NCPA - National Center for Policy Analysis


August 5, 2009

Under Obamacare, the federal government wants to own and run a public option health care system.  But have legislators learned anything from Tennessee's experience with public option health care, asks Fred Lucas, White House correspondent for

In 1993, Tennessee received a Medicaid waiver that allowed the state to leave Medicaid but use the same federal funds for its own managed care plan.  The plan pulled in nearly 800,000 Medicaid recipients and 300,000 more deemed uninsured or uninsurable.

Conceived primarily as a budget measure with the promise of more care for less money, the program received a costly blow when a federal court in 1996 prohibited the state from reviewing the eligibility of enrollees:

  • By 1998, enrollment had grown by 100,000, as employers moved employees into the TennCare system.
  • In 1999, a review by Pricewaterhouse-Coopers found that TennCare paid health care providers 10 percent below what would be considered actuarially sound, most hospitals had between 10 and 14 percent of their care delivered as charity care, indigent care or nonreimbursed care and the state's hospitals were being paid about 40 cents on the dollar for TennCare patients, which eventually rose to 64 cents on the dollar.
  • Also in 1999, a state audit showed Tennessee was spending $6 million to insure 14,000 dead people, that 16,500 enrollees lived outside the state and that 20 percent were not eligible for the program.

Current governor Phil Bredesen (D) implemented a mend-it-don't-end-it approach by limiting prescriptions to five per person per month and the number of doctor visits and days in the hospital.  But by November 2004, he scaled the program down even further with the hope of realizing savings.

Bredesen has called Obamacare the "mother of all unfunded mandates."  And he should know, says Lucas. 

Already four Blue Dog Democrats from Tennessee, congressmen Bart Gordon, Jim Cooper, Lincoln Davis, and John Tanner, have expressed skepticism about the Obama health plan.

Source: Fred Lucas, "Tried and Found Wanting," Weekly Standard, August 3, 2009.

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