The Tennessee Conference on Social Welfare

Public Policy Council

Report May 14, 2009

INVESTMENTS IN TENNESSEE FAMILIES AND COMMUNITIES

The TCSW Public Policy Council, representing a broad range of “social welfare” programs and organizations committed to the social and economic well being of Tennessee – family and child services providers, mental health, substance abuse, disability, health care, and child advocates – held a meeting on May 8, 2009 to review the proposed state budget adjustments and reductions currently before the General Assembly.

SUMMARY

In short, the Council has identified a set of essential community-based services that reduce institutionalization for children and adults, change lives, and build productive, prospering Tennesseans. 

Protecting these services in the 2009-10 budget requires $27 million dollars.

The Council, through its research and analysis has also identified untapped funding streams that can be used to safeguard these essential, cost-effective services.

Funding Streams:

Under-estimated ARRA $ 180 million

TennCare Reserves $ 75  (leaving $200 million in TennCare reserves after covering 08-09 shortfall)

TennCare Savings $ 209 million  (Daniels dis-enrollment not in proposed budget)

TOTAL Funds Available 09-10           $ 464  million

Funding Priorities Add-Backs:

$ 27.08 million for priority community services plus 5 million for DCS Youth Development Centers

Remainder Available 09-10:                 $436.92 million

POLICY ANALYSIS
 

In reviewing the proposed budget, the TCSW Public Policy Council has identified priorities and recommendations for supported needed community-based services in Tennessee.

Included here are:

I.          Funding priorities table

II.        Sources of potential revenue,

III.       Financial analyses detail of additional revenues, and

IV.       Rationale for funding priorities

The priorities and recommendations come out of our unshakeable belief that Tennessee’s social and economic health will rise only when proven preventive services, as well as acute services, are in place for healthy and productive programs from birth through adulthood, building capacities. 

Programs producing success for individuals, and ultimately Tennessee, should be at the top of the list for funding. The budget for this coming fiscal year and the one following is a moral document, reflecting our priorities for the future of Tennessee.  

The health and human services system traditionally – across states - are the hardest hit in revenue shortfalls, although those and educational improvements are the key ingredients to a strong Tennessee Tomorrow.

In short, we know – whether child-focused or adult-focused:

Community-based services reduce institutionalization for children and adults.

Community-based services change lives, and build productive, prospering Tennesseans.

Cost-effective community supports, early intervention, and evidence-based institutional programs for at-risk Tennessee children and adults reduces costly incarceration and long-term institutionalization, particularly in our current economic environment. 

We respectfully, strongly urge the 106^th General Assembly and the administration to lead with courage in face of current challenges.  This is an opportunity to demonstrate a political will to pass the 09-10 state budget – a moral document that can lift Tennessee, with a legacy of intact systems building stronger children, families, safer communities and a stronger economic base for Tennessee. 

I.  FUNDING PRIORITIES TO STRENGTHEN TENNESSEE COMMUNITIES

For Community-Based Essential Services Funding FY 2009-2010/2010-2011*

Recommendation:  Restore full base funding for priorities 2009-2010

CATEGORY	PROGRAM	DEPT.	ADD-BACK  NOW  2009-2010	FULL FUNDING 2010-2011	Expires / Non-Recurring END DATE	REFERENCE
Community-Based Recovery /Supports in Mental Health and Substance Abuse****	Child and Adult peer support, training, housing assistance, and mental health and substance abuse treatment in community settings.  Includes:	MHDD	6.7 million	9.7 million	June 30, 2009	FY 2010 Budget, Vol. 2, p. 73-75.
	Peer Support Centers, 46 centers statewide	MHDD		3,741,500	June 30, 2010 Non-Recurring	FY 2010 Budget, Vol. 2, pp. 74, 75, 103, 156,157
	Criminal Justice Mental Health Liaison Project – access services for mentally ill	MHDD		373,600		FY 2010 Budget, Vol. 2, pp. 75
	Crisis Services - Diversion	MHDD	710,400	1,021,700 million	June 30, 2010 Non-Recurring	FY 2010 Budget, Vol. 2, p. 73.
	Early Childhood Network	MHDD		144, 500	June 30, 2010 Non-Recurring	FY 2010 Budget, Vol. 2, pp. 74
	A&D Counseling in Schools	DOE		53,600	June 30, 2010 Non-Recurring	FY 2010 Budget, Vol. 2, pp. 74
	Planned Respite Services for families /children serious emotional disturbance	MHDD		114,000	June 30, 2010 Non-Recurring	FY 2010 Budget, Vol. 2, pp. 74
	Teen Screen – national mental health and suicide risk screening	MHDD		115,000	June 30, 2010 Non-Recurring	FY 2010 Budget, Vol. 2, pp. 75
	Peer Power – Youth Violence Prevention /Anger Management	MHDD		100,000	June 30, 2010 Non-Recurring	FY 2010 Budget, Vol. 2, P 75
	Homeless, Housing, for Mentally Ill		3,278,000	3,278,000	June 30, 2009	FY 2010 Budget, Vol. 2, P 103
CATEGORY	PROGRAM	DEPT.	ADD-BACK  NOW  2009-2010	FULL FUNDING 2010-2011	Expires / Non-Recurring END DATE	REFERENCE
	Children and Special Population – includes Family Support and Advocacy, the Jason Foundation, Project Tennessee, TN Suicide Prevention Network, and Erase the Stigma Campaign		1,282,300	1,282,300	June 30, 2009	FY 2010 Budget, Vol. 2, P 103
Community Services for Children At- Risk of Custody	Relative Caregiver  Program	DCS		2.8 million	June 30, 2010	FY 2010 Budget, Vol. 2, p. 95
	Family Resource Centers – 104 centers	DOE		3.463 million	June 30, 2010 Non-Recurring	FY 2010 Budget, Vol. 2, p. 62
	Family Support – intensive supervision for at-risk youth	DCS		2.685 million	June 30, 2010 Non-Recurring	FY 2010 Budget, Vol. 2, pp. 92, 94
	Contract reductions: custody services	DCS		4.266 million	June 30, 2010 Non-Recurring	FY 2010 Budget, Vol. 2, p. 93
	Contract reductions: residential and foster care, adoption, child and family mgmt	DCS		4.75 million	June 30, 2010 Non-Recurring	FY 2010 Budget, Vol. 2, p. 93
	Delinquency Prevention Grants to Juvenile Courts	DCS		5.254 million	June 30, 2010 Non-Recurring	FY 2010 Budget, Vol. 2, p. 92
At-Risk Child Access to health/develop-ment	Coordinated School Health	DOE	182,100	15.604 million	June 30, 2010 Non-Recurring	FY 2010 Budget, Vol. 2, p. 60
	CHAD – Child Health and Development - home visitation	DCS to Health		838,100	June 30, 2010 Non-Recurring	FY 2010 Budget, Vol. 2, p. 92
	Healthy Start to promote health, prevent child abuse and neglect through home visitation	DCS to Health		3 million	June 30, 2010 Non-Recurring	FY 2010 Budget, Vol. 2, p. 94
CATEGORY	PROGRAM	DEPT.	ADD-BACK  NOW  2009-2010	FULL FUNDING 2010-2011	Expires / Non-Recurring END DATE	REFERENCE
Families With Disabled Family Member	Family Support	DMRS	7.18 million	7.18 million	June 30, 2009	FY 2010 Budget, Vol. 2, p. 83
TennCare	Medically Needy Spend Down for Adults***	F and A	8.8 million	8.8 million	postponed – add in for 09-10.	FY 2010 Budget, Vol. 2, p. 45.
TennCare	Reductions Related to DCS reductions	F and A	1 million	1 million	June 30, 2010 Non-Recurring	FY 2010 Budget, Vol. 2, p. 47.
TennCare	Reductions Related to DMRS reductions	F and A	2.4 million	2.4 million	June 30, 2010 Non-Recurring	FY 2010 Budget, Vol. 2, p. 47.
NEEDED 7-1-09 for 09-10 ADD-BACKS			27.08 million
FOR 2010-2011 and Beyond				72 million per year

***  

 The Medically Needy Spend Down category will in 2009-2010 qualify for 3-1 federal/state match rather than the

current 2 to 1. With the additional federal match and the increase in the FMAP state cost would move to 8.8 million to implement rather than the estimate of 11.37 million currently postponed. 

**** This summary does not address in detail but wishes to express very deep concerns with the deep reductions in the Department of Children’s Services Youth Development Center’s capacities (5 million plus) Vol 2, p 94, and the additional costs to counties for services to juvenile and adult mentally ill persons.  Those transfers will effectively render the programs closed when counties cannot afford them.  The above are all essential to preventing the higher costs of institutionalization and incarceration.  Please see SB2357/HB2389 released 5-12-09 for revisions in reductions.   

II.  ADDITIONAL FUNDING STREAMS TO UTILIZE 2009-2010/2010-2011*

. Does not include Rainy Day Fund. 

 

SOURCE	CONSERVATIVE NEW REVENUES/SAVINGS FOR FY09-10	COMMENTS
Federal Stimulus: ARRA, Non-Recurring	Under-estimated by 180 million in FY 09	TN has already drawn down 331 million, and has notified federal DHHS of intent to draw down an additional 150 million.  The current budget includes only 300 million.  See Addendum 1, page 5
TennCare Reserves	75 million	Leaving 200 million in reserve after use to cover shortfalls in 09.  Need for huge reserves no longer necessary.  See Addendum 1, page 5-6
TennCare Savings in Daniels disenrollment	209 million	Current budget includes services to 140,000, although only 10,000 are expected to qualify.  See Addendum 1, page 6
TOTAL	464 million

Addendum 1

TCSW  Statement 5/14/2009

Rationale for Including Additional TennCare Savings, Reserves and Federal Stimulus Funds

In The 2009-2010 Budget

Our analysis indicates the proposed FY 2010 Budget overstates TennCare expenditures, understates savings and underestimates the federal Medicaid stimulus funding that TennCare, and other programs, will receive under the American Recovery and Reinvestment Act (ARRA).  We hope and believe these funds are viable resources to bridge the three years or more it will take to recover from the recent economic downturn. 

Underestimated Federal Stimulus Revenues

The Budget understates the amount of federal stimulus funding available under ARRA.

   The Budget estimates that the state will receive $300 million in FY 09 ending June 30 is. (Budget, pp. A-10 and A-48). According to the U.S. Department of Health and Human Services (HHS), which administers the ARRA Medicaid funds, TennCare had already drawn $331 million by March 20, 2009, before the Budget was presented to the General Assembly. The state has informed HHS that it expects to draw down at least another $150 million in the last quarter of FY 09.

   The Budget estimates that the state will receive $550 million in FY 10 (Budget, p. A-48). Estimates provided to the federal government place the number substantially higher, although specific estimates are not available.

   The Budget presents the federal Medicaid stimulus funds as an “allocation” to Tennessee (Budget, pp. A-18 and A-48).  There is no specific “allocation” for Tennessee. Instead, ARRA increases the federal match rate, known as the federal medical assistance percentage (FMAP) from 64.28% to 73.17%. That means that the state can draw down nearly three dollars of federal Medicaid funds for every state dollar it spends on TennCare, with no upper limit on what Tennessee can receive.

Changes Influencing Availability of TennCare Reserves

Finance and Administration indicated at the May 5 House Finance Committee that TennCare reserves currently stand at $500 million. The Governor’s budget projected taking $124 million from the reserves to close out FY 09, leaving around $376 million (The projection given at the TennCare Oversight Committee was $383 million). On May 5^th the department indicated that, with weakening revenues, the Administration will pull an additional $100 million from a combination of TennCare reserves and the Rainy Day Fund. If all of the additional funds were drawn from TennCare reserves, that would still leave a balance of approximately $275 million in the TennCare reserves.

In the past, there have been two reasons to maintaining a large TennCare reserve  for meeting an unanticipated TennCare expenses. But those two reasons no longer exist. In addition, ARRA creates a third reason to release the money for TennCare operations:

   During the Bush administration, the federal government notified the state of contingent claims for repayment of federal Medicaid matching funds, based on several proposed rules. The Obama administration filed notice May 1 that it would withdraw the rules, and Commissioner Goetz acknowledged in his May 5 appearance before the House Finance Committee that this contingent liability no longer exists.

   TennCare is now fully capitated. That means that the managed care contractors are paid a fixed fee, or capitation payment, each month in advance for each TennCare enrollee. The contractors are at financial risk if medical costs exceed the total of such capitation payments. There is no longer the risk that the state will have to cover unanticipated medical expenses. Although TennCare projects a 3% increase in enrollment due to the recession, this is offset by a further increase in the FMAP due to rising unemployment.

   Every dollar held in the reserve means that the state foregoes the chance to draw down federal funds at the enhanced rate of nearly three to one.

Savings From Daniels Appropriation

On January 9, 2009, the federal court in Nashville dissolved an injunction in the Daniels lawsuit, allowing the state to screen the eligibility of all 150,000 members of the Daniels class and terminate their coverage if the Tennessee Department of Human Services (TDHS) finds that they are no longer eligible. As explained below, the state will realize $209-227 million in unbudgeted savings in FY 10 from the disenrollment of members of the Daniels class.

The January 6 affidavit filed in federal court by TennCare indicated the state would not know how many class members would be eligible to remain on TennCare and how many might be terminated until TDHS began the redetermination process, and an inability at this time to estimate potential savings.

On April 17, TennCare officials reported that they had done an initial review of the Daniels class based on information already available to the state. 9,300 of the 150,000 had been found eligible. TDHS initiated a follow-up process on May 1 that requires the remaining class members to complete a detailed request for information form and submit supporting documentation.  TDHS estimates that as few as 700 and no more than 1,700 of the remaining 140,000 will be terminated after the review process’s second phase is completed.  That means that about 140,000 (93%) of the Daniels enrollees will be terminated. The first batch of enrollees will lose their coverage in late June, with almost all of the rest cut off by the end of the first quarter of FY 10.

The FY 10 budget contains no projected reduction in the base budget related to Daniels. (For a list of proposed reductions, see FY 2010 Budget, Vol. 2, pp. 45-48.) The base budget funds the continuation of coverage for this entire group.

In the affidavit, TennCare reported that the total annual cost (both federal and state) of covering the Daniels class was $1.2 billion. The state share of $1.2 billion annual cost would be $350 million. The Budget projects that the state share of costs of TennCare services will be 29.1% in FY 10 (Budget, p. B-158.)

Conservative estimates, based on an assumption that the state will disenroll only 130,000 (86.6%) (rather than the 140,000 DHS anticipates) of the 150,000 Daniels enrollees by the end of the first quarter, places the amount of unbudgeted savings at somewhere between $208.8 million and $227 million. The budget projects that the state share of costs of TennCare services is 29.1% in FY 10 (Budget, p. B-158.); at that rate, the savings would be $227 million. The lower estimate of $208.8 million applies the enhanced FMAP, which means that the state keeps 26.8% of the savings.

Total annualized cost (state & federal) of covering Daniels class of 150,000	State share of costs = 26.8% (Enhanced FMAP)	State share of costs = 29.1% (Budget, p. B-158)
State cost for full year for 150,000	$321.6 million	$350 million
- Cost of covering the 20,000 (13.3%) of enrollees who retain coverage	-  43.1 million	-  47 million
- 25% to allow for one quarter delay in  implementing cuts	-  69.6 million	-  76 million
Net state savings	$208.8 million	$227 million

Addressing Concerns About Funding For Continuation of Services For The Daniels Class

The TennCare op-ed 5-17-09 Tennessean op-ed, “Currently, we know more than 106,000 in the Daniels class will continue to qualify for comprehensive government-sponsored health insurance, either through TennCare or Medicare.”  

The figure of 106,000 includes about 9,300 Daniels people who have already been screened and found eligible for TennCare under another category of coverage, based on information that the state already had in its computer files. This is the figure that the Tennessee Department of Human Services (TDHS) reported on 4-17-09.

The figure also includes those who have Medicare. In March, Darin Gordon reported that 90,000 of the Daniels people had Medicare. Medicare is government-sponsored, but it is not “comprehensive”. That is why 90% of Medicare enrollees buy Medicare Supplement or “Medigap” insurance. None of these Daniels people will be able to get Medigap coverage, because it was only available to them during the first 6 months that they were on Medicare, which has long since passed. Their loss of TennCare will be significant because of the unfilled gaps in their Medicare coverage. For some, such as those who are severely and persistently mentally ill or patients on ventilators who are getting private duty nursing care, the loss of TennCare will be catastrophic.

From the standpoint of the state’s savings, the fact that these 90,000 people have Medicare does not affect the estimates in this position paper. The paper uses the state’s own cost estimates for covering the Daniels class. Once an enrollee is off the program it makes no difference to the state budget whether is still partially insured by Medicare or is entirely uninsured.

The Tennessee Department of Human Services, (TDHS), which is administering the eligibility process for TennCare, said on April 17 that they estimated that between 700 and 1,700 more will retain their TennCare coverage after the review is complete.

These three groups (the 9,300 already approved, the 90,000 with Medicare, and the estimated 1,700 who are yet to be approved, account for 100,000 to 101,000 of the 106,000 figure used in the Darin Gordon op-ed. We have been using the state’s figures, which are not always consistent. For example, state officials used the total of 150,000 when describing the Daniels class, but more recently they say it is 154,000.

Federal law only allows coverage in one category at a time. The fact that people in the Daniels class and are now in another category should not affect the budget. (It is very unlikely that they would move to another “cell” in the actuarial report, so that the amount of the capitation payment for them would change. The capitation rates are based on characteristics, such as age, gender and disability that should not be affected when they are reclassified from the Daniels class.)

Overstatement of Savings From Postponement of Services for the Medically Needy

The Budget reflects state intention to save $11.3 million by postponing coverage for the Standard Spend Down category of adults with catastrophic illness (See FY 2010 Budget, Vol. 2, p. 45, Red. Nbr. 8).  That figure is calculated at a Federal Medical Assistance Matching Percentage (FMAP) of  64.28% and does not take into account the enhanced federal match provided in the American Recovery and Reinvestment Act (ARRA). The enhanced FMAP is 73.17%, leaving Tennessee to fund only 26.83% of the total. The cost or restoring the Standard Spend Down coverage would therefore be $8.8 million in state funds, rather than $11.3 million.

Addendum 2

TCSW Statement 5/14/2009

RATIONAL FOR PRIORITY HIGHLIGHTS

Over the past two decades. Tennessee established public-private partnerships to implement essential services for vulnerable citizens.  There have been basic public supports developed to assist families and individuals to function and thrive in their communities.  These supports, developed in our child welfare, aging and disability, health, human services, court and mental health systems, are interrelated. Weakened structure resources in one system erodes the foundation of all systems.

Proposed budget reductions for 2010 would seriously weaken these systems’ ability to serve needy Tennesseans.  While the non-recurring funds proposed to mitigate the immediate cuts are an important bridge, maintaining services and supports beyond 2010 is essential for maintaining Tennessee’s quality of life.   Legislators must provide funding to ensure we maintain this legacy of critical services that provide family supports. 

Compromising the statewide public-private partnerships in communities throughout Tennessee will not only result in the loss of essential services and supports for vulnerable Tennesseans, but also contribute to the state’s overall economic distress as hundreds, if not thousands of people employed to provide these services lose their jobs.

Many of the most endangered programs are in prevention services, programs that most enable adults and children to be healthy and supported in their homes and families.  If these services are cut, the downstream impact will be more individuals and families in crisis, overtaxed service systems, and fewer active, productive, and independent citizens.

Careful consideration of both state revenues and expenditures are called for in these challenging times.  The Council carefully considered state revenues, federal stimulus dollars, and state investment in the public-private partnerships that help to create successful communities and citizens.   Addendum 1 is a paper that helps to outline where additional funding may be found to support critical programs. 

In addition, there are a number of revenue measures that can reduce or completely eliminate the revenue problem for the next fiscal year. Modernizing the state’s tax system, closing loopholes and exemptions, and scrutinizing all other available revenue streams would help stabilize Tennessee’s budget and create a sound economic footing for the future.

TCSW Public Policy Council