Strategies for Integrating and Coordinating Care for Behavioral Health Populations: Case Studies of Four States. D. Program Financing and Contracting


Funding mechanism. TennCare operates under a Section 1115(a) demonstration waiver from CMS. The current demonstration, TennCare II, has been in existence since 2002 and expires in June 2013. The state has requested a three-year extension for the program under Section 1115(e). When TennCare II was last extended, in 2010, the extension included several new amendments, among them approval for the implementation of the CHOICES program outlined by the Tennessee General Assembly's Long-Term Care and Community Choices Act of 2008. The long-term care benefits were added to the existing TennCare II benefit package of primary, acute, and behavioral health services. Tennessee is now one of a limited number of states in the country to deliver managed Medicaid long-term care and the only state to do so in a manner that does not require enrollees to change their MCO (Bureau of TennCare 2012c).

MCO contracting. The three MCOs participating in TennCare are fully at-risk for all services. The MCO contracts began in 2008 and expire in 2014. According to TennCare representatives, the state primarily looked at quality over cost containment when considering proposals from MCOs; it wanted to know how the MCO would manage the population and what experience it had in the past with service integration. Contracts carefully define each requirement of the MCO and include appropriate reporting and monitoring processes to ensure compliance. Staggering the implementation of the integration (from 2007 to 2009) also helped with both the procurement (the state had a chance to refine the RFPs) and with the implementation (allowing a thoughtful, focused approach).

The MCOs are allowed to subcontract for the management of behavioral health services, but subcontractors are required to operate on site within the MCOs' offices to ensure coordinated management across services. One MCO is currently subcontracting with a vendor to provide management of behavioral health services.

The CHOICES program involves contracts with MCOs and contracts with nursing facilities and home and community-based service providers. There is a blended capitation rate with built-in assumptions regarding expected utilization and level of care provided. There are different capitation rates for duals and non-duals.

Costs of integration. TennCare is fully funded by Medicaid, with 65 percent of the cost of medical services for TennCare enrollees funded by the Federal Government and 35 percent funded by the state (Bureau of TennCare 2012d). Stakeholders from the Bureau of TennCare and an MCO indicated that integration has not given rise to any unanticipated costs. Because members with SMI receive frequent and high-cost services, the Bureau initially provided an add-on payment to MCOs based on the number of members with SMI enrolled in the MCO. However, the assessment process for identifying members with SMI proved costly and failed to capture all members with SMI. The Bureau altered their arrangement to designate members with SMI as priority based on diagnosis information from claims data and added the payments into the capitation rate. The MCOs also hosted provider forums when integration first started, but these were at no additional cost to TennCare. No additional funds were paid to the MCOs for start-up preparation.

The most recent data available from the Bureau of TennCare for PMPM costs are from state fiscal year 2011. State officials we engaged during our project reported that the statewide average for MCO acute care (no CHOICES, no pharmacy) was $275.59 PMPM. For the disabled population specifically, the cost was $896.57 PMPM, and for the general Medicaid population (Temporary Assistance for Needy Families [TANF] and related groups), the cost was $199.88.

View full report


"4CaseStud.pdf" (pdf, 734.19Kb)

Note: Documents in PDF format require the Adobe Acrobat Reader®. If you experience problems with PDF documents, please download the latest version of the Reader®