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Wide Benefits, Lack Of Cost Restraint Crippled TennCare, Head Of Tennessee Blues Says in Health Affairs Interview

CEO Also Speaks On The Insurance Marketplace,
Use Of Information, And Medical Technology


BETHESDA, MD—Tennessee's pioneering Medicaid expansion program, TennCare, was doomed as an "everything for everybody" program because lawmakers prevented it from imposing financial restraint on consumers, providers, and suppliers, the top executive of BlueCross BlueShield of Tennessee says in an interview published today on the Health Affairs Web site.

While praising TennCare as a "noble experiment," Vicky Gregg, chief executive officer of BlueCross BlueShield of Tennessee (BCBST), said that consumer advocates successfully lobbied state policymakers against thinning such benefits as prescription drug coverage, while providers and pharmaceutical manufacturers successfully lobbied against any use of cost-control techniques as drug formularies or prior authorization for care. Under cost pressure, Tennessee recently moved to drop 191,000 TennCare enrollees from the program.

State policymakers did not see any reason to limit costs because Medicaid's unique state-federal partnership meant that for every dollar of state revenues spent, the state received a dollar from the federal government, Gregg said in the interview with James Robinson, a Health Affairs contributing editor and professor of economics at the University of California, Berkeley, School of Public Health.

"TennCare was sold as an everything-for-everybody program," Gregg says. “So from the perspective of the consumer advocates, there should not be any kinds of limits. The physicians and hospitals and pharmaceutical firms never envisioned anything other than being paid. No more need to provide charity-care—that was the way they viewed TennCare."

The interview with Gregg covers a wide array of topics, from BCBST's financial performance to the cost and effectiveness of new medical and information technologies to the politics of running a nonprofit health care plan.

Among her comments:

--"This year in particular—2005, year to date—our rate increases to our commercial customers are around 4 percent. We’re very successful, but we’re also today pricing below the medical cost trend."

-- "It was very clear that having better information at the point of care would be really helpful to physicians and hospitals. So we looked at what we had just within our own database and realized that we had, for our TennCare population in particular, pharmacy data that were updated every night. So we began to look at how we could leverage that information to be helpful. And that is what led to the formation of Shared Health, a new subsidiary of BCBST."

-- "The governor has put a stake in the ground with TennCare with his definition of medical necessity, which essentially says that the program will cover the least costly effective treatment for a given condition. Today, for the most part, when the FDA [Food and Drug Administration] staff look at approving new drugs or devices, they look at something in terms of how it performs against a placebo. The question in Tennessee now becomes whether this particular treatment, although it may be effective, performs well against other treatments in terms of cost-effectiveness. That’s a whole new way to think for our industry."

The interview can be read at http://content.healthaffairs.org/cgi/content/full/hlthaff.w5.558.

Health Affairs , published by Project HOPE, is the leading journal of health policy. The peer-reviewed journal appears bimonthly in print with additional online-only papers published weekly as Health Affairs Web Exclusives at www.healthaffairs.org. The full text of each Health Affairs Web Exclusive is available free of charge to all Web site visitors for a two-week period following posting, after which it will switch to pay-per-view for nonsubscribers. The abstracts of all articles are free in perpetuity. Web Exclusives are supported in part by a grant from the Commonwealth Fund.

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©2005 Project HOPE–The People-to-People Health Foundation, Inc.