How Tennessee finances Medicaid.

Tennessee is fortunate to have a comprehensive Medicaid program involving some 22 optional services, all financed through a combination of state revenues. These range from general state revenues to provider-donated funds, provider-specific taxes, and recently, a privilege tax. The state pays approximately $920 million to participate in Medicaid; the state's share generates $1.9 billion in federal dollars. The current system for financing the state's Medicaid program is unsustainable. Because Tennessee is relatively poor, legislators cannot afford to continue to increase its share of Medicaid expenditures at a rate 10 times greater than the general revenue increase from the entire state. To continue a comprehensive Medicaid program, Tennessee must move forward with alternative strategies to control Medicaid expenditures and manage resources.