In 1994, Tennessee launched an ambitious public insurance program to cover its uninsured. The plan, TennCare, fulfilled that mission but nearly bankrupted the state in the process. Unlike Massachusetts's more recent universal coverage law, the TennCare plan's... runaway costs show that the public health-insurance proposal by House Democrats could bankrupt the federal government.
As originally envisioned, the Tennessee plan expanded Medicaid, the government health-care program for the poor, to cover people who couldn't afford insurance or who had been denied coverage by an insurance company.
In a letter to Congress last month, Rep. Marsha Blackburn (R., Tenn.) compared the public plan envisioned in the House bill to TennCare, warning that TennCare became so costly at its peak that it ate up one-third of Tennessee's budget.
"The promise of TennCare has gone unrealized," she wrote. "Many of the concerns we have expressed about the proposal before us today are the stark realities of a system that went terribly wrong in Tennessee."
With an initial budget of $2.6 billion, TennCare quickly extended coverage to an additional 500,000 people by making access to its plans easy and affordable. But the program became so expensive that Tennessee was forced to scale it back in 2005.
TennCare had its failings. The plan, for example, paid health providers less than private insurance plans, prompting some physicians and hospitals to increase charges to private insurers. Some of this resulted in so-called cost shifting, with insurance companies passing on the costs through higher premiums.
Rep. Blackburn says TennCare shows that a public plan would undermine the current employer-based health-care system, citing data from University of California at San Diego that showed 45% of people claiming TennCare's benefits had left employer-provided insurance.
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