Report: Tennessee factored TennCare reserves into new budget

Published 1:25 pm Wednesday, June 19, 2024

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By Jon Styff

The Center Square

Over the past few budget years, Tennessee has received TennCare reserves that have covered the state’s end-of-year budget shortfalls.

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This budget year, Senate Finance Chair Bo Watson vowed the budget would be adjusted for lower-than-expected tax and use fee collections. The budget came in at $52.8 billion, lower than the past two years.

An analysis from Sycamore Institute shows the next fiscal year’s budget includes already obligated TennCare reserves.

“Our analyses of the state’s rainy day fund typically also includes the TennCare Reserve, which has also been used in the past to respond to economic downturns,” Sycamore Institute wrote in a recent budget summary. “However, FY 2025 budget documents show that a significant portion of those balances are already obligated for specific purposes (e.g., shared savings, IT improvements), so we have excluded them from this summary.”

Those reserves were higher over the past few years as Tennessee budgeted for TennCare expense increases due to inflated numbers due to a halt on eligibility checks during the COVID-19 pandemic between March 2020 to March 31, 2023.

During a special session last fall, Watson said the Legislature was able to pass new spending bills and close the books on last fiscal year despite the shortfall because $508 million was reverted from TennCare.

Those higher budgeted amounts, along with an influx of federal funds to the program, led to reserves.

“Under a 2021 agreement with the federal government, Tennessee can keep up to 55% of the federal share of any difference between the cap and actual spending without committing any additional state money,” Sycamore Institute wrote. “Referred to as ‘shared savings,’ these federal dollars must be used on specific state-funded activities that expand or improve health coverage, access, delivery or outcomes for low-income Tennesseans.”

The timeframe for the year-long unwinding of Medicaid programs from the COVID-19 eligibility pause is now complete, with composite results including March expected to be posted by TennCare soon.

Through February, Tennessee had checked the eligibility of more than 1.4 million through February with nearly 877,000 retaining eligibility and nearly 456,000 losing coverage with nearly 80,000 still pending a determination.

As of April, the state had 1.5 million enrolled in some area of coverage, down from a peak of 1.8 million.