...year. Healthcare-related budget pressures have mounted to the point where the state has been forced to implement significant reductions in TennCare expenditures. Considering the projected growing need for quality and affordable healthcare in the state of Tennessee and in Shelby County, the proposed reductions in TennCare expenditures raise concerns about the direct impacts on the health of its citizens as well as the overall economic impact.

TennCare funding, like all Medicaid programs, is governed by a Federal Medical Assistance Percentage (FMAP) based on the state's average income. For Tennessee in 2005, the FMAP resulted in the federal government paying 64.8 percent of TennCare expenditures. As a result of this funding formula, a reduction in state expenditures for TennCare results in a greater reduction in federal matching funds. This study was undertaken to estimate the economic impact to the state of Tennessee and to Shelby County of the reduction in the influx of federal funds resulting from a substantial reduction in state TennCare funding.

This study analyzed the economic impacts of the loss of federal matching funds that would result from three hypothetical reductions in state expenditures on TennCare. Only the impacts of the loss of federal matching funds were estimated, rather than the impact of both state and federal fund reductions, based on the assumption that state funds would be redirected to other needs and would remain within the state economy, although redistributed. In contrast, the loss of federal matching funds would represent a real loss of income into the state. Specifically, this study addressed:

* How large is the overall economic impact on the state of Tennessee and on Shelby County of the reduction in federal matching funds associated with the currently proposed reduction in state expenditures of $740 million? (1)

* How large is the overall economic impact on the state of Tennessee and on Shelby County of two scenarios that reflect reduction levels of 75.0 percent and 50.0 percent respectively of the amount of the TennCare reduction currently proposed at the state level?

* How large are the net savings to the state of Tennessee budget taking into consideration the loss of tax revenues from reduced economic activity associated with the loss of federal matching funds?

Study Methodology

To assess economic impact, many studies utilize either the RIMS II (Regional Input-output Modeling System) or IMPLAN[R] (Impact Analysis for Planning) input-output models. These models are used for assessing economic impacts resulting from an event or major capital input....

NOTE: All illustrations and photos have been removed from this article.



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