The recent Supreme Court ruling that allows our government to mandate that each citizen purchase insurance as required by the Patient Protection and Affordable Care Act through the definition of a tax presents a defining moment for states.
As a function of Obamacare, states are given the option to independently construct health insurance exchanges with federal grants in preparation for full implementation of the law or to participate in a federal exchange. Of America's 50 states, 35 have moved forward to ready for the law by working to establish minimal benefit plans.
As of May 2012, according to the Kaiser Family Foundation, Tennessee has received more than $8 million in federal grants, Alabama $8.5 million, and North Carolina over $12 million to take action. Georgia has not taken any federal funding to date.
In 1994, through an executive order, a "managed care" program was put into place through a waiver Tennessee received to modify our state Medicaid program that provides health care for the poor. TennCare was born.
According to a legislative briefing paper prepared by then-Comptroller John Morgan, spending on Tennessee's Medicaid population was $895.8 million in 1993. After the implementation of TennCare, that figure ballooned to $1.68 billion in 2001, a doubling in eight years. Gov. Bill Haslam's 2013 current draft budget includes a proposed $2.86 billion from the state for a total of $8.96 billion projected spending on TennCare.
Over the years, the perils of government engaging in a private function of commerce were discovered in TennCare. The state budget was placed in serious jeopardy due to the malignant expansion of the costs and a promise of health care coverage.
The state health exchanges, promoted in Tennessee as the "Expedia" of health options, will allow a qualifying individual to navigate through the options to make their selection that ultimately will receive the federal funding to the state program.
So, what's the problem with TennCare and the fear of a spawn of TennCare? Both would offer a defined benefit rather than a defined contribution.
A defined benefit promises services X, Y and Z will be offered. Whether an individual needs X or only Y and Z is not a factor. For example, does a 55-year-old uninsured man need health coverage that includes prenatal care? The plan that includes a standard fit of X, Y and Z in a defined benefit serves as the floor and the option that will receive the greatest funding through government subsidy.
A defined contribution, in contrast, permits a patient to serve as the consumer, choosing health care coverage through options and variations that best meet the needs of individuals based on their ages, their pre-existing conditions, their risk of trauma, etc.
Guess which of the two is easier to manage during a time of rising costs? Guess which option actually serves as a competitive market force to increase options and patient control?
Obamacare will move forward toward full implementation in 2014. States must decide whether to expand Medicaid for the uninsured poor and whether to complete the state exchange process. However, Tennessee must not create the Son of TennCare by following the same template that includes tremendous budget demands.
Let's use the opportunity to shift the solution to the private sector, create competition, and watch health care costs and the number of the uninsured decline.
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