A TALE OF TWO STATES

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Donna Guyton's experience bears this out. Her son Patrick, 9, has viral encephalitis and a seizure disorder. When he got an ear infection, her health plan refused to authorize the medicine he needed, but the cheaper medication aggravated his seizure disorder. Eventually, he got seriously ill and had to receive intravenous antibiotics. "What really aggravated me," says Guyton, "was that the [plan's] own physician said this is what Patrick needed, but then they wouldn't approve it."

Such penny pinching hurts not just the special-needs patients. Mary Milburn, an 82-year-old retired seamstress who suffers from high blood pressure, was prescribed a blood-pressure medicine to which she was allergic. As a result, her doctor then prescribed a more expensive alternative medication, Accupril, but her managed-care company refused to cover the cost. Milburn, who lives on $440 a month in Social Security benefits, had to lay out about $30 a month of her own money until the company eventually relented under the threat of a lawsuit. Says Milburn: "Thirty dollars a month doesn't seem like much, but to me, trying to get by on $440 a month, it was an awful lot."

Legal-aid lawyer Bonnyman claims that many of these wrinkles can be smoothed out with more flexibility and a better grievance system. For instance, managed-care companies could allow 5% of their patients to use nongeneric drugs if absolutely necessary. Keeping the providers from defecting may prove more difficult. Many doctors feel that the medical budget for poor Tennesseeans was balanced on their backs. Even now, money for TennCare is tight. According to a gao report comparing TennCare's reimbursement rates with the old Medicaid levels, doctors now get slightly higher fees for visits and consultations, but for some forms of surgery and radiology they receive 20% to 50% less than they did before.

All 12 managed-care companies renewed their contracts for 1996, but their support for TennCare is tenuous at best. The gao report suggests that if their concerns are not addressed, they "could withdraw in large numbers." Robert Corker, the Tennessee commissioner of finance, insists that the state is still working on making TennCare more responsive to providers. But if federal money is cut next year, the state may be faced with the stark choice of slashing rates still further or dropping coverage for thousands of residents.

--Reported by Adam Cohen/Atlanta and James Willwerth/Tucson