NCPA - National Center for Policy Analysis


July 7, 2004

States are searching for ways to contain huge costs for Medicaid, a shared state-federal program that provides medical care to poor Americans. Tennessee, for example, plans to modify the services and drugs its Medicaid program (TennCare) covers in order to avoid cutting coverage altogether for thousands of low-income citizens.

Tennessee will limit Medicaid recipients to 10 doctor visits and 10 lab or X-ray procedures a year, and six prescriptions a month. Doctors will be required to provide the "least costly" adequate treatment for patients, and the state will stop paying for antihistamines and gastric acid reducer drugs altogether.

Though critics say the cuts will create a second-class health care system for Medicaid recipients, Gov. Phil Bredesen (D) says that cutting costs and services is preferable to cutting coverage entirely:

  • TennCare's $7.1 billion annual budget accounts for almost one in three dollars the state spends.
  • The new plan will save $300 million next year and $1 billion a year by 2009.
  • The state spends $2.3 billion a year on prescription drugs, $400 million more than it spends on higher education.
  • Antihistamine and stomach treatments -- which are available over-the-counter -- make up 12 percent of the state's drug spending.

More than half of the state's enrollees, mostly children and pregnant women, would be exempt from limits on doctor visits and prescriptions, but the ban on certain drugs and a new standard of treatment would apply to everyone.

Source: William M. Welch and Julie Appleby, "States watching Tennessee's health care plan for the poor," USA Today, July 6, 2004.


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