TennCare director: managed-care model, shared-savings have funded new services including rural and behavioral health investments

TennCare Director Steven Smith told the House Health Committee on Feb. 1, 2025, that TennCare covers approximately 1.4 million Tennesseans, accounts for an $18 billion-plus budget and has used a managed-care model and a shared-savings waiver (TennCare 3) to finance new services and provider investments.

“TennCare is more successful today than at any point in our 30 year history,” Smith said, describing a multi-year shift from an “unpredictable and unsustainable” financing model to one that captures and reinvests federal shared savings. Smith said the TennCare 3 waiver produced more than $900 million in shared savings in its first three years and that the program has reinvested those funds in initiatives including adult dental coverage, elimination of waiting lists for some home- and community-based services, rural health investments and behavioral-health funding.

Under TennCare’s current structure, Smith said the program covers about 20% of the state’s population and pays for roughly half of births in the state. He described managed care as the primary financing model and said the program receives about 65% of its funding from the federal government.

Smith outlined several specific investments made with shared-savings funds. Year 1 investments expanded a “Strong Families” initiative that served additional children, pregnant women and parents; the state added an adult dental benefit covering roughly 600,000 adults, according to Smith’s presentation. Year 2 targeted rural health and behavioral health, including the Healthcare Resiliency Program administered by the Department of Health; year 3 shared savings included a $100 million allocation to the HEAL program for hurricane relief in affected communities.

On reserves and contingency funding, Smith said TennCare’s reserve (the so-called 10K reserve) totaled about $1.5 billion as of last year but that roughly $500 million of that had been set aside for pandemic-related costs and shared-savings commitments. He said unobligated reserves were about $300 million and that the historical average reserve has been approximately 4% of the program budget (he estimated that 4% would equal roughly $720 million for comparison).

Committee members asked about behavioral-health access, maternal health and workforce shortages. Representative Mackenzie asked whether TennCare’s investments are increasing access to behavioral-health services; Smith said the program has made record behavioral-health investments over four years, including a $100 million behavioral-health investment spread over five years and negotiated rate increases through managed care. Victor Wu, TennCare’s chief medical officer, described efforts to identify behavioral-health needs earlier, strengthen screening in pediatric and primary-care settings and partner with children’s hospitals and OB providers for postpartum care.

On maternal health, Representative Hammer asked about strategies beyond extending postpartum coverage to 12 months. Wu said early engagement in the first trimester, remote patient monitoring, telehealth and partnerships with providers are among the tools TennCare is pursuing, while acknowledging workforce and provider-workflow barriers to rapid uptake of new technologies.

Smith said preparation for the TennCare 3 waiver’s expiration in 2031 would begin years ahead of time and that federal negotiations typically start about two years before a waiver term ends. He also described the program’s recent consumer-satisfaction results (a University of Tennessee survey reporting a 96% satisfaction rate), improvements on national quality metrics and ongoing efforts to align cost management and quality improvement.

The committee did not take formal votes on TennCare items during the session; Smith said the TennCare budget and waiver investments will be part of upcoming budget hearings.