Governor’s Revised Budget Applauded by Safety Net Advocates
Editor’s Note: At press time, the FY2011-12 budget was still being reviewed and revised by lawmakers. However, it was anticipated that a final budget would go before the full House and Senate for approval prior to Memorial Day.
When Gov. Bill Haslam unveiled his inaugural budget in March, a collective gasp could be heard around the state as healthcare providers tallied the steep cuts that would impact services to many of Tennessee’s most vulnerable citizens. Two months later, that gasp turned into an audible sigh of relief when the governor’s amended budget proposal restored a considerable portion of the funding to TennCare, mental health services and other safety net providers.
What Was at Stake
The budget submitted in mid-March for FY2011-12 called for nearly $120 million in cuts to TennCare. With the accompanying loss of federal match dollars, officials would have had to shave more than $200 million from the program. Proposed cuts included reducing the reimbursement rate for non-emergency cesarean sections and emergency room care provided for non-emergencies, as well as placing more limits on prescriptions.
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Additionally, the initial budget called for cutting 600 jobs at two developmental centers (Greene Valley and Colverbottom) run by the Department of Intellectual and Developmental Disabilities, cutting $13 million from Meharry, as much as $47 million from nursing home care, and millions more from Jellico Hospital, the Regional Medical Center in Memphis, medical transportation providers, diagnostic and imaging services, home health and dental services for children.
Still, these cuts would have seemed mild compared to the draconian measures that would have been required without approval of an extension to the hospital coverage assessment. Gov. Haslam’s initial budget presumed an extension of the assessment at the rate of 4.52 percent of gross revenue (up from 3.52 percent in FY2010), which was expected to leverage nearly $450 million from Tennessee hospitals and draw down an additional $870 million in federal match dollars. Without approval from lawmakers, TennCare would be facing an additional $1.3 billion hole in its budget.
When the amended budget was released in early May, safety net providers and advocates were pleased to see that a number of cuts had been eliminated or lessened. The reversal of fortune has been attributed to several factors including higher-than-expected tax collections, the Tennessee Hospital Association’s (THA) backing of the coverage assessment, a windfall from the federal government to correct a Medicare payment mistake, tightening the budget in other areas, and advocacy and education efforts from safety net providers.
State officials now expect to collect about $50 million more in tax revenues than originally anticipated. Tennessee will also be the recipient of approximately $82 million from the federal government as the result of the Social Security Administration wrongly categorizing patients as SSI rather than SSDI beneficiaries. The result … the state paid for services that should have been covered under Medicare. Additionally, more than $30 million has been ‘found’ for healthcare by tightening up other state department budgets.
The THA, which originally urged lawmakers to pass a one-year hospital coverage assessment in FY2010, backed legislation to extend and increase the fee for the coming budget year beginning July 1. Increased enrollment, costs, and utilization — combined with the loss of one-time federal stimulus dollars last year — were responsible for the 1 percent increase in the assessment. As with last year’s legislation, hospitals would not be allowed to pass along any portion of the assessment to patients. Lawmakers in both the House and Senate approved this measure in late April.
Although significant cuts still exist, providers and advocates largely believe patients have dodged a bullet if the revised budget passes as anticipated. However, arguments are being made that even more cuts could be avoided if the state would consent to maximize its available resources.
Reaction and Reality Check
Beth Uselton is executive director for the Tennessee Health Care Campaign (THCC), a nonpartisan organization that advocates on behalf of Tennesseans accessing healthcare services. She said THCC has a three-pronged approach to serving its constituency — direct services including helping individuals find resources in their own community, advocacy for healthcare accessibility and affordability, and public education about the many different provisions and options under state and federal health laws.
Years of TennCare cuts coupled with the economic downturn and the termination of federal stimulus dollars at the end of this month have created what Uselton called a perfect storm of increased need and decreased resources. “We all understood the budget decision the new administration was going to have to make,” Uselton said. “It was clear the governor knew the important role of the social safety net, but it (the budget) did include significant cuts that would have damaged the cornerstone of the health and social service infrastructure that was developed over decades.”
Recognizing Tennessee’s economic realities, a coalition of nonprofit advocacy and provider groups joined forces prior to state elections last fall to serve as a resource to lawmakers and to search for ways to minimize the impact of budget cuts on healthcare delivery. In addition to THCC, the coalition includes the League of Women Voters of Tennessee, the Tennessee chapter of the National Alliance on Mental Illness, Tennesseans for Fair Taxation, Tennessee Citizen Action, Tennessee Conference on Social Welfare, Tennessee Disability Coalition, Tennessee Justice Center, Tennessee Kidney Foundation, and the Tennessee Mental Health Consumers’ Association.
Uselton said each of the separate organizations worked with lawmakers to underscore the larger community impact of cuts to the safety net. She added that it was important to the coalition to not just complain but to offer constructive alternatives. “We started doing research on sources of funding that could prevent those cuts,” said Usleton. “There are compassionate and fiscally responsible ways to deal with the problems we’re facing in the new budget reality.”
After the initial budget proposal was released, a top priority was to restore the proposed 8.5 percent rate reduction to mental health providers and to eliminate or minimize other TennCare cuts. “Our position was, as much as possible, to maintain TennCare. Any cuts to that spending had a three-fold impact, which could be devastating to the medical safety net,” she said. “Our thought (about TennCare cuts) was that’s ‘penny wise and pound foolish’ because it left federal matching funds.”
With the release of the amended budget early last month, Uselton noted, “We applaud the governor’s administration for recognizing the full impact of the original proposed cuts and taking steps to prevent that devastating impact on the social infrastructure … especially at a time when more people are in need of those services.”
Anthony Fox, executive director of the Tennessee Mental Health Consumers’ Association (TMHCA), said his organization had advocates at Legislative Plaza before furniture was even moved into new lawmakers’ offices. He said he believes that effort combined with the willingness of the General Assembly and the governor to learn about the impact of cuts in communities and the experience of Commissioner Douglas Varney of the Department of Mental Health all worked in favor of restoring much of the mental health funding for the coming year.
He added there was a preconceived notion that perhaps the new administration and lawmakers would be a particularly tough audience. Instead, he said, advocates have been pleasantly surprised at their interest in hearing about how dollars are put to work on the ground and the fresh viewpoints the new legislators bring to the table. “We feel this administration is more social services sensitive. Commissioner Varney came from a service provider background. We also feel like Gov. Haslam is a very compassionate man. This administration has a very different approach. It’s a better approach,” he said appreciatively.
That said, Fox would still like to see changes in the way the Department of Mental Health’s budget is handled. “About a third of our budget at TMHCA is from the Department of Mental Health’s discretionary budget so we wait each year until about this time to see if that money is going to be reflected in a new budget,” he explained, noting that funding is used for peer-to-peer services, mental health education and support, and advocacy and empowerment programming. “I would hope there would be some sort of sustainability to the budget.”
To restore some of the remaining cuts and shore up services, Uselton said she would like to see the state explore the additional funding resources identified by the coalition. Some of those avenues include tapping into the Rainy Day Fund with $283 million and utilizing some of the $260 million in the TennCare reserve fund. With the TennCare reserves in particular, Uselton noted, “That $260 million in practice could be tripled if put into use. We can’t get match dollars until we actually spend on services. That federal match money isn’t going to wait for us. It’s being drawn by other states so we are essentially leaving it on the table, and it’s disappearing.”
Fox agreed. He noted that mental health transportation service cuts remain even in the amended budget. Using dollars from TennCare reserves could draw down additional federal funds. “It just makes sense when you can get a two-for-one match,” he said. Fox added that if transportation services weren’t restored, people would ultimately wait longer to access services and then end up utilizing emergency transport in the form of an ambulance. Not only does that form of transportation cost a lot more, the patient would now access care at a higher level of acuity, which also has a much higher price tag.
Ultimately, the coalition members pointed out, never accessing reserves or a rainy day fund is the same thing as not having them at all. After all, the group reasoned in a recent position paper, “It makes little sense to save money as a means of preventing possible cuts in the future if doing so means making definite cuts in the present.”