Judge’s ruling turns spotlight on Tennessee’s worn, torn safety net

Former Sen. Brian Kelsey was one of two legislators who blocked Medicaid expansion in Tennessee. (Photo: John Partipilo)

(This story was first published by the Institute for Public Service Reporting Memphis.)

A decade has passed since two state legislators launched Tennessee’s Medicaid blockade. The law remains in place. The two legislators do not.

One — former state Sen. Brian Kelsey of Germantown — was sentenced to 21 months in prison in 2022 for violating federal campaign finance laws. His sentence was upheld in July, though Kelsey said in a court pleading this week he may ask the Supreme Court to review his case.

The other — former state Rep. Jeremy Durham of Franklin — was expelled from the legislature in 2016 for alleged sexual misconduct. In an unrelated case, he also was fined for misuse of campaign funds.

Meanwhile, the law they passed in 2014, which requires the legislature to approve any Medicaid expansion, continues to block billions of federal health care dollars from reaching adults and children living in poverty in Tennessee.

“It’s really shameful what happened to them, but it’s even more shameful what has happened to so many people who have been denied access to health care because of them,” said Michele Johnson, executive director of the Tennessee Justice Center , a Nashville nonprofit that advocates for poor and under-resourced families.

Tennessee remains one of 10 states yet to accept federal Medicaid expansion. As a result, the state leaves more than $2 billion in federal Medicaid funds in Washington every year.

Those rejected funds could make an additional 340,000 uninsured nonelderly adults eligible for Medicaid in Tennessee, popularly known as TennCare, according to a 2023 report by the nonpartisan Washington-based Urban Institute.

But Medicaid is just one of several social safety-net programs that Tennessee doesn’t fully fund, an investigation by the Institute for Public Service Reporting found.

If fully utilized those extra funds would reduce the state’s child poverty rate by more than a third and the overall poverty rate by more than a quarter, according to the Urban Institute study. That translates to about 90,000 fewer children under age 18 living in poverty in Tennessee.

The widening gaps in Tennessee’s social safety net — Medicaid, welfare benefits, food stamps, housing and childcare subsidies among others — led a federal judge last month to issue a 116-page ruling that blistered state policymakers for their approach to Medicaid.

“Poor, disabled, and otherwise disadvantaged Tennesseans should not require luck, perseverance, and zealous lawyering to receive healthcare benefits they are entitled to under the law,” U.S. Dist. Judge Waverly D. Crenshaw wrote.

In his ruling, the judge found that the state unlawfully terminated Medicaid coverage for tens of thousands of poor families and violated their rights.

State officials have yet to respond to the judge’s ruling. They agree the social safety net isn’t working properly, but they disagree on the reasons and what to do about it.

“There is always going to be a need for a rich, robust, efficient, effective safety net,” said Clarence Carter, commissioner of the state’s Department of Human Services and former Trump administration official. “It just ought to be catching people like a trampoline, not a hammock. We want to help as many people as possible move beyond the safety net.”

Poor, disabled, and otherwise disadvantaged Tennesseans should not require luck, perseverance, and zealous lawyering to receive healthcare benefits they are entitled to under the law.

– U.S. Dist. Judge Waverly Crenshaw

Safety net advocates say the state’s social welfare programs have become more of an obstacle course than a hammock. They cite a variety of reasons:

• State-level policy decisions that have resulted in hundreds of millions of dollars in unspent, underspent, misspent or rejected state or federal funds.
• Unnecessarily strict, confusing and changing state-level rules for eligibility.
• New computer system glitches, staffing problems, flawed rules and regulations, administrative errors, and other procedural issues.

The TennCare lawsuit highlighted many of those issues. “TennCare sat on its hands for months before it fixed system-wide errors that … resulted in wrongful terminations of disabled individuals,” Judge Crenshaw wrote.

Those individuals included Journey Cottle of Crossville, Tenn., one of the child plaintiffs. Journey, 11, has Down’s Syndrome, leukemia, and other significant developmental disabilities.

More than half the children in Tennessee, including most children with special health care needs, rely on TennCare to get medical and mental health care.

Journey had been on TennCare since 2018 when her father became disabled and lost his job. TennCare wrongly terminated her coverage in May 2023. The agency misplaced the family’s renewal documents and then had the wrong home address, according to court testimony.

The family didn’t find out until mid-June when TennCare denied a claim. “She can’t do without medical insurance,” Keith Cottle, her father, testified during the 2023 trial on the lawsuit. “She simply cannot. Every aspect of her life is a disability.”

Journey’s coverage was reinstated in August 2023 after attorneys for the Tennessee Justice Center intervened.

But even if Judge Crenshaw’s ruling stands, it won’t come close to closing the larger TennCare coverage gap, which represents only part of the state’s larger safety net gap.

“The safety net in Tennessee is holding on, but it’s fraying,” said Signe Anderson, TJC’s senior director of nutrition advocacy. The center was one of the parties that represented plaintiffs in the lawsuit against TennCare.

“People in need are not getting what they need, and many are not participating because the hurdles are so great and the opportunities more and more limited,” Anderson said.

State officials have acknowledged some of the concerns, especially those involving SNAP and TANF.

SNAP is Tennessee’s Supplemental Nutrition Assistance Program, also known as food stamps.

Over the past year, the number of people receiving SNAP benefits in Tennessee dropped by more than 100,000. That follows a reduction of more than 130,000 from 2018-2022. About a third of all SNAP benefits go to children.

State officials say they are working to reduce backlogs in applications and recertifications. Advocates blame a new computer system, staffing shortages, and new state rules that require individuals to re-submit more frequently their proof of income and other paperwork to recertify.

“With SNAP cases, the backlog is mostly a processing issue,” said Allison Jones of the Legal Aid Society of Middle Tennessee. “With TANF, it’s just a general decline in overall recipients, for a lot of reasons.”

TANF, or Temporary Assistance for Needy Families, was a product of the Clinton administration’s effort to “end welfare as we know it.” It replaced Aid to Families with Dependent Children, or AFDC, the welfare program enacted during the Great Depression.

“TANF is broken,” said Carter, who ran the national TANF program for the Trump administration. “The way it works is goofy. I’m sure that wasn’t the intent. We want to figure out what works. We want to use TANF as a tool to transform the Tennessee safety net.”

States use TANF funds to provide eligible low-income families with temporary cash assistance as well as support for transportation, childcare, educational and job training.

Tennessee and most other states limit benefits to five years. Adult participants, unless exempted, are required to satisfy a 30-hour work requirement, meet child support duties, and ensure their children receive immunization shots and health checks and attend school.

But states like Tennessee have found other ways to limit benefits.

Since the mid-1990s, the share of eligible low-income Tennessee families who receive TANF cash assistance has declined from 67 percent to 15 percent. Overall TANF caseloads have dropped 80 percent, from 68,000 to 13,000.

“The lack of minimum federal standards has allowed states to enact extremely restrictive eligibility policies, leaving the families with the greatest needs — including, disproportionately, Black families — unable to cover the basic essentials through either employment or cash assistance,” the nonpartisan, Washington-based Center for Budget and Policy Priorities reported in 2022.

Tighter TANF eligibility rules have collided with tighter funding at both the federal and state level.

Federal funding for TANF continues to decline. The original $16 billion annual block grant to states established in 1996 remains the same. As a result, the real value of federal funding has fallen by 40 percent due to inflation.

Meanwhile, Tennessee and other states have redirected billions of dollars in TANF funds to other budget areas.

For example, states have spent more than $1 billion in TANF funds on college scholarships (including for middle- and high-income individuals without children). Tennessee allocates more than 30 percent of its annual $190 million in TANF funding to pre-K and Head Start programs. The national average is 10 percent.

Loopholes in the law also have allowed states to accumulate billions of dollars in unspent TANF funds. Tennessee kept about $800 million in TANF funds in the state treasury, the largest surplus in the country.

“We’ve got to do something different from what we’ve been doing,” state Sen. Bo Watson (R-Chattanooga) said at the first meeting of the state’s new Families First Advisory Board. “If this is not working, we’ve got to pivot to what does work.”

Families First is Tennessee’s version of TANF. State officials are redesigning it. Per legislation approved in 2021, Carter’s department is redirecting millions in surplus TANF funds to a handful of nonprofits, including two in Memphis.

Seven nonprofit organizations are each getting $25 million in TANF funds and four years to test and prove different “theories of change” — strategies to “help families to become stable and move beyond the need for safety net benefits in the long-term.”

For example, one of the Memphis-based pilots is testing the impact of offering cash payments to participants who achieve certain educational, job training, or employment milestones.

While the state works to close lengthy backlog in food aid program, enrollment dropped by 122k

A second Memphis-based pilot is testing the impact of parenting and co-parenting education, and “the effects of healthy marriage and relationship education on labor market outcomes and economic well-being.”

State officials believe that one or more of the pilots will become a model for TANF reform here and across the country.

“Something has to change,” said Stephanie Jenell Godwin-Chu, project director for GROWWTH , a pilot program based at the University of Memphis. The program will serve all 21 West Tennessee counties.

“Too many people in this state are not participating in TANF. Either they’re not eligble or they’re not applying. We need to figure out why and how we can do this better. The state can’t afford for this not to work.”

Safety net advocates are glad to see the state being intentional about spending unused TANF dollars in the coming years. But they remain concerned that the state isn’t moving quickly enough or effectively enough.

The seven pilot programs aim to enroll only about 25,000 TANF-eligible families over the next three years. That will cover only a fraction of the more than 250,000 children living in poverty in Tennessee.

Advocates also are concerned that the pilots — and whatever nonprofit-based programs follow — will divert more TANF funds away from direct cash assistance.

“It seems like the state is looking for more ways to reduce direct cash assistance to poor families,” said Jane Dimnwaobi of the Tennessee Justice Center. “But study after study shows that direct cash assistance is the most effective way to help lift families out of deep poverty.”

“System demands overhaul”

Earlier this year, Gov. Bill Lee and the legislature expanded TennCare coverage to about 25,000 additional children and parents.

“Through responsible management of our TennCare program and the shared savings model, these crucial services will be provided at no additional cost to Tennesseans,” Lee said in his State of the State address in January. “Together, we’ll strengthen families and create a brighter future.”

The new coverage makes permanent a recent 12-month extension of postpartum coverage. The state also increased TennCare’s income limit for families to 100 percent of poverty. Previous limits were not adjusted for inflation. Medicare expansion would raise the income limit to 138 percent of poverty.

“It’s really just an overdue adjustment to account for inflation since the pandemic,” Johnson said. “But the diapers are new.”

In August, Tennessee became the first state to cover the cost of diapers for all children under age two enrolled in Medicaid. More than half of expectant mothers rely on TennCare for prenatal, delivery, and post partum care, and care for their newborns.

So far, a limited number of pharmacies are participating in the diaper program. There are only three in Memphis: The Medicine Shoppe, 4770 Knight Arnold, Highland Heights Pharmacy, 4726 Poplar, and First Pharmacy Services, 3171 Directors Row.

“It’s a great idea. It’s just not being executed,” Johnson said. “Those so-called ‘shared savings’ don’t begin to make up for the lost Medicaid expansion funds.”

Medicaid expansion was a feature of the 2010 Affordable Care Act, which became known as Obamacare.

The goal was to provide health care coverage for millions of uninsured “working poor” by expanding Medicaid coverage to nearly all adults with incomes up to 138% of the Federal Poverty Level ($20,783 for an individual in 2024.)

The federal government covered 90 percent of the cost, but states were free to decline the expansion. Ten states continue to decline, including Tennessee and Mississippi. Republican leaders in both states acknowledge the politics that were involved.

“It’s President Obama’s signature piece of legislation. No denying it. It’s known as Obamacare,” Mississippi’s Republican House Speaker Jason White told reporters earlier this year after that state’s legislature rejected expansion. “So there are a lot of political dynamics centered around it that probably never allowed it to get off the ground.”

The Kelsey-Durham law originally was called the “Stop Obamacare Act.”

Since it was passed, Tennessee Republican leaders have repeatedly thwarted attempts to accept Medicaid expansion. Several attempts earlier this year to repeal the Kelsey-Durham law died in subcommittee.

“I’m not saying we need to do Medicaid expansion,” state Rep. Sam Whitson (R-Franklin) told reporters when he proposed one repeal measure. “I just think that was a restrictive bill done for purely political reasons to enhance Kelsey’s and Durham’s political future.”

Despite this year’s TennCare enhancements, enrollment continues to decline. The “shared savings” Lee touted are largely a product of TennCare’s shrinking rolls.

More than 500,000 Tennesseans have been disenrolled from TennCare over the past 18 months. That includes around 95,000 children, according to the Kaiser Family Foundation.

The disenrollments are part of a national “unwinding” of pandemic protections. When the Covid-19 public health emergency ended in 2023, states were required to renew (or “redetermine”) the eligibility of everyone receiving Medicaid.

Disenrollments in Tennessee and many other states have been compounded by computer programming and administrative errors. Around 7 in 10 TennCare recipients were disenrolled for procedural reasons — generally, incomplete or unreturned renewal forms, according to the General Accounting Office .

Earlier this year, the National Health Law Program and two other organizations asked the Federal Trade Commission to investigate Deloitte, a global firm that provides Medicaid eligibility software to nearly two dozen states including Tennessee.

“Deloitte systems have generated incorrect notices to Medicaid beneficiaries, sent their paperwork to the wrong addresses, and been frozen for hours at a time, according to findings in state audits, allegations and declarations in court documents and interviews,” according to a June report by Kaiser Health News .

Deloitte built the Tennessee Eligibility Determination System, or TEDS, for TennCare. It was launched in May 2019.

“When TEDS launched, ingrained systemic errors pervaded eligibility considerations,” Judge Crenshaw wrote in his ruling last month against TennCare. Because of various design defects, “TEDS made erroneous eligibility determinations.”

Computer program flaws were only part of the problem, the judge said. The ruling quoted Dr. Peter Blanck, a Syracuse University professor and expert on disability law and policy. Blanck evaluated TennCare’s policies and practices.

“Enrollees face a maze of program referral circles, complaint processes, and administrative burdens to access TennCare,” Blanck said. “It appears that TennCare’s structures and policies are reactive only. Thus, they do not anticipate or appropriately plan for the system needs of the large number of individuals with diverse disabilities that such Medicaid programs serve.”

Crenshaw’s ruling was filed on behalf of 35 children and adults who charged that a faulty computer system and flawed state policies deprived them and thousands of others TennCare coverage.

“This system demands overhaul,” the judge wrote. “Though TennCare has remedied some errors in TEDS and instituted certain processes that may catch the programs future mistakes, it has not yet remedied the core underlying deficiencies in its notices or appeals process.”