the Sixth Circuit in 2005 for a process to review eligibility that meets federal guidelines. The federal government reaffirmed its approval of the process in July 2008. The state’s motion asks the court to allow the state to use that process in determining eligibility for the Daniels class. The federal government has told the court that the state’s request should be granted.
Because of the court order barring redetermination of eligibility, it is not known how many Daniels class members are ineligible. However, TennCare estimates that expenditures for the over 150,000 Daniels class members totals more than $1.2 billion annually, of which over $400 million is state dollars. Even if only a small percentage of these individuals are found to be ineligible, the savings may enable the state to avoid hundreds of millions of dollars in spending cuts that otherwise will have to be made.
TennCare prepared a budget proposal for next year that includes cuts of 15% and possibly another 5% for a worst-case scenario economic condition. Budget cuts identified to reach the 15% goal include:
  •  An increase in the assessment on managed care organizations to up to 5.5 percent (from the current level of 2 percent) which would provide additional state funds of between $90.7 and $97.7 million;
  • Elimination of supplemental payments to hospitals, saving $172.54 million ($62.61 million state);
  • Delaying planned new enrollment of non-pregnant adults into the Standard Spend Down category while eliminating 30-day retroactive eligibility for nursing home patients who have completed pre-admission evaluations would reduce spending by $72.33 million ($25.14 million state);
  • Increasing the level of care criteria for admission into a nursing home, reducing spending by $47.12 million ($16.38 million state); 
  • Eliminating a number of technology contracts and upgrades from the FY 2009-10 budget will save $22.87 million ($9.37 million state); 
  • An across-the-board 7 percent decrease in the rates paid to TennCare providers (along with a new co-pay for members) would reduce spending by $325.76 million ($113.21 million state);
  • Elimination of Medicare Part A crossover reimbursements to reduce spending by $35.55 million ($12.35 million state). 
Should additional cuts be necessary statewide, TennCare would be forced to consider additional program reductions as necessary to match expenditures to available revenue. These could include a further decrease in provider reimbursement rates of 1.5 percent and/or the imposition of benefit limits on adult services (likely consisting of 15 inpatient hospital days per year, 12 laboratory services per year, 15 outpatient services per year, and 15 office visits per year).