Nashville

Every day this summer, a couple of dozen folks staged a sit-in outside the office of Tennessee's Democratic governor, Phil Bredesen, to protest drastic cuts in TennCare, the state's Medicaid program. The protest was "the best thing I've put effort into in my life," says TennCare enrollee Glen Barnhill, a 45-year-old from Nashville who stocked grocery shelves at Kroger before he was rendered a quadriplegic from a gunshot wound to his brain. "If we don't keep fighting," Barnhill says between puffs on his ventilator, "these people are going to die."

Nearly 200,000 Tennesseans lost their health insurance in July, while 379,000 others now have limited prescription drug coverage and face more benefit cuts this winter. Until this summer, these mostly poor residents had comprehensive health coverage under the boldest, most visionary expansion of Medicaid the United States had ever seen. TennCare covered two groups that have trouble buying insurance in every state: low-income adults whose employers do not provide medical benefits, and people with health conditions that make them uninsurable. At its peak, TennCare covered almost 1.4 million people. By the late 1990s, only 14 percent of the state's population was uninsured--while in states like California and Texas, one-quarter of the population had no insurance.

Today TennCare is $60 million in the red, and Tennessee is just another state struggling to keep poor and terminally ill people insured. All across the country, Medicaid offices are reducing benefits, freezing provider payments and kicking people off the rolls. But the outcry has been loudest in Tennessee--both because its program was once the best and because no other state has slashed Medicaid so deeply. Governor Bredesen, who made his fortune in managed care, has refused to meet with the protesters in public, as they've requested. He has also ignored calls for a special legislative session to reconsider the TennCare cutbacks. The state's senior senator, Republican majority leader Bill Frist, has not been helpful either. Before he was elected to the Senate, Frist championed TennCare; now he says the program's troubles are a state matter, and he can't get involved. "It's ironic how Senator Frist stands up for Terri Schiavo," says protest organizer Lori Smith, "yet denies medical care to his own people in Tennessee."

The ironies don't stop there. At its conception in 1994, TennCare looked like a national model for expanding Medicaid coverage. Born in the days of Lyndon Johnson's Great Society as a way of covering the poor, Medicaid has evolved into the nation's largest health insurance plan, now covering 53 million Americans. The federal government matches the money a state puts up for the program, but states have broad latitude to add benefits and enroll more residents as they see fit. As President Clinton's plan for national healthcare collapsed and the number of uninsured continued to mount in the mid-1990s, Tennessee leaders came up with a creative solution: Redirect money that hospitals were already spending on care for the uninsured into a unified program that would cover more people and better control costs.

Crafted at a time when policy experts believed managed care was the antidote to rising medical costs, TennCare relied on HMOs to provide benefits. The theory was that if the state did managed care right, it could cover a good chunk of the uninsured. But TennCare's HMOs did little managing. First Health Services Corporation, owned by a company that Bredesen founded, failed to implement federal requirements designed to insure that drugs are prescribed properly--but never lost its contract with the state. The state allowed two HMOs to "cover" residents even though they were undercapitalized and could not pay providers for care their patients received. Eventually the state assumed the risk and responsibility for all patients' medical expenses. But Tennessee continued to pay the managed care companies handsome fees--simply for processing claims. For the HMOs it was a sweet deal: fees but no risk.

Former Governor Don Sundquist, a Republican, sped along TennCare's slide into insolvency. In 2002, during routine Medicaid renegotiations with the federal government, Sundquist agreed to give back some federal matching funds--even though the program was already running into financial trouble and starting to trim residents from its rolls. Until 2002 anyone who was uninsurable could join TennCare, regardless of income, in return for paying premiums; those with higher incomes paid more. That changed dramatically in 2002, when the state closed TennCare to anyone with an income above poverty level--and stopped enrolling people who could not buy insurance because of bad health.

That same year, Tennessee voters rejected an income tax that could have helped pay for TennCare. The governor has refused to support subsequent proposals for new sales taxes on alcohol and tobacco. "There's no political appetite in this state for new taxes," says TennCare spokesperson Michael Drescher.

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