McNally seeks AG opinion on legal aspects of Medicaid expansion

UPDATE: News release from Senate Republican Caucus
NASHVILLE, Tenn. – Senate Judiciary Committee Chairman Brian Kelsey (R-Germantown) today called for a committee meeting next week to study the legal issues raised by the governor’s proposed Obamacare Medicaid expansion plan. The meeting will be held Tuesday, January 27, 2015 at 1:00 p.m. in 12 Legislative Plaza. The committee will hear testimony from legal experts on the questions raised by Sen. Randy McNally (R-Oak Ridge) in his January 5 letter to the state Attorney General.

In a letter to the state attorney general, Senate Finance Committee Chairman Randy McNally has posed a series of questions about the legal validity of Gov. Bill Haslam’s proposal to expand Medicaid, suggesting potential problems in several areas.

“We need a lot of in-depth type questions answered,” said the Oak Ridge Republican, adding he believes the “vast majority” of Republican legislators are — like himself — undecided about the wisdom of adopting the governor’s Insure Tennessee plan and willing to listen and learn more about it.

The governor provided more details about his proposal last week, making public the formal waiver request filed with federal officials. The Legislature will take up the proposal in a special session beginning Feb. 2 “to do all that is necessary and appropriate to implement Insure Tennessee,” according to the official gubernatorial proclamation.

“My big concern is the exposure of the state in future years,” McNally said.

Some of the questions posed to Attorney General Herbert Slatery in McNally’s five-page letter involve the potential long-term financial liabilities of state government under the plan. Haslam depicts Insure Tennessee as a two-year pilot project, subject to termination if costs to the state increase.

McNally questions whether such a termination would run afoul of various laws and constitutional provisions relating to the rights of those thrown off losing coverage.

The letter also raises questions about the financial underpinnings of Insure Tennessee, an “assessment fee” imposed on Tennessee hospitals. The state is already imposing such a fee, the letter notes, with the money deposited in a special fund.

“The governor’s proposal would require rerouting that balance of funds after hospitals paid the assessment … and after that revenue was deposited into the fund to be used for making payments to hospitals,” the letter states.

Slatery is asked whether such a move would violate provisions of the state and federal constitutions prohibiting “impairment of contracts.”

The Tennessee Hospital Association has agreed to an increase in the assessment fee — now at 4.52 percent of net hospital revenues — to provide state matching funds for the Medicaid expansion program. The federal government will pay 100 percent of expansion costs through 2016. The state will then begin paying a portion of the cost, starting with 5 percent in 2017 and reaching 10 percent in 2020.

McNally, the longest-serving member of the Tennessee General Assembly, recalled he was the only state senator to vote against a bill in 1993 that gave then-Gov. Ned McWherter authority to negotiate a waiver with the federal government that led to creation of TennCare — Tennessee’s name for the state version of TennCare.

At the time, McNally said, he was concerned about such a broad grant of authority to the governor, and “I had trouble with the numbers” used in projecting TennCare enrollment and costs to the state.

“In the first year, they proved me wrong,” he said. “In later years, they did not.”

Former Gov. Phil Bredesen wound up presiding over removal of about 190,000 people from TennCare coverage after a long-running series of lawsuits and legal entanglements. Such considerations, McNally said, show the need for a cautious approach to Medicaid expansion — although it has obvious benefits in many respects.

“What procedures would be required to provide the discontinued enrollees procedural due process protections that comport with federal Medicaid and any other fair hearing regulations?” McNally asks at one point in the complex series of questions. “What is the maximum amount of time required to provide due process protections for a population of 200,000 enrollees?”

The senator said he hopes to have a formal legal opinion in response to his questions from Slatery, who was Haslam’s legal counsel prior to his appointment as attorney general, before the special session.

Comments from various legislators — in interviews with some and in reported statements by others — indicate McNally is correct in assessing a majority of the Republican supermajority as undecided on the Haslam proposal at this point. The governor is counting on united backing from Democrats — there are only five in the 33-member Senate and 26 in the 99-member House — and must persuade a substantial number of Republicans to win passage.

To reach a 17-member majority in the Senate, Haslam needs at least 12 Republicans. To reach a 50-member majority in the House, he needs 24 Republicans.

Freshman Rep. Eddie Smith, R-Knoxville, is among the ambivalent.

“If we can find a way to craft a plan that is both financially responsible, doesn’t add to our state budget, but also is stable enough for the long term and doesn’t have the Legislature revisiting and possibly having to cut residents from this plan in 2 years, we need to give that plan a fair look,” he said in an email.

So is state Rep. Bill Dunn, also a Knoxville Republican with 20 years experience in lawmaking.

“We’re just going to sit down and ask questions and see where we are,” Dunn said in sizing up the Republican legislator response to the Republican governor’s proposal and their dealings with the issue in the special session.

Over at the western end of the state, Rep. Steve McManus, R-Cordova, told a GOP gathering — as reported by the Memphis Flyer — he has concerns similar to McNally’s about long-term ramifications. He likened Medicaid expansion to the “Hotel California,” a song wherein those entering the hotel can never leave. And Rep. Curry Todd, R-Collierville, predicted “a lot of bloodletting” when Haslam’s proposal comes up for debate.

In Middle Tennessee, House Republican Caucus Chairman Glen Casada of Williamson County told the Tennessean “a lot of us are getting cold feet real quick.” But he also said most are reserving judgment until they hear more.

The cold feet could be partly in response to national conservative criticism of Haslam’s move. Sen. Brian Kelsey, R-Germantown, one of a minority adamantly opposed to the governor’s plan, cited a Forbes magazine online article in a recent email.

That article berates Haslam’s “funding scheme” and declares Tennessee’s “last Medicaid expansion nearly bankrupted the state” — a reference to Bredesen’s TennCare disenrollment. Haslam’s proposal is deemed “little more than a re-branding of Obamacare expansion.”

Similarly, a Washington Times editorial painted Haslam — who has generally declared his opposition to the Affordable Care Act overall — as guilty of “foolish flip-floppery” in embracing Medicaid expansion.

House Speaker Beth Harwell and Senate Speaker Ron Ramsey have lauded Haslam for offering an “innovative” approach to Medicaid expansion, but have stopped short of declaring they will support him.

Ramsey says GOP distaste for anything associated with President Obama is a major factor in the Republican reaction to Haslam’s proposal. He says Haslam’s appearance with the president in Knoxville last week could have negative ramifications for passage of Insure Tennessee.

“Barack Obama has like a 32 percent approval rating in the state of Tennessee, and he and the governor are going to be on every (state) newspaper,” Ramsey said Friday, according to the Kingsport Times-News. “That doesn’t help perception, and in politics, perception is reality.”