NCPA - National Center for Policy Analysis


January 12, 2005

Tennessee Governor Phil Bredesen (D) expects to save the state about $1.7 billion this year by eliminating coverage for nearly half of all adults enrolled in TennCare, the state's costly safety-net insurance program for the poor, disabled and uninsured.

Designed as an expansion of Medicaid benefits, TennCare at its peak covered 1.3 million residents, or about 22 percent of the state's population.

  • About 121,000 of the enrollees who will be dropped from the program are mostly healthy uninsured, with incomes too high to qualify for Medicaid.
  • However, 396,000 adults will remain in the program with reduced benefits, while the 612,000 children in the program will be unaffected.

According to a report by the state comptroller's office, costs have grown at an unexpected and exponential rate. Furthermore, the program is broken and needs fundamental reform:

  • The program, which cost $6 billion in 2003, could incur costs of up to $12 billion annually and consume up to 91 percent of new tax revenues by 2008.
  • In 2005, TennCare's pharmaceutical costs alone are estimated to reach $2.3 billion, exceeding the amount spent in the state on higher education.
  • Seventy-five percent of the TennCare's costs are incurred by only 15 percent of enrollees.
  • If all proposed changes are implemented by 2008, TennCare is expected to consume only 39 percent of new tax revenues for that year.

However, the new plan is subject to review by the Legislature TennCare Oversight Committee and the Tennessee Justice Center, an advocacy group for beneficiaries, as well as federal approval.

Source: Anita Wadhwani, "Bredesen Slices Benefits to 719,000 on TennCare," Tennessean, January 11, 2005; and Dave Goetz, "TennCare Briefing," Tennessee Comptroller of the Treasury, August 16, 2004.


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