State insurance plan has $258 million hole despite tax increase.



NASHVILLE -- TennCare will end the state’s budget year next June with at least a $258 million shortfall despite the largest tax increase in Tennessee history, the program’s director told legislators Wednesday.

The shortfall is expected largely because reforms failed to generate the expected savings, and payments to managed care organizations (MCOs) and for drugs are higher than expected, TennCare Director Manny Martins told House members during the second day of their organizational session.

“We’re looking at a $258 million problem,” Martins said.Worst case: an additional $300 million shortage. Martins’ appearance was the first of three days worth of presentations to House members by officials dealing with the state’s three biggest -- and most immediate -- financial headaches: TennCare, teacher pay equity and setting up a state lottery.

Sponsors of the lottery legislation made their case in the Senate on Wednesday and will discuss the matter in the House on Thursday.

State Attorney General Paul G. Summers will make a presentation on teacher pay equity in the Senate on Thursday and in the House on Friday.

In his presentation to House members, Martins noted that medical services account for about half of the $6 billion TennCare program. “In the first six months of this year, we’re going to spend $593 million more than we budgeted in dental, $43 million more in pharmacy and $4 million more in supplemental provider payments,” Martins said.

Aggravating the problem is a severe difference between real and anticipated savings expected from TennCare reforms, such as the reverification of who is eligible and who is not.

TennCare spends an average of $158 per enrollee every month. But the enrollees booted from the program were largely a healthy group, leaving the state to pay an average of $200 a month for most of its enrollees, who are a sicker group, Martins said.

“It was quite an eye-opener,” House Speaker Jimmy Naifeh said later during his weekly news conference.”We have a real problem with TennCare, (but) if something is doing good, it

ought to survive.”

Naifeh said he wants to wait for a TennCare solution from incoming Gov. Phil Bredesen, who made millions of dollars in health care, mainly in managing health maintenance organizations. “I hope to manage our way out of this mess,” Naifeh said. “I think it was an innovative program. It’s something that’s needed.”

House Speaker Pro Tem Lois DeBerry, D-Memphis, said TennCare has been underfunded, an argument made by health care providers who say they’re underpaid, since its inception in 1994.

“The bottom line is we need a miracle,” she said.

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