TennCare director reports program growth, shared-savings investments and $18 billion budget to House Health Committee

TennCare officials briefed the House Health Committee on the Medicaid program’s scale, recent fiscal performance and program investments during an informational session on Jan. 1, 2025. Director Steven Smith described enrollment, budget figures and the state's use of federal shared-savings funds under the TennCare 3 waiver.

Why it matters: TennCare covers about one in five Tennesseans and is a major state budget item; recent shared-savings under the federal waiver have funded new benefits and targeted investments that committee members and agency leaders said are affecting access and services.

Director Steven Smith told the committee TennCare covers roughly 1,400,000 Tennesseans, about 20% of the state population, and that the program's annual budget now exceeds $18 billion. “When it comes to our mission, TennCare is more successful today than at any point in our 30 year history,” Smith said, and he credited long-term management changes and the TennCare 3 waiver for generating reinvestment dollars.

Smith described TennCare 3 — a Section 1115-style waiver implemented in January 2021 — as a financing model that produced shared savings the state can reinvest. He said the waiver produced more than $900 million in shared savings during its first three years. The committee heard examples of reinvestment: the addition of a comprehensive adult dental benefit (covering an estimated 600,000 adults), steps to reduce waiting lists for home and community-based services for people with intellectual and developmental disabilities (the ECF Choices program served 2,300 more people), provider rate investments, and a pilot diapers benefit covering children under age 2.

Smith also described year-two investments in rural health and behavioral health. The rural investments included recommendations from the state's rural health task force and a second round of a health care resiliency grant program administered by the Tennessee Department of Health; applications for that round recently closed, TDH staff said. Behavioral-health funding is directed at community mental-health centers, substance-use providers, behavioral-health hospitals and children's services, Smith said; it is intended to expand access and strengthen workforce capacity.

Smith said the program reinvested a portion of year-3 shared savings — $100 million — to help communities affected by a recent hurricane through the HEAL program. He also summarized TennCare's managed-care approach and quality metrics: TennCare is managed care-based, receives about 65% of its funding from the federal government, and has improved on many nationally recognized quality measures over the last five years.

Committee members asked about specific issues. Representative Sam McKenzie asked how shared-savings funds are reserved; Smith said the agency's reserve (referred to as a rainy-day or 10K reserve) was about $1.5 billion last year but included obligated funds; unobligated balance was about $300 million, roughly 2% of TennCare's budget. Representative Sam McKenzie and others discussed the timing and negotiation window for waivers; Smith said waiver discussions typically begin about two years before expiration.

Members also asked about maternal health and behavioral-health access. Chief Medical Officer Victor Wu described efforts to find people earlier in pregnancy, promote remote patient monitoring and telehealth, and to work with pediatric and OB providers to identify postpartum depression and other conditions earlier. Smith noted TennCare has invested in workforce and rate increases in recent years — averaging about 6% per year over the previous five years in negotiated increases — but said recruitment and retention remain challenges.

The committee did not vote on policy during this briefing. Members asked the agency to return for detailed budget hearings and follow-up meetings on physician recruitment, rural workforce strategies and maternal-health initiatives.

Less-critical details: staff accompanying Director Smith included Chief Medical Officer Victor Wu and Chief Financial Officer Zane Seals. The committee heard that TennCare's annual satisfaction survey reported a 96% satisfaction rate among respondents this year and that for the first time the program's reported quality of care met or exceeded reported quality for all Tennessee households in the University of Tennessee survey.