Friday, March 26, 2010

How Much Will Health Care Reform Really Cost Tennessee?

Posted By on Fri, Mar 26, 2010 at 2:34 PM

click to enlarge oie_Dr.Obama.jpg

The health care overhaul has been the law now for nearly a week, but tea party protesters remain in a state of denial, and Tennessee's Republicans can't stop bellowing and braying about the terrible injustice of it all. Their main gripe? In addition to stealing our freedom in some unexplained way, Democrats in Congress are busting the state government's budget.

"It will be devastating to the state's finances," Lt. Gov. Ron Ramsey says everywhere he goes. As his No. 1 witness, he cites none other than Gov. Phil Bredesen, the state's top Democrat. Bredesen famously denounced health care reform as "the mother of all unfunded mandates" back in the summer when the tea partiers were just beginning to work themselves into a froth. Now, he's dropped the catchy language. It's merely "a huge unfunded mandate" that, according to the governor, will cost the state $1.1 billion in its first five years--from 2014 to 2019.

The media, including your beloved Pith in the Wind, have been accepting this calculation as the gospel. The governor is saying it. It must be true, right? So Pith was surprised when, on the morning after the big vote in Congress, Rep. Jim Cooper told us Bredesen is mistaken. Cooper assumed the governor was using outdated figures from previous incarnations of the legislation.

It's true the law expands Medicaid coverage to anyone earning up to 133 percent of the federal poverty level, or $14,300 for a childless adult and $29,300 for a family of four. That will add 200,000 beneficiaries in Tennessee over the first five years, according to the TennCare Bureau. That's what Bredesen has been complaining about since last summer.

But under the law in its final form, the feds won't pay the usual two-thirds of the cost of these new beneficiaries, but the whole bill for all of them until 2017. At that point, states will start paying a 5 percent share. That share would grow to 7 percent in 2019 and top out at 10 percent in 2020.

"This is completely unheard of," Cooper says. "In any prior year in modern American history, governors would have championed this as the greatest deal they could ever have dreamed of."

And so began our weeklong quest for the facts. Bredesen has been in a terrible snit about health care reform since the president refused to appoint the governor to his Cabinet as HHS secretary. But he wouldn't fudge cost calculations for political advantage to undercut Obama, would he? How does Bredesen figure this billion-dollar cost? That's our simple question.

We asked Bredesen's army of flacks to break down the cost. They said they'd get back to us. Meantime, we asked Ramsey whether he could do it.

"Absolutely, I can specify it," he said, pointing out he had discussed this very issue at breakfast with the governor the day before. "That plan that's passed, and this is using the best-case scenario, is going to cost the state of Tennessee between $250 million and $300 million annually. And we all know that any estimation that the federal government has ever given us on any kind of cost, add 50 percent to it automatically. ...

Q: What exactly is going to cost $300 million a year?

Ramsey: You're going to expand the Medicaid rolls. ... The federal government is saying, states you're going to have to expand your Medicaid rolls by lowering eligibility, I guess is the way you'd put that, and by the way you're paying for it.

Q: No, actually the federal government is going to pay for it ...

Ramsey: They'll pay two-thirds of it.

Q: No, they'll pick up all the cost until the year 2017 and then it goes to ...

Ramsey: Well, OK, I'll have to see that to believe it. I know they put that amendment on there, but that was not in the original plan and I just don't think in the end that the states will end up getting this money. It's undeniable that it's going to cost the state taxpayers more money. The federal government just flat-out doesn't get it.

Actually, senator, we think you're the one who doesn't quite get it. After that entirely unsatisfactory little exchange, it was back to Plan A: Ask the Bredesen flacks. Finally, TennCare communications director Kelly Gunderson coughed up a little information.

The TennCare Bureau expects national health insurance reform to cost Tennessee $200 million annually, not up to $300 million as Ramsey claimed. And it turns out the major "cost driver," as she puts it, is not newly eligible beneficiaries at all because, as Cooper pointed out, the feds are paying almost all their cost.

No, the big cost comes from the addition of an estimated 50,000 beneficiaries who already are entitled to Medicaid but aren't on the rolls mainly because they don't know they're eligible. It's believed that publicity over national health insurance will lead them to sign up for Medicaid. It's called the "woodwork effect" because these people will come out of the woodwork to sign up. (That's a charming tag, isn't it? They'll come out of the woodwork like cockroaches.) And the feds aren't giving any special deals for these people. The state will pay the usual one-third of their cost.

"Initially we estimate the woodwork effect would be our largest cost driver according to our current interpretations of the legislation and discussions we have had with other states," Gunderson tells Pith.

So let's get this straight: Bredesen and the Republicans are complaining because health care reform is creating publicity that's alerting people to sign up for benefits for which they already are eligible. That's the big problem here. God forbid that we should give health care to people who already should have been receiving it. Is this even a cost that you legitimately can attribute to health care reform?

We're still not convinced it will add up to $1.1 billion by 2019, either. We asked Gunderson to provide all the costs and to break them down so that could we see exactly how the governor arrived at his figure. At last report, the TennCare Bureau was putting together this information.

"The analysts who calculated the estimates have been working since this morning to provide you with the requested breakdown," Gunderson replied a few minutes ago.

Which raises new questions: Shouldn't this information be available readily? If no simple cost breakdown exists, how did the governor come up with his calculation in the first place? Is it guesswork?

Update: What a bizarre coincidence of timing! Not 10 minutes after we filed this post, the Bredesen administration produced the long-sought cost breakdown. It shows $309 million in state savings from health care reform, mainly from the apparent abolition of Bredesen's stingy CoverTN program. (That's not necessary anymore, so no loss there.) Funny, we haven't heard a thing from any Tennessee politician about any cost savings. The biggest cost by far--at more than $900 million--is the woodwork effect. How dare those cockroaches sign up for what they're already entitled to receive!

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