Tennessee's Program Broadens Coverage but Faces Uncertain Future

HEHS-95-186: Published: Sep 1, 1995. Publicly Released: Sep 19, 1995.

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Pursuant to a congressional request, GAO reviewed Tennessee's Medicaid capitated managed care program (TennCare), focusing on: (1) TennCare's basic design and objectives; (2) the degree to which the program is meeting these objectives; and (3) the experiences of TennCare insurers and medical providers and their implications for TennCare's future.

GAO found that: (1) TennCare's objectives are to expand health care coverage to the state's uninsured and to control program costs by mandating that Medicaid participants enroll in managed care organizations (MCO) and covering certain uninsured, Medicaid-ineligible persons; (2) Tennessee has cut costs by setting its capitation rates below historical Medicaid costs, applying an additional discount based on the assumption that extensive insurance coverage would reduce charity care costs, and discontinuing certain supplemental payments; (3) in granting the Medicaid waiver, the Health Care Financing Administration has required Tennessee to implement measures to monitor and ensure access to quality care and has limited federal payments over the 5 years to ensure that federal costs do not exceed what they would have been without the waiver; (4) despite the increased number of participants, federal and state TennCare expenditures have increased much less than the national average for Medicaid programs and program costs have actually declined when uncapitated administrative and long-term care costs are excluded; (5) access to and quality of care could not be measured because Tennessee and MCO have not yet set up their monitoring systems, but a survey of beneficiaries revealed significant dissatisfaction with the new program because of the limited choice of doctors and difficulty in finding providers; (6) many MCO and providers lost money in 1994 despite receiving supplemental payments from TennCare; and (7) although TennCare has met its initial objectives, its long-term success is uncertain.

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