Tennessee's Failed Managed Care Program for Mental Health and Substance Abuse Services

In July 1996, Tennessee initiated a managed mental health and substance abuse program called TennCare Partners. This publicly funded "carve-out" experiment started chaotically and soon deteriorated into a crisis. Many patients did not receive care or lost continuity of care, and the traditional "safety net" mental health system nearly disintegrated. This qualitative case study sought to ascertain the impact of the TennCare Partners program. It points out that the program's difficulties stemmed directly from a flawed design that spread funds previously earmarked for severely mentally ill patients across the entire Medicaid population. States contemplating similar reforms should strive to protect vulnerable patients by risk-adjusting capitation payments and by focusing resources on care for severely mentally ill persons. States should also minimize program complexity and ensure the accountability of managed care networks for their patients' behavioral health care needs.