Cooper Testifies at Middle Tennessee TennCare Block Grant Hearing

Oct 1, 2019
Press Release

Testimony of Rep. Jim Cooper
on TennCare II Demonstration, Amendment 42 

Oct. 1, 2019 

“History may not repeat itself, but it often rhymes.” – attributed to Mark Twain 

Let’s be completely honest. Tennessee is one of the unhealthiest states in America and we lead the nation in per capita hospital closings. Both of these tragedies are partly the result of our refusal to expand Medicaid. And this waiver request not only doesn’t help, it moves us backward. This radical, Trump-inspired plan would treat Tennessee like a guinea pig. 

Don’t take my word regarding our bad health. Ask Tennessee’s Department of Public Health, Nashville’s non-partisan Sycamore Institute or Sen. Bill Frist’s Health & Well-Being Index. Here are some of their examples: 

Although the outlook is better and better for Americans with cancer, not for us living in Tennessee. Cancer deaths are falling nationwide, but Tennesseans’ continue to climb. How about Tennessee children? They are more likely to die here than if you’re child in 40 other states.

What if you are one of the two million Americans who suffer opioid abuse? There’s hope if you live in a state that expanded Medicaid where access to treatment centers has led to fewer overdoses. But in Tennessee, more of our people are overdosing. And what about the health of mothers in Tennessee? Of all of the maternal deaths in 2017, 85% were preventable. Think about that – many of these mothers might still be alive if Tennessee had only treated them better by expanding Medicaid. 

How can we explain our state government’s complicity in all this bad news? And Nashville dares call itself America’s health care capital! 

Now Tennessee is applying for its 42nd Amendment to its federal waiver in 25 years so that we can experiment again on our children, poor people and rural hospitals. The waiver application calls for refinancing “core medical services to its core population.” Shockingly, the waiver request barely mentions the health of Tennesseans because it’s such a low priority. 

Don’t forget that, since 2010, we have been offered almost a billion dollars a year in health assistance by the federal government. Perhaps if it had been offered by the Gates Foundation, we would have accepted it. Since 2010, we have made the cruel decision to reject federal money for ideological reasons. Never has our state turned down so much money, and we wouldn’t think of doing so for other causes. Only the medical needs of our most vulnerable are scorned. 

History: The Public TennCare Reform Efforts 

For the last twenty-five years, Tennessee Medicaid has been operating on a series of so-called Section 1115 waivers. In 1994, the legislature passed a page-and-a-half bill asking Gov. Ned McWherter to handle the problem of fitting medical care for the low income and disabled into tight state budgets. The legislature’s motivation was primarily financial, not medical. They were not trying to improve public health but to reduce state spending. 

Tennessee received its waiver from the Clinton Administration (McWherter was favorite of President Clinton), and TennCare was born in 1994. Tennessee’s big idea was managed care, forcing hundreds of thousands of poor Tennesseans into managed care plans because it might save lots of money. Of course, the legislature would never have dared force regular citizens or state employees into such plans. Reimbursements to these Managed Care Organizations under TennCare were so low that no national managed care company wanted to do business in Tennessee. Nevertheless, the legislature bulldozed ahead, waiting six years before seriously studying reimbursement levels. As a result, the entire crop of home-grown TennCare MCOs failed while waiting to be fairly paid for their work, leaving the state’s Medicaid patients in the lurch. 

When Gov. Phil Bredesen was elected in 2002, he had the advantage of having been a managed care executive. He knew that reimbursement levels for Medicaid had to be high enough to attract qualified managed-care providers. His change in reimbursement meant that Tennessee market was attractive to companies like Amerigroup and United – companies with proven management systems. Despite Gov. Bredesen’s expertise, he had to correct previous structural problems in the original design of TennCare, which forced the removal of 170,000 Tennesseans from the rolls. 

The Affordable Care Act, when passed in 2010, was a national fix a number of features of our health care system. It wasn’t perfect, but I was proud to vote for it on behalf of the 750,000 people I represent in Middle Tennessee. Gone were the laws that allowed insurance companies to dump people as soon as they got sick; gone were sham insurance policies that provided no benefits; gone were the higher premium charges for women; gone were the policies that prevented people with previous medical conditions from ever getting health coverage. All Americans, including Tennesseans, have been beneficiaries of these changes in the law. 

But the ACA was also designed to get not only the poor, but the low-income, medical insurance. This reform works wherever it is allowed to work, but not in Tennessee. The federal government committed to pay for the additional costs to states, and most states – enticed by the prospect of a realigned health care marketplace that was heavily subsidized by the federal government – signed up. The near-poor citizens of 36 states are now under the coverage of care, but not Tennesseans. Here, we had the third largest increase in uninsured in the nation last year. One out of every 10 people in our state, about 675,000 people, remain without any health insurance. Read the first chapter of T.R. Reid’s book, The Healing of America. It describes a young Tennessee woman in her 30s who needlessly died of lupus for lack of medical care. 

To his credit, after Gov. Bill Haslam was elected, he supported expanding TennCare in this newly aligned system, and ALL of our Tennessee hospitals and provider groups also supported the effort. His plan was called “Insure Tennessee”, and it was chock-full of conservative features such as co-pays and work requirements. Nevertheless, the state legislature soundly rejected the Governor’s initiative after his half-hearted sales attempt and so began nearly a decade of refusing to expand TennCare. Gov. Haslam’s failure left Tennesseans in the sad situation of paying federal taxes so that other states could take better care of their citizens than we do. 

Now, eight years later, Gov. Bill Lee has been handed another page-and-a-half bill (H.B. 1280) by the General Assembly asking Gov. Lee to handle the same problems that Gov. McWherter first faced a quarter-century ago: tight state budgets with little room for the medical needs of our citizens who need help most. Gov. Lee has the same response: more managed care. 

The Hidden History: Gaming “the Match” 

Tennessee governors have been very creative in grabbing federal dollars to shoulder their constitutional responsibilities in caring for the medical needs of Tennesseans. No matter how generous the federal government has been in assisting states with their constitutional responsibilities, states always want more money to do the work the Constitution left to them. 

Medicaid was created in 1965 to offer federal matching grants to state-run Medicaid programs. Prosperous states like Connecticut get a 50% match, or one federal dollar for every state dollar. Lower-income states like Tennessee get a much better deal, a 65% match rate. That means about two federal dollars for every Tennessee dollar. 

Critics of this uncapped matching formula know that it has drawbacks and benefits. Federal generosity has spurred endless medical care price increases. Any attempt to reduce medical spending looks punitive because of the “ratchet effect” of, in Tennessee’s case, losing three dollars for every cut of one state dollar. Nevertheless, federal generosity under this formula has allowed dramatic improvements in health outcomes nationwide. 

The two-for-one match rate is so favorable to Tennessee that it creates incentives for Tennessee to look literally everywhere for money to earn more matching funds. Some of these efforts look laughable in hindsight. Tennessee hospitals once volunteered to give large “charitable” contributions to state government, with the implicit understanding that they would quickly get all their money back and more. These were not charitable contributions at all, but self-serving investments. When the federal government tried to close this blatant loophole, state officials complained that they were being unfairly treated.

After the charitable loophole was closed, hospitals began volunteering to have their beds taxed. Anytime someone volunteers to be taxed, especially with high taxes, you should get suspicious. These “provider-specific” taxes of, say, $10,000 per bed paid for themselves almost immediately with federal grants of $20,000 per bed. Once again, the feds closed this loophole, but only after Tennessee had taught many other states how to game the match. 

The third generation of TennCare loopholes involved using inter-governmental funds to boost our lawful 65% match rate to higher levels of matching. The goal is to get as close to 100% federal funding for TennCare as possible. The irony is that all along the Affordable Care Act offered 90% to 100% federal funding for expanding Medicaid. Under the ACA (or “Obamacare”), Tennessee could easily have boosted its match rate without needless delays or loopholes. 

Today’s Amendment 42 waiver request is really a fourth-generation loophole to get federal government to pay for virtually all of TennCare. By allowing Tennessee to use the highly-theoretical “savings” of its TennCare program vs. so-called “budget neutrality,” Tennessee is really seeking federal approval to spend as few state dollars as possible on the entire Medicaid population. This proposal moves Tennessee backwards, not forwards. Once again, our state’s proposed TennCare reforms are almost entirely budget-driven, not people-driven. 

The valid argument that the legislature should be concerned about our nation’s fiscal situation is belied by the fact that Tennessee has long been a national leader in increasing federal deficits by milking the federal funds with every trick in the book, even inventing new tricks, while paying little or no regard to the health of poor Tennesseans. Also, our state cannot be trusted to stick to commitments to ask for less federal money. Tennessee once pledged it would not ask for the “disproportionate share” or DSH aid. Of course, the state soon reversed its position. 

The TennCare II, Amendment 42 Demonstration Request 

I had hoped that Gov. Lee’s religious faith would give him more of a heart for the poor, especially as we anticipate his Day of Prayer and Fasting later this month. His waiver request does not reflect what most states view as their duty to the poor. Remember, at least 36 states are doing better far than Tennessee in helping their most vulnerable. 

My biggest issues with the Amendment 42 request are hidden in plain sight. 


The main thing the Amendment 42 request says is, “This is not Obamacare.” I understand that our legislature feels that way, but that emotion costs us $1 billion a year. That is staggeringly wasteful and out-of-step with public opinion. Obamacare has never been more popular than it is today. All insured Tennesseans are benefitting from the many insurance reforms that were key elements of Obamacare such as pre-existing condition coverage. 

Not expanding Medicaid is one thing; shrinking it is worse. The waiver request allows cutting the eligible population of 1.4 million Tennesseans on Medicaid if, as has already been happening in our state, there are problems re-registering beneficiaries. 


The second thing the Amendment 42 proposal says is, “We want a block grant.” The words “block grant” are very popular with state legislators. Who doesn’t want free federal money with no strings attached? 

But remember that Medicaid ALREADY has many aspects of a block grant (although, to be sure, it is way too complicated and bureaucratic). Unlike Medicare – health care for people over 65 – which is federally funded and administered, Medicaid was always mainly federally-funded but state-administered. States have always had wide discretion to design their own Medicaid programs, without any waivers. With waivers, there is even more flexibility. That’s why Medicaid benefits vary widely from state to state. After 41 waivers, Tennessee has enjoyed extra flexibility. Of course, federal oversight remains to guarantee a safety net for the poor so that states do not mistreat their disadvantaged citizens. Amendment 42 asks permission to rip holes in the TennCare safety net that was supposed to protect all Americans. Do poor Tennesseans really deserve less protection than citizens of other states? 

A strong case can also be made that it would be illegal under federal law for Section 1115 to waive Section 1903 of the Medicaid statute. Gov. Lee seemed to acknowledge the unlikelihood of CMS granting his entire waiver request. If this part of the waiver request proves illegal, then what? If Amendment 42 is not severable, then denying any of the request negates the entire plan. 


The third major feature of Amendment 42 is “shared savings.” Producing any genuine savings in medical care is nearly miraculous, like finding a Holy Grail, because medical spending nationwide has increased 2.5% faster than inflation for four decades. Tennessee seems so confident of savings that the waiver request offers to be responsible for 100% of any cost overruns. Such overruns may be harder to prevent than the state anticipates, despite the state excluding several volatile TennCare programs from its waiver request. 

There are only two ways to reduce spending on medical care if, as Amendment 42 says, there are no reductions in eligibility or benefits: providers must cut their prices or they must reduce the intensity or availability of care.

Have you ever heard of any hospitals, doctors, or other providers voluntarily cutting retail prices or having a sale? I never have, and I am guessing they don’t want to start now. Is the TennCare Bureau about to hammer Tennessee providers with lower reimbursement levels? Do we want more hospital closures and more physicians refusing to see TennCare patients? 

That leaves rationing care as the only way to reduce TennCare spending. The state must rely on the “tender mercies” of its Managed Care Organizations to figure out how to spend less on our poor without hurting them. That is the most likely way that any savings can be found, namely denials of care by Amerigroup, United, and Blue Cross of Tennessee. These three insurance companies will be in charge of doing the dirty work while our legislature washes its hands of the problem. 

Amendment 42 is really a return to Gov. McWherter’s old playbook, with the difference that true management of care barely existed in 1994; companies that claimed to do it were really managing costs, not care. Health plans today have learned how to manage care but they are already using all the legal techniques in Tennessee. Do we really want to unleash them to use the previously illegal techniques on our fellow Tennesseans? Are any state legislators, with their government-paid health benefits, willing to accept such cutbacks for themselves and their families? 

There is some suspicion that, because government dollars are fungible and the medical needs of poor people are so unpopular in the legislature, that Amendment 42 could become a piggy bank for other state spending. Is it moral to squeeze the TennCare MCOs to squeeze the state’s poor for more money? The waiver request explicitly says that it won’t spend expected savings on “tourism development, financial institution regulation, or routine infrastructure maintenance…” but that’s hardly reassuring. Robbing the poor to pay for other state programs would be beyond cruel. 


One of the gravest dangers of this radical waiver request is reducing the little transparency we have into the workings of TennCare. There are no safeguards in the proposal to help Tennesseans monitor the effects of proposals such as the closed drug formulary that has never been allowed in any Medicaid program. What if your lifesaving drug is not on the list? And it’s not likely to be with only one drug per disease. The waiver request does mention hiring “an independent evaluator” but that seems to be for internal use, not for public information. 

From its first days, TennCare lacked transparency because the state did not want anyone to know its many management difficulties, such as herding everyone into managed care or refusing to get the reimbursement levels right for six years. Today, TennCare does not want to emphasize the poor health of Tennesseans. Even TennCare seemed surprised recently at the unexplained drop in child enrollees. Forget about getting a list of reimbursement levels for providers. No one seems to have cracked down on Medicaid millionaires. Interestingly, the only mention of Medicaid fraud in the application refers to poor individual patients, not rich health care providers. They get a free pass. 

Any worthy waiver proposal should be completely transparent to the public. Experimentation may make sense, if it is a genuine experiment. But if it is just sweeping the problems of the poor under the rug, then it is exploitation, not experimentation. 


Tennessee should be granted a waiver, but for some modification of former Gov. Haslam’s “Insure Tennessee” waiver request, and not this dangerous proposal. Our state should not be part of this radical Trump-inspired plan to further damage the health of Tennesseans and close more of our hospitals. 

Our state should focus on getting everyone in Tennessee health insurance coverage instead of unleashing managed care organizations to squeeze savings from the poor. At the very least, CMS should deny the worst parts of the waiver request and should force Tennessee to go back to the drawing board. 

Tennessee would be wisest to do what the head of CMS, Seema Verma, did when Mike Pence was governor of Indiana: simply expand Medicaid. Our hospitals are closing, families are going bankrupt from medical expenses and people are dying. This is not the time for more state government experiments. It is not too late to get Tennessee back on Indiana’s (and 35 other states) path to better health and stronger hospitals.