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Tennessee GOP Governor Proposes to Expand State's Medicaid Program

By Rebecca Adams, CQ HealthBeat Associate Editor

December 15, 2014 -- Tennessee Republican Gov. Bill Haslam has unveiled the outlines of a two-year plan to expand his state's Medicaid program that would include vouchers for private insurance and require beneficiaries to pick up some of the costs of their care.

Haslam faces a difficult task in creating a plan that will pass muster with both federal officials and reluctant Republican legislators. However, Haslam has spoken with Health and Human Services Secretary Sylvia Mathews Burwell about the plan, and last week some state critics softened their opposition. Last week, state Senate Speaker and Lt. Gov. Ron Ramsey said publicly that he might be able to persuade lawmakers to accept the proposal.

Haslam said that more than 200,000 Tennesseeans could gain coverage under the move to broaden eligibility to people earning up to 138 percent of the federal poverty level, as allowed under the health care law (PL 111-148, PL 111-152). More than half of those people are employed.

If state legislators and federal officials approve the plan, the state would become the 29th jurisdiction, including the District of Columbia, to expand Medicaid.

"This is an alternative approach that forges a different path and is a unique Tennessee solution," said Haslam. "This plan leverages federal dollars to provide health care coverage to more Tennesseans, to give people a choice in their coverage and to address the cost of health care, better health outcomes and personal responsibility."

Haslam said his approach would provide a voucher that is worth slightly less than the average per-person cost for Medicaid, which is known in Tennessee as TennCare. The money would be used to pay for premiums and out-of-pocket costs for private insurance. One option that beneficiaries could use the voucher for would be to buy coverage through an employer if that is available. State officials are leaving open the possibility that consumers could use the voucher in future years to buy private plans through the marketplace created by the health law, but those details have not been settled yet.

Tennessee would require people covered by the expansion benefit to pay for any costs above the value of the voucher.

"This structure empowers individuals to make a choice about which plan is better for their needs and to manage their healthcare expenses to avoid additional costs," said a summary of the plan.

The state wants to create a new program modeled on health reimbursement accounts. Consumers would get money for earn additional money for their accounts by participating in healthy behavior programs. The account could then be used to cover out-of-pocket expenses like copayments.

Newly eligible people who participate in the health account-type program and whose incomes are above the federal poverty level would have to pay premiums and copayments for services. All enrollees, including those with incomes below poverty, would have pharmacy copays.

Haslam said that the plan would not increase state budget costs because hospitals are willing to help pay for the program after the first two years. The federal government will pay all of the costs of new enrollees in 2015 and 2016, but then the federal contribution phases down to 90 percent of costs in 2020. The Tennessee Hospital Association agreed to cover the additional costs for the state, said Haslam.

The Centers for Medicare and Medicaid Services would still need to approve the proposal, but federal officials said the concepts in it appear to be ideas the administration could support. Once the state legislature passes legislation accepting it, the proposal would undergo a 30-day comment period at the state level before being sent to CMS. Then federal officials will have a second 30-day comment period before deciding whether to approve it.

"The administration is willing to work with any state interested in expanding Medicaid, and welcomes the news out of Tennessee," said CMS spokeswoman Marilyn Jackson. "The department has had productive discussions with Governor Haslam, and we look forward to the state submitting its plan to give low-income Tennesseans new options for health coverage."

Consumer advocates applauded the governor's announcement.

"This is an important moment," said Michele Johnson, executive director of the Tennessee Justice Center, a patient advocacy group. "We will look closely at the details of the governor's plan. Overall, we fully support its intention to keep Tennesseans' federal tax dollars in the state, cover working families and give them financial peace of mind."

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