Feds, AG agree: TN can opt out of Insure Tennessee

The Tennessee attorney general and the head of the federal health department agree: Tennessee can opt out of Gov. Bill Haslam's health care plan in the future if the state no longer likes the program.

The opinions could help Haslam avoid legal and political hurdles in implementing his Insure Tennessee plan, a proposal to provide an estimated 200,000 Tennesseans with federally subsidized health care similar in parts to Medicaid.

Haslam has said his proposal won't cost Tennessee any additional money, thanks to federal dollars covering most of the costs and hospitals chipping in down the road. If that funding changes, Haslam pledges Tennessee could eliminate the program.

However, critics say they fear Tennessee would be on the hook to pay for coverage because they argue it's illegal to take people off the health care rolls after they're included. The new opinion from Tennessee Attorney General Herbert Slatery says that's not the case.

"That was one of the concerns that was originally brought up," Haslam said, according to a statement provided by a spokesman. "The fact that the Attorney General said we most definitely can (opt out of the program) is clear."

Department of Health and Human Services Secretary Sylvia Mathews Burwell echoes Slatery's opinion. Slatery cited a federal health "Frequently Asked Questions" document as part of his justification for why federal health officials would allow Tennessee to end its expanded program. Burwell elaborated on the document, stating Tennessee can opt out.

"Tennessee may take up the Medicaid coverage expansion and later drop it at state option," Burwell wrote in the letter, dated Jan. 23.

"Further, if Tennessee expands Medicaid coverage and then drops such coverage at a later point, there would be no financial penalty and no reduction to the federal matching dollar rates otherwise available to Tennessee for its Medicaid program."

Any hint from the attorney general that anything about Insure Tennessee was illegal could have doomed the proposal that's already on shaky ground in the General Assembly. Regardless, opponents are likely to use Slatery's opinion to attack the plan.

Slatery — who said he didn't help craft the Insure Tennessee plan while serving as general counsel to Haslam last year — provided the opinion at the request of Sen. Randy McNally, R-Oak Ridge. The chairman of the Senate Finance, Ways and Means Committee made several requests questioning the state's legal ability to extend coverage to a large population and then potentially remove that coverage.

Slatery's opinion says the state can end coverage, as long as it follows a "phase-out" plan that's included in its request to expand the coverage. The opinion also says the state can use a fee (in the plan it's called an assessment) on hospitals to help cover costs of Insure Tennessee. State hospital associations have already agreed to pick up the rest of the tab when the federal government's share of the costs drop to 90 percent at the end of the decade.

Senate Judiciary Chairman Brian Kelsey, R-Germantown, blasted the plan in a committee meeting Tuesday. Although he had the Slatery opinion — the Burwell letter was released during the hearing — he questioned the state's legal capacity to opt out of the program. He used the song "Hotel California" as an analogy: You can opt in to the program, but you can never leave.

Robert Alt of the conservative Ohio think tank Buckeye Institute agreed. He was one of two people to testify during the hearing and made it clear he thinks expansion is a "gamble." Vanderbilt University professor James Blumstein, who worked on TennCare reform for Gov. Phil Bredesen, disagreed. He said he thinks Slatery is correct in his opinion that the state can opt out, but it's an "extremely painful" decision: The Bredesen administration was criticized after it chose to cut roughly 170,000 people from the TennCare rolls because of budget issues.

Although he didn't testify Tuesday, Tom Scully, the former head of the U.S. Centers for Medicare and Medicaid Services, was at the state Capitol. Scully said he spoke with Kelsey about testifying; after he told the senator he supported the Haslam plan, Kelsey said he could testify but didn't need to attend the hearing.

"Given where the state is ... I think what Gov. Haslam is doing is totally right. It's a no-brainer," said Scully, a Republican who served as CMS head under President George W. Bush.

The General Assembly still hasn't decided if it will approve the governor's plan, and Haslam continues to meet with lawmakers every day this week in attempts to convince them his plan is not "Obamacare." Any connection to the contentious federal legislation is likely to make some Republicans in the General Assembly hesitant to support the plan.

Lawmakers are set to debate Haslam's plan in earnest during a special session that starts Monday.

Reach Dave Boucher at 615-259-8892 and on Twitter @Dave_Boucher1.

What's next for Insure Tennessee



Form of proposal: The General Assembly has yet to publicly announce whether the Senate and House will work on Gov. Bill Haslam's plan separately or at the same time. This decision could have a huge affect on the proposal's chances of passing in the legislature.

Committees: Lt. Gov. Ron Ramsey said he planned to create special committees for the special session. House Speaker Beth Harwell hinted at the committee in her chamber that would likely take up the plan, but that hasn't been finalized yet either.

Special session: The special session to discuss Insure Tennessee is scheduled to start Monday. As of late Tuesday, the General Assembly online schedule listed a "joint convention" slated for 5:45 p.m. Monday.