But trouble was brewing; the dot-com bubble burst hard in Oregon, leaving the state scrambling to cover health care and other basic services. OHP’s rich benefits package became problematic. Oregon applied for a federal waiver to reduce benefits, which didn’t come through for a year. As state coffers shrank, Oregon couldn’t pay for its swelling number of OHP beneficiaries. It dropped those who didn’t pay premiums, raised premiums, and eliminated services. They cut reimbursement to doctors and hospitals and we tolerated that but gradually the program stopped working properly, says Dr. Richardson. Enrollment dropped from 104,000 in January 2003 to 49,000 in December 2003. In 2004 only 24,000 OHP beneficiaries remained.
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April 2007Lessons from Tennessee
TennCare offers another cautionary tale. On January 1, 1994, Tennessee extended health care coverage to Medicaid eligibles, those uninsurable due to chronic illness or without access to employer-sponsored care, and catastrophic illness victims. By 1995 TennCare covered 1.2 million Tennesseans and contributed $99 million to a $225 million budget deficit. State officials collected only $11.1 million of $54.4 million in premiums owed by beneficiaries. In 1996 the state launched TennCare Partners, a $350 million program for mental health services for 1.17 million beneficiaries. In 1997 TennCare started enrolling uninsured children.
In 1998 TennCare’s national success story began its unhappy ending, done in by structural defects: Tennessee’s income tax revenue being limited to dividends and interest income only, and its failure to establish a separate SCHIP (the only state to do so). Advocates for the poor filed federal suits against TennCare for not covering children and for restrictions on adults’ benefits package. A federal judge ordered Tennessee to cover its 550,000 uninsured children in a separate program.
TennCare blithely soldiered on, with a $350 million budget boost in 2003. It added a formulary to curb pharmacy costs that had climbed to $1.8 billion annually. Its year of reckoning was 2004. Governor Phil Bredesen submitted a five-year plan to shrink benefits. The legislature approved it, but advocates for the poor sued to block the overhaul, which a federal judge upheld because of the state’s failure to fix its program for uninsured children.
Governor Bredesen tried desperately to save the $8.7 billion-a-year program but on January 1, 2006, 323,000 persons were dropped from TennCare; the remaining 396,000 got strict limits on doctor visits and prescription drugs. Jerome W. Thompson, MD, MBA, Chairman of the University of Tennessee’s Department of Otolaryngology, said that TennCare’s early reimbursement (80% of Medicare’s rate) was fair, and preapproval and disallowed services checked utilization. It was a good plan but it was bankrupting the state. Federal court actions made things worse, such as disallowing generic substitution for branded drugs, he said. The governor tried everything but Tennessee has no sales tax and low property taxes. It’s crazy to think you can offer a generous plan to the uninsured without sufficient tax revenues. When indigent patients disenrolled from TennCare became self-pay, and TennCare patients limited to three or four prescriptions a month, we knew it had failed, he concluded.