Healthy Debate 2018: Challenges on the Horizon

This section of Healthy Debate 2018 highlights several challenges that Tennessee policymakers may need to consider in the months and years ahead — including the ongoing opioid epidemic and potential new pressures on the state budget. Many of these challenges exist at the intersection of health and the state budget — some requiring difficult decisions about how to allocate limited resources.

Tennessee’s Opioid Epidemic

Tennessee has been a national leader in implementing evidence-based policies to address the state’s opioid epidemic, which have successfully reduced the supply of opioid prescriptions. The state’s policy response has largely focused on targeting prescriber practices — including expanding the use of the state’s controlled substance monitoring database, issuing prescriber guidelines, and regulating pain management clinics. The negative outcomes of opioid addiction may have been worse without these efforts.

Opioid-related hospitalizations, overdoses, and cases of neonatal abstinence syndrome continue to rise in Tennessee despite recent policy efforts. While Tennessee has done well in nearly all facets of addressing the opioid supply, the evidence suggests that demand for opiates remains and that the epidemic is evolving with individuals switching from prescription opioids to heroin and fentanyl.


Tennessee's Progress on Key Opioid Indicators
Source: Citation (1) in References and Notes


Addiction underlies many of these trends and the demand for opioids in Tennessee. Addiction is a chronic, relapsing brain disease that is influenced by the drivers of health and requires long-term treatment and care. Reducing the demand for opioids involves a comprehensive spectrum of efforts aimed at broadly promoting health and well‑being, preventing substance abuse and opioid misuse, and treating drug addiction.

As the effectiveness of current policies becomes clearer and the opioid epidemic evolves, Tennessee has room to expand and improve evidence-based treatment and prevention efforts to fight the epidemic.

Recession Readiness

Economic downturns create higher-than-usual needs for state programs and services while reducing the revenues that fund them. States can respond to revenue shortfalls by reducing spending, increasing taxes, and/or tapping rainy day reserves. During the most recent recession, the federal government also provided additional funding to states through the American Recovery and Reinvestment Act of 2009. Policymakers should consider each of these tools when assessing the state’s readiness for another recession, which many experts believe could be around the corner.

State spending cuts since the Great Recession could make finding additional savings a challenge during the next recession. Since FY 2007‑2008, Tennessee has enacted nearly $2 billion in recurring budget reductions. (2) Some of the state’s biggest budgetary items are most in demand during recessions (e.g. TennCare), making spending cuts in these areas both politically and practically difficult.


Tennessee Rainy Day Fund Resources

Tennessee’s ability to raise new revenues is limited. Although Tennessee is a low-tax state, its primary sources of state tax revenue — the general sales tax and the franchise and excise taxes  are already relatively high compared to other states. (3) Changes to tax policy in recent years — including a constitutional ban on an individual income tax — suggest that policymakers and many Tennesseans have little appetite for raising taxes.

Tennessee is on track to amass a combined balance of $1 billion in the Reserve for Revenue Fluctuations and the TennCare Reserve (the state’s rainy day fund resources) by June 2018. This amount is about $100 million less than what the state had on hand in FY 2006-2007 just prior to the Great Recession of 2007-2009. In terms of buying power, the combined reserve balances alone could cover state-funded General and Education Fund operations for around 25 days — 16 fewer days than in FY 2006-2007. (4)

States may or may not receive significant federal aid during the next recession. Congress has shown an interest in reducing federal deficits and spending for a number of existing state aid programs. Policymakers in Tennessee may want to consider what resources the state needs to weather a recession without outside help.

Responding to Federal Reforms & Funding Pressures

Congress and the Trump administration have proposed changes to federal law that would give states more control over health and social services policy but could also place additional pressure on state budgets.

Health Insurance Reform

In 2017, Congress tried to give states additional regulatory and financial responsibilities over the individual health insurance market. Although the future of these proposals is uncertain, Congress did repeal the penalty associated with the Affordable Care Act’s (ACA) individual mandate. Other major legislation proposed in the U.S. House and Senate sought to let states tailor the ACA benefit and coverage mandates for the individual health insurance market. Under these proposals, states would also direct federal funds to help stabilize local health insurance markets and address affordability issues for older and less healthy individuals. Some of these proposed funds would also require a state match.

If these proposals become law, states would face numerous decisions with difficult trade-offs. For example, loosening the ACA’s benefit mandates would increase access to plans with lower premiums, higher deductibles, and less comprehensive benefits. As a result, more comprehensive plans that appeal to older and sicker Tennesseans would likely become more expensive.

Federal Funding Pressures

The President and Congress are considering major funding revisions for health and social services programs — with significant implications for state budgets. For example, the U.S. House and Senate bills mentioned above would slow the growth of federal Medicaid spending and put greater pressure on state budgets. These reforms would cap federal Medicaid spending based on external measures of growth like inflation or medical inflation. Since 2006, TennCare per enrollee spending has typically grown faster than general inflation, closer to medical inflation, and slower than medical inflation +1%. (5)


TennCare Spending vs. Proposed Federal Funding Caps

Downward pressure on federal funding for health and social services programs could require state policymakers to make difficult decisions to keep the state’s budget balanced. These decisions could require redesigning programs to produce cost-savings, shifting funding from other priorities in the state budget, or raising taxes. Each of these decisions would pose trade-offs.

Related Work by The Sycamore Institute

The Opioid Epidemic in Tennessee: A 3-Part Introductory Series
August 2017

Analysis of Health and Medicaid Reform Efforts
Ongoing

References and Notes

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  1. The Sycamore Institute’s analysis of data from:
  2. The Sycamore Institute’s analysis of the FY 2013-2014 Tennessee State Budget: Volume 2 Base Budget Reductions (page 59) and the FY 2017-2018 Tennessee State Budget: Volume 2 Base Budget Reductions (page 9)
  3. Tennessee’s average state and local sales tax rate is the 2nd highest in the country, and its corporate tax collections per capita are the 11th highest, according to the Tax Foundation’s 2017 Facts and Figures (tables 19 and 16) (https://files.taxfoundation.org/20170710170127/TF-Facts-Figures-2017-7-10-2017.pdfhttps:/taxfoundation.org/facts-figures-2017/)
  4. The Sycamore Institute’s analysis of the FY 2008-2009 – FY 2017-2018 Tennessee State Budgets and the Tennessee General Assembly’s Office of Legislative Budget Analysis’ 2017 Session Summary (http://www.capitol.tn.gov/joint/staff/budget-analysis/docs/17-18%20Post%20Session%20Summary%20Report%20Revised%206%2027%202017.pdf)
  5. The Sycamore Institute’s analysis of the FY 2007-2008 – FY 2017-2018 Tennessee State Budgets, TennCare Historical Expenditure and Enrollment Data (https://www.tn.gov/content/dam/tn/tenncare/documents/historicalchart.pdf), and the U.S. Bureau of Labor Statistics’ Consumer Price Index data (accessed in June 2017 via http://data.bls.gov/pdq/SurveyOutputServlet)

 

Featured image at top by Joshua Earle on Unsplash