Haslam's Bold Health Care Gambit May Result in a Better Plan—if it Works

Anyone who doubts Gov. Bill Haslam's sincerity in seeking to provide high-quality health care coverage to low-income Tennesseans has another think coming.

In rejecting federal Medicaid expansion funding that would have provided roughly $1 billion a year to cover everyone in the state with incomes up to 138 percent of the poverty line, Haslam seemed to many to be spurning a bird in the hand for a bird in the bush.

But the bush, as Haslam envisions it, would be far sturdier and prove far more beneficial to health care consumers and providers alike than Medicaid/TennCare expansion. Moreover, he believes it can be grown in ways that will cause health care delivery and payment reforms to flourish with resultant savings to all concerned, including the state and federal governments.

What Haslam is proposing is to use the billion dollars to buy health insurance for the same low-income population on the Exchange that is being established as a centerpiece of the Affordable Care Act. The federal Department of Health and Human Services has said it's amenable to this approach but with some strings attached. These include provisions for maintaining Medicaid benefits and appeal rights for any care denials as well as a demonstration of cost effectiveness and "budget neutrality."

Actually, Arkansas Gov. Mike Beebe was the first to propose using Medicaid expansion dollars to purchase private insurance coverage on the Exchange instead. In an April 1 letter to Beebe, HHS Secretary Kathleen Sibelius wrote, "let me assure you that we will work with you on this innovative approach for Arkansas." Haslam reports that the day after he unveiled what he's dubbed his Tennessee Plan on March 27, "I was very encouraged that the secretary called and said ‘I want to talk.'" Beyond that, he will only say, "We are continuing those conversations."

At first blush, it's hard to fathom how buying private insurance could pass the budget neutrality test since it generally costs much more than Medicaid coverage. Congressional Budget Office projections at the time the ACA was enacted placed the average cost of an individual policy on an Exchange at $9,000 a year compared to $6,000 for a Medicaid enrollee. But several subsequent studies have suggested that competition among carriers on exchanges is likely to bring their costs in line with Medicare's $7,500 a year average. And the CBO's projections don't take into account the compelling case for higher Medicaid reimbursement rates for doctors in order to get enough of them to accept and care for a greatly expanded patient population.

The ACA did recognize this need in providing federal funding for a 57 percent increase in Medicaid reimbursement of primary care physicians for the years 2013 and 2014. But this lollipop could turn into a sucker punch in 2015 when the supplemental federal funding goes away.

Assuring sufficient coverage is one of the reasons Haslam wants to go the insurance route. "With insurance, doctors will take you because they are being reimbursed at a better rate, whereas under Medicaid, a lot of them say ‘I'm sorry, I don't take Medicaid patients,'" he says in an interview. But that's only a point of departure for effective healthcare delivery and payment reforms he believes are essential "to gain control of health care costs that are growing unsustainably."

Incentivizing people to make "smarter health choices" is one element of that. "If you can go and get care from a family practice doctor or a specialist that you couldn't get before, then you have less of an excuse to make an unwise health care choice like going to the emergency room for a non-emergency. And if you do show up at the ER under these circumstances, there should be an additional co-pay."

Beyond that, Haslam is bent on getting "true payment reform for providers that is outcome-based rather than paying a fee-for-service for anything they do. There is no way this state or the country can continue with that." As he sees it, "We have a one-time hammer, if you will, because we have this window where we're going to have this population that hasn't had any coverage, and if they can have insurance coverage instead of just Medicaid, that's a whale of an incentive for the provider community.

"I've said to them that if we can cover this segment that you're not now getting paid for, then will you come back to us and show us true payment reform? And I've been amazed how much the providers—hospitals and doctors—have worked with us. I've given them a number for the savings they've got to show down the line so that the state won't incur any additional cost, and they've been willing to sign on the dotted line for that."

Haslam also believes, "If you can tie it to having insurance, which is better coverage that gives the user true options, then we should be able to incentivize them to choose the best option. I think that will save not just the state, but also the federal government, money."

Just when or whether Haslam can satisfy HHS of this remains to be determined, and his insistence on the imposition of co-pays for incentivization could also be a sticking point.

The governor will only venture to say, "I don't know if we're close or if we're a year away. But I can promise you we didn't do this as a way to get out of the trap of having to say ‘yes' [to Medicaid expansion] and make a whole lot of people mad at us or ‘no' and that will make a whole lot of other people mad."

For his part, Gordon Bonnyman, whose Tennessee Justice Center has been a long-time champion of health care access for the underprivileged, believes HHS' posture is "tantamount to a handshake with Tennessee. We can all only hope that the Tennessee Plan will work."