The American Recovery and Reinvestment Act
The American Recovery and Reinvestment Act
The American Recovery and Reinvestment Act greatly helped TennCare avoid immediate budget reductions and allows the Bureau to adjust to the changing economic climate over a period of time. TennCare estimates it will receive about $1.1 billion additional federal Medicaid matching dollars over the entire nine-quarter "recession adjustment period" outlined in the Recovery Act. That period of time spans from October 2008 to December 2010.
The funds will solely be received through an increased federal match on one type of expenditure—medical assistance payments. These are payments TennCare makes that are directly related to providing health care services to our enrollees. TennCare operates on a “reimbursement” model, meaning TennCare must spend state money and then the federal government will reimburse the state for a portion of the expense. Previously, for every dollar TennCare spent on medical assistance payments, the federal government paid about 65 cents, and the state of Tennessee paid about 35 cents.
With the passage of the American Recovery and Reinvestment Act, the federal match changed. The federal government now pays about 75 cents for every dollar spent on medical assistance payments and the state pays the remaining 25 cents. This increased funding has prevented some immediate budget reductions and financially helped the state as a whole during these tough economic times.
The state now anticipates approximately $16 million in increased TennCare federal matching dollars in the present fiscal year and an additional $60 million in FY 2009-2010 due to the state’s current unemployment rate. As a result of the increased federal match, these funds will be used to displace state dollars that would be required to draw down the same amount of funding.
The Act also outlines grants to be used in implementing new Health Information Technology Extension Programs and incentive funds to help encourage providers to transition to electronic health records. TennCare is still awaiting guidance from federal officials before it is certain how that money will be best utilized.
Click here to find out information about the Recovery Act.
Here are some frequently asked questions regarding TennCare and the Recovery Act:
Q: Does the additional Recovery Act money mean more people will be eligible for TennCare?
A: No. TennCare cannot use the recovery money to expand eligibility. TennCare will be maintaining all current eligibility groups during the recession adjustment period. TennCare does however estimate an increase in enrollees for the upcoming fiscal year, due to the nationwide economic downturn. These enrollees will be persons who qualify in current eligibility categories.
Q: What will TennCare do with the money?
A: Because of the nation-wide economic downturn, TennCare—like many state agencies—was faced with some very difficult budgetary decisions, including some reductions for both FY09 and FY10. We know that for FY09—which ends June 30, 2009—TennCare will no longer have to make some expected reductions due to the additional federal money from the Recovery Act. For instance, TennCare will be able to continue to provide supplemental payments to hospitals to help offset some of their uncompensated care costs, as well as continue to provide funding to university medical schools for graduate medical education.
As for FY10, all state agencies were facing the possibility of approximately 15 percent budget reductions due to the nation-wide economic downturn. However, in his address to the General Assembly, Governor Bredesen proposed a common-sense, balanced budget that will allow TennCare and other state agencies to greatly minimize cuts due to the financial assistance provided by the Recovery Act. The FY10 proposed budget will continue to provide supplemental payments to hospitals and continue to provide funding to university medical schools for graduate medical education. Also, as a result of the increased Medicaid match in the Recovery Act, state funds are freed up in order to help broader state government avoid layoffs and deeper cuts. This proposed budget must still be approved by the Tennessee General Assembly.
Q: Will the additional money mean some people will now avoid losing their TennCare coverage?
A: TennCare had never planned to reduce eligibility this year, even though the state was faced with a significant revenue shortfall. TennCare had not and does not plan to reduce eligibility. TennCare will instead focus its efforts to make sure only those people who are eligible for the program remain on the program. As a result, TennCare had not and does not intend to reduce eligibility categories.
Q: Can we use the Recovery Act money to add TennCare services?
A: No. Any time a new service is added to TennCare, the state must have a source of funding to be able to pay for that service indefinitely. The recovery act money is short-term funding, also called "non-recurring" funding. It isn't available on an ongoing basis. If we were to use these funds to add a new service, the state would have to find a new source of funding to support that service once the Recovery Act money is gone. This bill only provides additional funds through December 2010.
