TennCare Director Steven Smith told the Finance, Ways and Means Committee on Oct. 30 that Tennessee's TennCare 3 waiver has produced nearly $1 billion in shared savings that the agency can reinvest in services for the program's enrollees.

The most important point, Smith said, is that TennCare has achieved "record investments" in the program while maintaining public education and other state priorities. He described TennCare 3 as a shared-savings model negotiated with federal officials that "rewards Tennessee for its conservative, effective, and responsible management" of Medicaid and that the state has claimed and budgeted the shared-savings dollars for future reinvestment.

Why it matters: Committee members pressed TennCare on when and how those savings must be spent. Smith said the state structured the funds to be used over multiple years rather than in a single fiscal year. He told Chairman Williams the funds have been obligated and appropriated in multi-year plans; roughly $180 million of the first year's savings had been spent as of the most recent accounting Smith cited during the hearing.

Enrollment and redeterminations: Smith reviewed pandemic-era enrollment, saying TennCare's rolls rose from roughly 1.4 million to about 1.8 million during the federal pause on eligibility redeterminations and then declined after the pause ended. He told the committee Tennessee never paused renewals after redeterminations resumed and was not required to submit a federal mitigation plan. When members asked where people who left the rolls went, Smith said about 40% of those who did not respond to renewals had other insurance, but the department does not have a single reason for every case.

Rebase and federal negotiation: Members asked whether a midterm rebase of the waiverthe neutrality capmight reduce the state's shared-savings gains. Smith said the waiver's rebase follows the same methodology used at the five-year mark of the initial term and his expectation is that the methodology should preserve the state's ability to generate savings; he emphasized discussions with CMS will continue.

Regional allocations for mobile crisis units: Several lawmakers pressed Smith about large geographic differences in direct allocations for mobile mental-health crisis units, where per-person funding varies substantially between communities. Smith said the distribution formula was inherited from earlier program design, that wholesale changes create winners and losers, and that TennCare has made two targeted increases since 2020 to reduce extremes. He encouraged the Tennessee Association of Mental Health Organizations (TAMHO) members to propose a mutually acceptable formula.

Provider payments and access: Committee members raised concerns from physicians that TennCare payment rates can be substantially below Medicare and commercial rates. Smith said TennCare has not seen a broad exodus of physicians from the network and that access is the primary metric the agency monitors. He noted aggregate physician rate increases averaged about 3.5% over the previous five years and said TennCare relies on managed care organizations to negotiate and allocate rate adjustments in specific areas of need.

Programs funded by shared savings: Smith detailed how shared-savings dollars were prioritized across yearsfirst-year investments in Strong Families, second-year emphasis on rural health and behavioral health, and third-year investments focused on long-term care. He credited broad legislative and executive support for enabling the reinvestments and said the state has flexibility in timing and use of those funds.

What didn't change: Smith said, and repeated in response to questions, that TennCare is not designed to pay commercial or Medicare rates across the board; doing so would create budgetary holes comparable to challenges other states are facing.

Sources and attribution: Statements in this article are based on Director Steven Smith's presentation and his answers during committee questions; specific numerical figures (near $1 billion in shared savings; $180 million spent) were provided by Smith in committee discussion.