TennCare has dramatically changed Tennessee's healthcare system. After two full years, during which the program has experienced many problems, we are now beginning to see very positive long-term results.
First, despite the dire predictions of some, TennCare has not endangered the healthcare of Tennessee's poor and uninsured. While the media has understandably focused on individual problems encountered by patients and providers, similar or worse problems also existed in the Medicaid program that preceded TennCare. Unfortunately, in the over two decades of Medicaid's existence, we had grown insensitive and even comfortable with Medicaid's flaws.
Today, as we begin to evaluate TennCare, it should be objectively judged by its performance in four critical areas:
In the year before TennCare started, the University of Tennessee was commissioned to perform an in-depth survey. The purpose of the survey was to determine the number of uninsured, the manner in which Medicaid recipients and the uninsured received their healthcare services and their perceptions of the quality of their care. The survey has also been performed in each of the two years since TennCare began. The results offer clear evidence upon which to judge TennCare in the areas of coverage, access and quality.
Last year's healthcare reform debate yielded little consensus about how our nation should address the most difficult problem in the healthcare system -- the uninsured. It did, however, produce a consensus objective by which we should judge our success in this important area. The President, Congressional Democrats and Congressional Republicans agreed that our goal should be 95 percent coverage.
Thanks to TennCare, Tennessee has essentially achieved this goal. By expanding coverage to about 400,000 Tennesseans who were uninsured, the University of Tennessee Survey has confirmed coverage in Tennessee is above 94 percent for two consecutive years. No state, other than Hawaii with its long-standing employer mandate, even approaches this level of coverage. It is clear that in this important area, TennCare is successful.
But coverage, without access to needed healthcare services, would be a hollow victory. So how does TennCare measure up in the important area of access? Several pieces of information in the survey are good news on this score as well.
In the first survey, Medicaid recipients were asked how they initially accessed the healthcare system. As would be expected, the rate of initial access through hospitals was substantially higher for the Medicaid population. While 9% of all heads of household initially sought care through a hospital, 14% of Medicaid recipients went to a hospital first. In the two years of TennCare the number of TennCare recipients receiving their care first at a hospital has been reduced to 10%.
The frequency with which those covered by TennCare see a physician is also shown to be comparable to the non-TennCare population, with 89% of the children of both groups seeing a physician at least annually. For TennCare covered children, 19% saw a doctor at least monthly, while only 12% of all families reported that their children saw a doctor that often. The same was true for adults covered by TennCare with 20% seeing a physician at least monthly while 10% of all households reported such frequency.
The ease with which TennCare recipients obtained appointments with physicians also improved in 1995. About 54% said that they received an appointment either the same day or the next day after seeking care. This is up from 46% in 1994 and is equal to the results for the insured and Medicare populations reported for 1994. Given both the findings of the survey and the trends, TennCare appears to be succeeding in its goal of improving access for those previously covered by Medicaid and in providing access to those previously uninsured.
Even with TennCare's success in extending coverage and access, it must also succeed in preserving and, in the long run, enhancing the quality of care. While measures of quality continue to develop in healthcare, the best indicator remains the perception of the consumer. In this vital area, TennCare also meets the challenge.
In 1993 Medicaid recipients were asked to rate the quality of the care they received. About 58% of the adults covered rated their care as "excellent or good". About 67% of the adults rated the care their children received as excellent or good. In TennCare's first year, despite the difficulties of implementation, the perceptions of the quality of care for the larger group remained stable. The 1995 survey finds the ratings up for both children and adults. In the case of adults it had risen to 62% and to 71% for children. While more technical measurers will become an important future gage of quality, consumer perceptions are and will remain the single most effective means of assessing the quality of care. Based on this important measure, TennCare passes the critical test of preserving the quality of care and seems to be on the right path to improving quality.
The final area on which TennCare should be judged is cost control. Unless costs are effectively controlled, none of the other accomplishments can be maintained. It was the dramatic escalation of cost that forced Tennessee to adopt TennCare.
In the five years that preceded TennCare's implementation, the cost of Medicaid had grown over 20% each year. In fact, an analysis of the growth in Medicaid expenditures from the program's inception in the late 1960s, reveal double digit increases almost every year. Since TennCare's implementation, the cost of the program has stabilized, averaging only 4.4 percent growth over the two year period.
TennCare's success in controlling cost is due its design. Escalating Medicaid cost was driven by two factors. First is medical inflation, which drove up the cost of serving each person and was comparable to the medical inflation experienced in the private sector. Second is the growth in the number of people covered. This was driven by the total number of uninsured and federal mandates that required states to cover them.
TennCare effectively controlled the cost factor by taking a page from the private sector. This was accomplished by using the state's buying power (instead of its taxing power) to achieve immediate savings and control the future rate of growth. In a market driven system, the state government, as the largest buyer of healthcare services in the state, is entitled to the best price the market can deliver. To achieve such pricing, however, it was necessary to make the market accountable by placing responsibility for managing the care in the hands of the private sector organizations willing to meet the state's pricing. Managed care with capitated pricing was the obvious structure through which this could be achieved. Allowing consumers to select their plan among those meeting the state's pricing and other requirements, builds in the incentive for the managed care plans to please the consumer by providing quality services that are conveniently available.
The approach to controlling the number eligible was simple -- use the savings produced by the market and disproportionate share payments to extend coverage to the uninsured. By formally extending this coverage to the uninsured, TennCare was able to virtually eliminate the source of new Medicaid eligibles, thus effectively controlling it as a source of Medicaid's excessive growth.
Without question this two pronged strategy has effectively controlled TennCare's cost. Only time will tell if it can be as effective in the future as it has been in the first two years. Market forces, however, are clearly the best available tool for controlling cost without sacrificing quality. In fact, throughout all of our history only market forces have been able to control costs and preserve quality over any substantial length of time.
TennCare's success is not due to the tinkering with details engaged in by both the current and past Administration. Rather, it is due to the program's reliance on market forces and the willingness of both Administrations and the Legislature to give the market the time it needed to achieve these impressive results.
Future success will be dependent upon the state's willingness to avoid tinkering with the system, allowing TennCare to remain true to its market based foundation. There is an unfortunate tendency within both political parties controlling government to attempt to "fix" every problem presented to them. This often results in tinkering with programs resulting in unintended consequences. Should this occur with TennCare, it will inevitably damage or destroy TennCare's market based foundation and render it no more effective than was Medicaid.
Future success will also be dependent upon Tennessee's determination to maintain TennCare's funding, allowing it to continue the expanded coverage that is so critical to controlling cost. Tennessee has a very narrow tax base that is heavily dependent on the sales tax. This makes the state's revenue base subject to wide fluctuations during recessions, which often place enormous pressure on state officials to cut the budget. While TennCare is a bargain compared to Medicaid, it will come under increasing financial pressure as the inevitable cycle of budget problems recur for state government. Should Tennessee resort to short-term budget cutting in TennCare, it will inevitably lead to higher healthcare cost and ultimately to higher state expenditures.
In the long run, success will also depend on the nation addressing, in a meaningful way, the problem of the growing number of uninsured. This problem is caused by many factors, not the least of which is the restructuring of our economy that is shifting much of our job growth to the service sector. We as a nation expect, and require by law, that that all Americans receive emergency and other critical healthcare services. A decision by either an employer or an individual not to have health insurance is a decision that causes the taxes and healthcare cost of other business and individuals to be higher.
In the past this was financed through Medicaid, other tax supported programs and cost shifting to private payers. This approach had virtually no accountability and lead to tremendous inefficiency in the healthcare system. The market based revolution presently occurring throughout the healthcare system will eliminate this inefficiency. It will also curtail the system's ability to finance the care of the uninsured through cost shifting as we have known it. Taxpayers will clearly resist any effort to place this increasing burden them.
Past efforts to address this difficult problem have been focused on an increasing role for government in the healthcare system. This approach was appropriately rejected by the American people. This in no way reduces the need to find a solution to this growing problem. It is clear, however, that any solution must be compatible with the market driven system presently emerging throughout the healthcare system.
When measured by the objective criteria of coverage, access, quality and cost control, TennCare is clearly successful after its first two years. Future success will be dependent on the state's determination to continue reliance on market forces and maintain its funding commitment. A long run commitment, at the federal level, to address the growth of the nation's uninsured will also be needed.
Tennessee has shown remarkable courage and discipline thus far. TennCare's long-run success, however, will require that Tennessee's current and future leaders stay focused on the big picture, continuing to resist the temptation to "fix" every problem.