Gatschenberger: Health Care Addendum to March 19th Capitol Report

TennCare Shows Folly of Government-Run Healthcare

by James R. Edwards Jr. (from HumanEvents.com the week of February 15, 2010)

The slam-dunk election of Scott Brown to the U.S. Senate from Massachusetts has apparently taught Washington Democrats nothing.  They remain hell-bent on forcing their version of "health reform" on the country.

Yet, a valuable lesson could be learned from one of the best teachers, experience.  Democrats should consider the nightmare known as TennCare.

I worked in the Tennessee congressional delegation or lived in Tennessee during the first years of the TennCare experiment-gone-awry.  That well-intentioned but grossly utopian program parallels the health legislation produced by the U.S. House and Senate.

In 1994, Democratic Gov. Ned Ray McWherter revamped Tennessee's Medicaid program and kicked it off as TennCare.  It was to do what no government-run health care had ever done successfully before:  reduce costs while expanding coverage to more people.

Much like the current federal legislation, TennCare was supposed to cover the uninsured and uninsurable in the state.  It was supposed to provide affordable health coverage.  It was supposed to squeeze out waste and overutilization of medical services.

Things didn't go as planned by McWherter and his Health Services Commissioner, Nancy-Ann Min DeParle.  If DeParle's name sounds familiar, it could be because she became a health official in the Clinton administration and now serves as Obama's health czarina.

TennCare quickly signed up people.  The state's uninsured population fell significantly.  Some 1.2 million enrolled in the program by 1998.

But "crowd-out" also kicked in.  Only 55 percent of TennCare beneficiaries had previously been uninsured.  The rest were people who had had private, employment-based health insurance but moved over to "free" health care.

All those newly insured Tennesseans became new patients.  They took advantage of their new insurance, which charged people right over the poverty line just $2.74 in monthly premiums.  TennCare promised them generous coverage for doctors, hospitals and medicine.  It shifted them from the emergency room to doctor's offices.

According to Rep. Phil Roe, a physician who now represents Tennessee's First Congressional District, TennCare patients with sniffles went to the doctor and billed the state for a prescription instead of heading to the local drug store and themselves paying for over-the-counter medicine.

As Ronald Reagan reminded us, you get more of what you subsidize.  And Tennessee subsidized medical services in a big way.  The Wall Street Journal said in 2004, "If a doctor prescribes aspirin, TennCare pays for it.  Ditto for antacids for heartburn and other over-the-counter products."  Tennessee became the leading state for prescription medicine consumption.

TennCare's "free" care sparked unsustainable increases in the program's costs.  Its 1.2 million to 1.4 million beneficiaries sent program costs from $2.5 billion in 1995 to $8 billion by 2006.  TennCare gobbled up 38 percent of the entire state budget.

The governor who inherited this nightmare, Don Sundquist, wrestled to meet the unpredictable and unsustainable costs.  The Republican even floated a state income tax, which taxpayers understandably rejected.  His successor, Democrat Phil Bredesen, fought liberal lawyers to eventually reduce TennCare's rolls and overhaul its benefits structure.

To control costs, TennCare slashed what it paid providers.  The program reimbursed doctors at such low rates for treating TennCare patients, doctors stopped seeing TennCare patients.  Hospital reimbursements dipped to 60 percent underpayment.  PriceWaterhouseCoopers determined in 1999 that TennCare underpaid providers 10 percent under the level regarded as "actuarially sound."  Providers began to shift costs to privately insured patients, charging them more and forcing private health costs up.

The state couldn't disenroll people from TennCare, despite state audits showing widespread fraud and abuse.  Litigation terrorists at the Tennessee Justice Center sued the state to keep it from tightening eligibility rules.

TennCare contracted out the administration of the program to private insurers.  Despite the best efforts of managed care, TennCare didn't allow real-world forces to work.  So, the state's Blue Cross Blue Shield left TennCare.  Of 11 private insurers managing Tenncare, three went bankrupt.  The state government ended up taking over the risk management of TennCare.

The bureaucracy to oversee TennCare also swelled.  Government bureaucrats became a regular part of medical practice.  The government interference wasted doctors' and other providers' time and resources.  It also interfered with actual treatment of patients.

Over a decade after its inception, TennCare the monster has finally been changed back from Mr. Hyde to Dr. Jekyll.  It has nearly returned to a normal, expensive, wasteful government-run Medicaid entitlement program.

Gov. Bredesen pared the TennCare rolls.  He established CoverTN, a more sustainable program for covering Tennesseans without private insurance who don't qualify for Medicaid.  This program covers up to $25,000 of health care annually, and carries more realistic premiums and copayments.

Unfortunately for America, not only have Washington Democrats learned nothing from the Massachusetts Senate shot heard 'round the political world.  An architect of the TennCare nightmare has learned nothing about the folly of government-run health care.

It is impossible for the government to do health care well.  It can't contain costs.  It can't improve quality.  It can't expand access to decent care.  It can't manage insurance.  Only private, market-based health care can achieve cost containment, quality improvement and expanded access to decent care all at the same time.  Can't we please learn from the TennCare debacle?