¹ Doctor Cries “Commie” in Patient Rule, COM. APPEAL, Oct. 6, 1994, at B2.

² See Terese Hudson, Vision of the Future? Tennessee Hospitals, Physicians Worry Over TennCare, HOSP. ' HEALTH NETWORKS, Apr. 5, 1994, at 44. On January 1, 1994, when TennCare began, only about a third of the state’s nearly 9,000 practicing physicians had agreed to participate in the program. Id.

³ See TENNESSEE MEDICAL ASSOCIATION, TENNCARE: GOOD INTENTIONS GONE BAD, A PERSPECTIVE ON HEALTH CARE REFORM IN TENNESSEE (1994) [hereinafter GOOD INTENTIONS GONE BAD].

⁴ See generally Charles W. White, TennCare: The Physician View, HEALTH SYS. REV., Mar.-Apr. 1994, at 24.

⁵ See ROBERT STEVENS & ROSEMARY STEVENS, WELFARE MEDICINE IN AMERICA: A CASE STUDY OF MEDICAID 190-94 (1974).

⁶ Law, Sylvia A. ' Ensminger, Barry, Negotiating Physicians’ Fees: Individual Patients or Society? (A Case Study in Federalism), 61 N.Y.U. L. REV. 1, 47 (1986)Google Scholar.

⁷ See Emily Friedman, Changing the System: Implications for Physicians, 269 JAMA 2437 (1993).

⁸ See STARR, PAUL, THE SOCIAL TRANSFORMATION OF AMERICAN MEDICINE 72, 151-52 (1982)Google Scholar; Rosenblatt, Rand, Book Comment: Dual Track Health Care—The Decline of the Medicaid Care, 44 U. CIN. L. REV. 643, 645 (1975)Google Scholar [hereinafter Rosenblatt, Dual Track Health Care]. As Rosenblatt points out:

Rosenblatt, Rand, Medicaid Primary Care Case Management, the Doctor-Patient Relationship, and the Politics of Privatization, 36 CASE W. RES. L. REV. 915, 916 n.2-3 (1986)Google Scholar (citation omitted).

⁹ See infra te.vf accompanying notes 34-35.

¹⁰ See infra text accompanying notes 66-72.

¹¹ See Sidney D. Watson, Health Care in the Inner City: Asking the Right Question, 71 N.C. L. REV. 1647 (1993).

¹² See PHYSICIAN PAYMENT REVIEW COMMISSION, REPORT TO CONGRESS: PHYSICIAN PAYMENT UNDER MEDICAID 23-24 (1991), reprinted in 3 MEDICARE ' MEDICAID GUIDE (CCH) Special Rep. No. 661 (July 18, 1991).

¹³ Physician Payment Review Commission, Ensuring Quality in Medicaid Managed Care, 1993 ANN. REP. 259 [hereinafter Ensuring Quality]. In a 1993 survey of Medicaid participating physicians, 35% refused to see new Medicaid patients, even though they were taking new patients. By contrast, 97% were accepting privately insured fee-for-service patients and 93% were accepting fee-for-service Medicare patients. Id.

¹⁴ PHYSICIAN PAYMENT REVIEW COMM’N, supra note 12, at 23.

¹⁵ See Janet B. Mitchell ' Jerry Cromwell, Access to Private Physicians for Public Patients: Participation in Medicaid and Medicare, in 3 SECURING ACCESS TO HEALTH CARE 105, 107 (President’s Comm’n for the Study of Ethical Problems in Medicine and Biomedical and Behavioral Research ed., 1983).

¹⁶ See, e.g., PHYSICIAN PAYMENT REVIEW COMM’N, supra note 12.

¹⁷ 42 U.S.C. § I396a(30)(A) (Supp. V 1993).

¹⁸ GOOD INTENTIONS GONE BAD, supra note 3, at passim.

¹⁹ STARR, supra note 8, at 151-52.

²⁰ Id. at 149 (quoting DAVID ROTHMAN, THE DISCOVERY OF THE ASYLUM 42-43 (1971)).

²¹ Id. at 182.

²² MARC A. RODWIN, MEDICINE, MONEY, AND MORALS: PHYSICIANS’ CONFLICTS OF INTEREST 13 (1993).

²³ Id.

²⁴ Id.

²⁵ Id.

²⁶ Id. at 11.

²⁷ Id. at 12-13; STARR, supra note 8, at 294-95.

²⁸ RODWIN, supra note 22, at 12-13.

²⁹ Id.; STARR, supra note 8, at 294-95.

³⁰ RODWIN, supra note 22, at 12-13.

³¹ Id.

³² STARR, supra note 8, at 294-95.

³³ See generally STEVENS ' STEVENS, supra note 5.

³⁴ See 42 U.S.C. § 1396a (1988 ' Supp. V 1993).

³⁵ Rosenblatt, Dual Track Health Care, supra note 8, at 649-50.

³⁶ Geraldine Dallek, The Legal Implications of Health Care Cost Containment: Commentary, 36 CASE W. RES. L. REV. 969, 969 (1975) [hereinafter Dallek, Legal Implications].

³⁷ STEVENS ' STEVENS, supra note 5, at 191-92.

³⁸ See, e.g., Social Security Amendments of 1965: Hearings on H.R. 6675 Before the Senate Comm. on Finance, 89th Cong., 1st Sess., pt. 1, at 92-104 (1965).

³⁹ STEVENS ' STEVENS, supra note 5, at 191-94.

⁴⁰ Id.

⁴¹ Id.

⁴² Law ' Ensminger, supra note 6, at 12.

⁴³ STEVENS ' STEVENS, supra note 5, at 192. HEW had two rationales for requiring states to pay “usual and customary” rates. First, the Medicare statute required that physicians be paid according to the Blue Cross formulae and the Department of Health and Human Services (HHS) thought it was important to tie the two new medical assistance programs together. Second, HEW’s initial goal was to enroll two-thirds of the physicians in each state and in each specialty in Medicaid, and the agency believed paying competitive rates would create an incentive for physicians to sign up to treat Medicaid patients. Id. at 191.

⁴⁴ Id. In Illinois, for example, physician participation almost doubled in two years, jumping from 3,288 in 1967 to 6,000 in 1969. Id.

⁴⁵ Id.

⁴⁶ Rosenblatt, Dual Track Health Care, supra note 8, at 651.

⁴⁷ STEVENS ' STEVENS, supra note 5, at 191. Physician fees increased 6.7% annually, running 50% ahead of the consumer price index. Rosenblatt, Dual Track Health Care, supra note 8, at 651.

⁴⁸ STEVENS ' STEVENS, supra note 5, at 156, 195.

⁴⁹ Id. at 194-96.

⁵⁰ Rosenblatt, Dual Track Health Care, supra note 8, at 651-52.

⁵¹ STEVENS ' STEVENS, supra note 5, at 196-97. HEW took this action in response to a statutory amendment to the Medicare statute that eliminated the Medicare requirement that physicians be paid their reasonable and customary charges. See Law ' Ensminger, supra note 6, at 12-14.

⁵² Rosenblatt, Dual Track Health Care, supra note 8, at 652.

⁵³ MEDICAID: LESSONS FOR NATIONAL HEALTH INSURANCE 49 (Allen D. Spiegel ' Simon Podair eds., 1975).

⁵⁴ See PHYSICIAN PAYMENT REVIEW COMM’N, supra note 12, at 26-36 (1994).

⁵⁵ Nationally, one of four physicians refused absolutely to treat Medicaid patients. See id. at 24. Participation rates have remained relatively stable since 1984. Id. at 23. But calculating physician participation is difficult. The Health Care Financing Administration (HCFA) defines participating physicians as those who submit at least one Medicaid claim annually, which obscures the differences between physicians who treat a few Medicaid patients and those with substantial Medicaid caseloads. Id. at 21. Thus, most studies rely on physician surveys, but even these need to be judged with caution because physicians tend to substantially overestimate their Medicaid involvement. Id. (citing Phillip R. Kletke et al., The Extent of Physician Participation in Medicaid: A Comparison of Physician Estimates and Aggregated Patient Records, 20 HEALTH SERVICES RES. 503-23 (1985)).

⁵⁶ PHYSICIANS PAYMENT REVIEW COMM’N, supra note 12, at 26-28. Wide variations in fee levels exist among states. A 1990 survey indicated a threefold to fifteenfold variation between the highest and lowest Medicaid physician fees for all services except deliveries—a variation that remains even when factoring in geographic differences in practice costs. Id.

⁵⁷ Id. at 23.

⁵⁸ See PHYSICIAN PAYMENT REVIEW COMM’N, supra note 12, at 39 (citations omitted); see also PHILIP HELD ET AL., THE EFFECT OF MEDICAID AND PRIVATE FEES ON PHYSICIAN PARTICIPATION IN CALIFORNIA’S MEDICAID PROGRAM (The Urban Institute Working Paper No. 1306-02-02, 1983); Mitchell, Janet B., Medicaid Participation by Medical and Surgical Specialists, 21 MED. CARE 929, 930 (1983)CrossRefGoogle Scholar; Mitchell, Janet B. ' Schurman, Rachel, Access to Private Obstetrics/Gynecology Services Under Medicaid, 22 MED. CARE 1026, 1036-37 (1984)Google ScholarPubMed.

⁵⁹ See Fox, Michael H. et al., Effect of Medicaid Payment Levels on Access to Obstetrical Care, 11 HEALTH AFF. 150, 152-53 (1992)Google Scholar; see also Davidson, Stephen R., Physician Participation in Medicaid: Background and Issues, 6 J. HEALTH POL. POL’Y ' L. 703 (1982)Google ScholarPubMed; Stephen M. Davidson et al., Full and Limited Medicaid Participation Among Pediatricians, 72 PEDIATRICS 552 (1983). But see Thomas Fanning ' Martin de Alteriis, The Limits of Marginal Economic Incentives in the Medicaid Program: Concerns and Cautions, 18 J. HEALTH POL. POL’Y ' L. 27 (1993) (suggesting that once Medicaid reimbursement falls to a very low level a marginal increase in the fee structure will not increase physician participation).

⁶⁰ See supra note 59.

⁶¹ See, e.g., Ensuring Quality, supra note 13, at 259. In a 1989 AMA survey, 74.7% of physicians reported that 1.0% or more of their practice revenues came from Medicaid. PHYSICIAN PAYMENT REVIEW COMM’N, supra note 12, at 24. In the same year, 62% of physicians who treated Medicaid patients billed less that $5,000 to Medicaid, and 75% billed less than $10,000. Mitchell ' Cromwell, supra note 15, at 107. A mere 5.5% of participating physicians treat 32% of all Medicaid patients and 25% of physicians provide services to almost 74% of the Medicaid patients. Id. In general, though, most physicians who treat Medicaid patients have Medicaid caseloads that account for less than 20% of their patient load. Id.

⁶² See generally Fosset, James et al., Medicaid and Access to Child Health Care in Chicago, 17 J. HEALTH POL. POL’Y ' L. 273 (1992)Google Scholar.

⁶³ See Watson, supra note 11, at 1649; Randall, Vernellia R., Racist Health Care: Reforming an Unjust Health Care System to Meet the Needs of African-Americans, 3 HEALTH MATRIX 127, 158-60 (1993)Google ScholarPubMed.

⁶⁴ See generally Randall, supra note 63, at 158-60.

⁶⁵ See Watson, supra note 11, at 1650-52.

⁶⁶ Patients in states with higher physician reimbursement rates have greater access to private physicians than do patients in states with lower reimbursement. Barrilleaux, Charles J. ' Miller, Mark E., Decisions Without Consequences: Cost Control and Access in State Medicaid Programs, 17 J. HEALTH POL. POL’Y ' L. 97, 106 (1992)Google ScholarPubMed; see also PHYSICIAN PAYMENT REVIEW COMM’N, supra note 12, at 41. Although the number of physician services does not vary with the payment rate, the site of delivery of those services does. Beneficiaries in high-fee states receive services in physicians’ offices, while those in low-fee states obtain care in hospital emergency rooms, hospital outpatient departments, and local health department clinics. See Long, Steve et al., Reimbursement and Access to Physicians Services Under Medicaid, 5 J. HEALTH ECON. 235 (1986)Google ScholarPubMed.

⁶⁷ PHYSICIAN PAYMENT REVIEW COMM’N, supra note 12, at 1, 41.

⁶⁸ Id.; see also Watson, supra note 11, at 1649-52.

⁶⁹ See Dallek, Geraldine, Health Care for America’s Poor: Separate and Unequal, 20 CLEARINGHOUSE REV. 361 (1986)Google Scholar.

⁷⁰ See Butts, Cassandra Q., The Color of Money: Barriers to Access to Private Health Care Facilities for African-Americans, 26 CLEARINGHOUSE REV. 159 (1992)Google Scholar; see also Watson, supra note 11, at 1647.

⁷¹ Watson, supra note 11, at 1650-51.

⁷² Rosenblatt, Dual Track Health Care, supra note 8, at 970. For a discussion of America’s separate and lesser quality care system for poor people see generally Dallek, supra note 69; Watson, supra note 11.

⁷³ See supra note 59.

⁷⁴ Omnibus Budget Reconciliation Act of 1989, Pub. L. No. 101-239, § 6402(a), 103 Stat. 2260 (codified as amended at 42 U.S.C. § 1396a(30)(A) (Supp. V 1993)).

⁷⁵ H.R. Rep. No. 247, 101st Cong., 1st Sess. 390 (1989), reprinted in 1989 U.S.C.C.A.N. 1906, 2117.

⁷⁶ Id. at 2110.

⁷⁷ Id.

⁷⁸ Id. “The Committee recognizes that payment levels are only one determinant of physician participation. However, the Committee believes that, without adequate payment levels, it is simply unrealistic to expect physicians to participate in the program, particularly when so many of them believe that Medicaid patients present a greater liability risk.” Id.

⁷⁹ 42 C.F.R. 447.204 (1994). The regulation provides that “[t]he agency’s payments must be sufficient to enlist enough providers so that services under the plan are available to recipients at least to the extent that those services are available to the general population.” Id. The regulation was originally adopted in 1966 and codified in its present form in 1978. See Clark v. Kizer, 758 F. Supp. 572 (E.D. Cal. 1990). For a history of the regulation see DeGregorio v. O’Bannon, 500 F. Supp. 541, 549 n.13 (E.D. Pa. 1980).

⁸⁰ See Methodist Hosp. Inc. v. Sullivan, 860 F. Supp. 1309, 1331 (N.D. Ind. 1994).

⁸¹ H.R. Rep. No. 247, supra note 75, at 2116.

⁸² Id. HHS interprets the “geographic area” requirement to include a county or other appropriate substate area. U.S. DEP’T OP HEALTH ' HUMAN SERVICES, DRAFT STATE MEDICAID MANUAL § 6308.1 (1990) [hereinafter DRAFT STATE MEDICAID MANUAL].

⁸³ H.R. Rep. No. 247, supra note 75, at 2116. Obstetrical participation had historically been low. PHYSICIAN PAYMENT REVIEW COMM’N, supra note 12, at 23. Although pediatricians historically had relatively high participation rates, the number of pediatricians also dropped precipitously during the 1980s. Id.

⁸⁴ 42 U.S.C. § 1396r-7(a) to (c) (Supp. V 1993).

⁸⁵ Id. § 1396r-7(a)(3).

⁸⁶ See DRAFT STATE MEDICAID MANUAL, supra note 82, § § 6306, 6306.1.

⁸⁷ Id. § 6306.1. At least 50% of [obstetric and pediatric practitioners]—100% if only one such practitioner in a county or geographic area—are full Medicaid participants or there is full Medicaid participation at the same rate as Blue Shield participation among this group. Full participation means accepting all Medicaid patients who present themselves for care or treatment. Id.

⁸⁸ your fee-for-service payment rates for … services … are at least 90% of the average allowance (weighted by frequency) of private insurers. The average allowance is the average ’UCR’ amount. It includes the amount paid by the insurers plus coinsurance paid by the insured. This comparison must be done for each category of practitioner and the standard is to be met category-by-category. This standard is met only if it is met for all categories of practitioners. Id. § 6306.1.

⁸⁹ Id. (“You may document equal access by other appropriate means, including other measures of participation, recipient surveys, or ‘equal’ utilization rates for prenatal visits.”).

⁹⁰ Id. § 6306.3.

⁹¹ See PHYSICIAN PAYMENT REVIEW COMM’N, ANNUAL REPORT 353 (1994) [hereinafter PPRC 1994].

⁹² Id. at 352-53.

⁹³ Id. at 352.

⁹⁴ Id. The gap between Medicaid and private rates narrowed slightly between 1990 and 1993 because private sector fees grew slightly more slowly than Medicaid fees. Id.

⁹⁵ Id. Medicaid fees are close to the Medicare rate only for deliveries, one of the services subject to yearly reporting and monitoring. In 1993, Medicaid reimbursement rates for deliveries were 97% of Medicare rates. Id.

⁹⁶ Id. at 350.

⁹⁷ Id.

⁹⁸ See supra text accompanying note 87-89.

⁹⁹ Physician Payment Review Comm’n, Monitoring Access for Medicaid Beneficiaries, 1993 ANN. REP. 279.

¹⁰⁰ Id.

¹⁰¹ Id.

¹⁰² Id.

¹⁰³ Id.

¹⁰⁴ PPRC 1994, supra note 91, at 352.

¹⁰⁵ See id.

¹⁰⁶ H.R. Rep. No. 247, supra note 75, at 2116.

¹⁰⁷ Id.; see supra text accompanying note 81.

¹⁰⁸ See generally Fosset et al., supra note 62.

¹⁰⁹ TennCare has been granted a research and demonstration waiver of several statutory and regulatory Medicaid requirements pursuant to the Social Security Act, 42 U.S.C. § 1 115(a) (1988 ' Supp. V I993);see STATE OF TENNESSEE, TENNCARE SECTION 1115 DEMONSTRATION WAIVER APPLICATION 98-105 (1993) [hereinafter TENNCARE WAIVER APPLICATION].

¹¹⁰ See id. at 6-11; see also NATIONAL ASSOCIATION OF PUBLIC HOSPITALS, ASSESSING THE DESIGN AND IMPLEMENTATION OF TENNCARE 5 (1994) (eligibility during 1994, the first year of the demonstration, was capped at 1.3 million) [hereinafter NATIONAL ASS’N OF PUB. HOSPS.].

¹¹¹ TENNCARE WAIVER APPLICATION, supra note 109, at 6-11.

¹¹² Id. at 7.

¹¹³ See GOOD INTENTIONS GONE BAD, supra note 3, at passim.

¹¹⁴ TENNCARE WAIVER APPLICATION, supra note 109, at 11-16; NATIONAL ASS’N OF PUB. HOSPS., supra note 110, at app. 2.

¹¹⁵ TENNCARE WAIVER APPLICATION, supra note 109, at 14.

¹¹⁶ Id. at 11, 16.

¹¹⁷ See id. at 1, 11-14, 91, 95. The rise in Tennessee’s Medicaid costs during the 1980s were the result of a number of factors. First, Tennessee, like other states, experienced an increase in the number of Medicaid eligibles as Congress expanded program eligibility. Second, the costs of services increased. Nationwide, inflation within state Medicaid programs outpaced even the medical inflation rate which was itself higher than the general rate of inflation. NATIONAL ASS’N OF PUB. Hoses., supra note 110, at 21-22.

¹¹⁸ NATIONAL ASS’N OF PUB. HOSPS., supra note 110, at 21.

¹¹⁹ Id.

¹²⁰ TENNCARE WAIVER APPLICATION, supra note 109, at 91.

¹²¹ NATIONAL ASS’N OF PUB. HOSPS., supra note 110, at 22. In 1985, HCFA began allowing states to include voluntary donations from providers in calculating federal matching payments under Medicaid. Tennessee was one of the first states to turn to provider donations to fund its Medicaid program. By 1992 Tennessee had collected over $22 million in voluntary provider donations from Tennessee hospitals, which the federal government matched at slightly better than two to one. See id.

¹²² See id. at 22. Tennessee receives a federal match for its Medicaid program of 66.98%. TENNCARE WAIVER APPLICATION, supra note 109, at 80-81.

¹²³ NATIONAL ASS’N OF PUB. HOSPS., supra note 110, at 22.

¹²⁴ Id.

¹²⁵ Id. at 23.

¹²⁶ Id. at 22-23. The THA had initially agreed to support the tax on the condition that the disproportionate share hospital (DSH) payment methodology would be altered to assure that the hospitals with the greatest provider tax liability would receive an equally large share of DSH payments. Patient advocates criticized the revisions in the DSH methodology as unfairly favoring large hospitals that did not serve a significant number of poor patients. In March 1993, a group of small hospitals which fared poorly under the new DSH formula filed suit, calling the tax a violation of federal law and seeking an injunction to block collection. Id.

¹²⁷ See TENNCARE WAIVER APPLICATION, supra note 109, at 6.

¹²⁸ See NATIONAL ASS’N OF PUB. HOSPS., supra note 110, at 27, 28; TENNCARE WAIVER APPLICATION, supra note 109, at 91.

¹²⁹ Medicaid: Federal Officials Raise Questions About Financing for Proposed TennCare, 4 MEDICARE REP. (BNA) No. 38, at 1122 (Sept. 24, 1993). Tennessee’s share of the costs of TennCare is paid with $383 million from state general revenues that had historically been appropriated for Medicaid, $188.2 million in state funding for other health programs, $50 million in local government subsidies appropriated to pay for indigent care, $227.8 million in recipients’ premiums, co-payments and deductibles, and $585.5 million in charity care provided by the state’s health care providers. TENNCARE WAIVER APPLICATION, supra note 109, at 92.

The value of charity care was deemed to be 5% of total health care charges. Tennessee estimated that hospital charity care was worth $358 million, physician charity care worth $182.7 million, and other charity care worth $54.8 million. Since the charity care is an in-kind contribution, it appears as a 5% discount in the per capita rate the state pays the networks for each TennCare enrollee. Id.

In approving TennCare’s waiver request, HCFA refused to recognize some of TennCare’s state funding sources as eligible for federal matching funds. For purposes of computing the federal match HCFA, agreed to count TennCare’s cash capitation payments to MCOs, expenditures to providers from supplemental funds, funds certified by public hospitals as non-reimbursed costs of providing services to current and eligible TennCare enrollees, funds paid by Knox and Davison Counties as indigent care subsidies to private hospitals for non-reimbursed costs of providing services to current and eligible TennCare enrollees, expenditures for TennCare enrollees in Institutions for Mental Diseases, and a portion of the premiums collected. No federal match is allowed for other cost-sharing collected, the rest of the premiums, deductibles and copayments, charity care, or other state funds that are not usually eligible for federal matching funds. TennCare Demonstration Fact Sheet and Special Terms and Conditions for Medicaid Waiver, reprinted in MEDICARE ' MEDICAID GUIDE (CCH) ¶ 41,908 (1994) (accompanying letter from HCFA to Tennessee Department of Health) [hereinafter TennCare Demonstration Fact Sheet].

¹³⁰ See NATIONAL ASS’N OF PUB. HOSPS., supra note 110, at 23.

¹³¹ See id.

¹³² Id. at 24. The governor needed legislative approval to seek a wavier from HCFA and the Tennessee Legislature acted quickly, and overwhelmingly, to give him broad authority to pursue a waiver for TennCare. Id.

¹³³ Id.

¹³⁴ TennCare Demonstration Fact Sheet, supra note 129, ¶ 41,908.

¹³⁵ NATIONAL ASS’N OF PUB. HOSPS., supra note 110, at 24.

¹³⁶ See generally TENNCARE WAIVER APPLICATION, supra note 109, at 6-9.

¹³⁷ Breakthrough or Blackmail? Emotions on TennCare Run High, ST. HEALTH NOTES (Intergovernmental Health Pol’y Project, Geo. Wash. U.), May 2, 1994, at 1, 8 [hereinafter Breakthrough or Blackmail?]. The governor’s press release announcing the program promised it would “make Tennessee the first state in the nation to provide universal health care coverage for virtually every citizen.” News Release B-132040B from the Office of Governor Ned McWherter, Tennessee. However, TennCare does not guarantee universal coverage; in fact, enrollment is limited. First year enrollment was capped at 1.3 million, rising to 1.5 million in years two through five. If the cap is reached, enrollment of the uninsured will be limited. Breakthrough or Blackmail?, supra, at 1,8.

¹³⁸ TENNCARE WAIVER APPLICATION, supra note 109, at 17. Estimates were that 70% of those who were uninsured were in the work force, but did not have employer-sponsored health insurance. To discourage employers from dropping coverage and increasing the numbers eligible for TennCare, TennCare defines the “uninsured” as those who were uninsured as of March 31, 1993 and are not eligible for insurance, either directly or as a dependent, for employer-sponsored coverage. Id.

¹³⁹ Prior to TennCare, 3,700 Tennesseans could not obtain private health insurance because of a pre-existing medical condition and instead received some coverage through the Tennessee Comprehensive Health Insurance Pool (TCHIP). These people are eligible for TennCare. Medicaid: Managed Care Medicaid Program Goes Into Effect in Tennessee, 2 HEALTH CARE POL’Y REP. (BNA) No. 2, at 50 (Jan. 10, 1994); TENNCARE WAIVER APPLICATION, supra note 109, at 16.

Initially TennCare excluded 300,000 at risk children and 35,000 persons with serious and persistent mental illness who continued to be insured through other state programs. In January 1995, these groups were also brought into TennCare. Lower TennCare Enrollment Figures Allow Funding Infusion of $340 Million, 2 HEALTH CARE POL’Y REP. (BNA) No. 36, at 1585 (Sept. 12, 1994) [hereinafter Lower TennCare Enrollment].

¹⁴⁰ TENNCARE WAIVER APPLICATION, supra note 109, at 19. TennCare actually provides more generous benefits because children up to 21 receive Early and Periodic Screening Diagnosis and Treatment (EPSDT) services which are more extensive than the preventive services offered to state employees. Id.

¹⁴¹ NATIONAL ASS’N OF PUB. HOSPS., supra note 110, app. 6. TennCare also expanded coverage to include outpatient substance abuse treatment. Tennessee: HHS Approves State’s Medicaid Waiver to Implement TennCare Program, 4 MEDICARE REP. (BNA) NO. 47, at 1461 (Dec. 3, 1993).

¹⁴² TENNCARE WAIVER APPLICATION, supra note 109, at 19.

¹⁴³ TENNCARE WAIVER APPLICATION, supra note 109, at 21-22. Co-payments and deductibles vary with income. Those with income below the poverty line and mandatory Medicaid eligibles pay nothing. Co-payments are set at 10% of the cost of the service for those whose incomes are greater than 100% of the poverty line. Id. Individuals with income between 101 and 199% of the poverty line pay a $250 deductible for an individual policy and $500 per family. For those with incomes above 200% of poverty, enrollees may choose between a low premium with a high deductible ($1000 for individuals and $2000 for a family), or a higher premium with a lower deductible ($250 for an individual and $500 for a family). Id.

TennCare limits yearly out of pocket expenditures for deductibles and co-payments. The maximum for those with income between 101% and 199% of the poverty line is $1,250. For families with income above 200% of the poverty line the maximum in the low-deductible plan is $1,250, and $5,000 in the high-deductible plan. Id. at 22.

MCOs are required to collect deductibles and co-payments from those enrollees with cost sharing requirements and are permitted to keep these payments. NATIONAL ASS’N OF PUB. HOSPS., supra note 110, at 32.

¹⁴⁴ Premiums are set on a sliding-scale based on income with premium maximums tied to the capitation rate. Both individual and family premiums are available, and enrollees with income at or above 200% of the poverty line may choose between two plans: a low premium with a high deductible plan or a high premium with a low deductible plan. TENNCARE WAIVER APPLICATION, supra note 109, at 22. Those with incomes between 101 and 199% of the poverty level pay a premium that increases with income, up to a maximum of 20% of the capitation rate. Those with incomes at or above 200% of the poverty level pay increasingly higher premiums up to a maximum of 100% of the capitation rate when the TennCare enrollee’s income is at or above 400% of poverty. Id. at 22.

When TennCare began, the federal poverty guideline was $1,196 a month for a family of four. A non-Medicaid eligible TennCare family with a monthly income of $1,197, or 101% of the poverty guideline, paid a monthly premium of $6.84. A family of four with an income of $2,391, or 199% of the poverty guidelines paid $47.87 per month, approximately 2% of income. A family of four with an income of $2,870, or 240% of the poverty guidelines, paid a monthly premium of $91.88 for a high deductible plan or $183.75 for a low-deductible plan, a premium cost of either 3% or 6.4% of income, respectively. See id. at 23-26.

Premiums are paid directly to the state and added to the pool of money available for TennCare. NATIONAL ASS’N OF PUB. HOSPS., supra note 110, at 32.

¹⁴⁵ TENNCARE WAIVER APPLICATION, supra note 109, at 3-5.

¹⁴⁶ NATIONAL ASS’N OF PUB. HOSPS., supra note 110, at 31-32.

¹⁴⁷ Id. at 31.

¹⁴⁸ TennCare’s capitation rate varies depending on the age, sex, and health status of the enrollee. See TENNCARE WAIVER APPLICATION, supra note 109, at 31.

¹⁴⁹ NATIONAL ASS’N OF PUB. HOSPS., supra note 110, at 31-32.

¹⁵⁰ Id. at 31.

¹⁵¹ TennCare’s initial average capitation rate was $1,641. From this amount the state subtracted $335 for the value of charity care, $28 for the value of local government subsidies for indigent care, and $48 for patient co-insurance and deductibles, resulting in a capitation payment to MCOs of $1,275. TENNCARE WAIVER APPLICATION, supra note 109, at 82. On October 1, 1994, the state allocated additional money to the capitation pool, extended eligibility to at-risk children and the chronically and seriously ill, and increased the capitation rates for seriously ill patients, such as those with cancer and AIDS. These changes raised the average capitation payment to $1,507. See Medicaid: Lower TennCare Enrollment Figures Allow Funding Infusion of $340 Million, 2 HEALTH CARE POL’Y REP. (BNA) NO. 36, at 1585 (Sept. 12, 1994). Tennessee counts the value of charity care as part of the state funding to support TennCare because “TennCare should not result in a windfall to providers.” The state relied on studies that calculated the value of charity care provided in Tennessee at 11% overall, and the 1991 Hospital Joint Annual Reports showed that the dollar amount of charity care provided by hospitals alone exceeded the five percent in kind contribution calculated into the TennCare budget. TENNCARE WAIVER APPLICATION, supra note 109, at 82.

¹⁵² TennCare Demonstration Fact Sheet, supra note 129, ¶ 41,908. MCOs must also meet certain quality criteria and present evidence of financial viability. Id.

¹⁵³ TENNCARE WAIVER APPLICATION, supra note 109.

¹⁵⁴ Id. at 34.

¹⁵⁵ MCO Contracts (on file with author).

¹⁵⁶ Id.

¹⁵⁷ Hudson, supra note 2, at 44. HMOs are required to provide case management services from the outset; preferred provider organizations (PPOs) have three years to implement such services. NATIONAL ASS’N OF PUB. HOSPS., supra note 110, at 31.

¹⁵⁸ See TennCare Providers to Receive 180 Million in Additional Funding, 5 MEDICARE REP. (BNA) No. 39, at 1121 (Oct. 7, 1994). In October, Tennessee disbursed $180 million of these funds to hospitals and physicians. Hospitals deemed to be essential providers received $150 million in direct payments. Essential providers are large teaching hospitals, children’s hospitals, large Medicaid providers, local health departments, federally qualified health centers, and “safety net” providers (providers which serve a large number of indigent patients). Formerly 120 of Tennessee’s 147 hospitals received disproportionate shares of hospital payments. Under TennCare, status as an essential provider is more difficult to qualify for and all the disproportionate share hospitals will not qualify. Another $20 million went to primary care physicians (pediatricians, family practitioners, general practitioners, internists, obstetrical-gynecologists, and nurse practitioners) who treat a greater than average number of TennCare patients. The final $10 million pays the portion of physicians’ malpractice insurance premiums attributable to their TennCare patients. See id.

¹⁵⁹ See id.

¹⁶⁰ See id.

¹⁶¹ NATIONAL ASS’N OF PUB. HOSPS., supra note 110, app. at 7, 30-31. CHAs are entities created in 1989 by Tennessee law to coordinate services to the medically indigent in Tennessee. Id. at 30.

¹⁶² Id. at 46-48.

¹⁶³ Medicaid: Survey Shows Physicians in TennCare Feel Prescription Limits’ Effect, 5 MEDICARE REP. (BNA) NO. 41, at 1174 (Oct. 21, 1994) [hereinafter Survey Shows Limits’ Effect].

¹⁶⁴ MARSHA GOLD ET AL., MANAGED CARE AND LOW-INCOME POPULATIONS: A CASE STUDY OF MANAGED CARE IN TENNESSEE 55 (1995).

¹⁶⁵ Id.

¹⁶⁶ Id.

¹⁶⁷ NATIONAL ASS’N OF PUB. HOSPS., supra note 110, at 47. TPN provided the model for TennCare. While Tennessee’s Medicaid costs were skyrocketing, TPN’s cost increased only two percent from 1992 to 1993. The average cost per TPN enrollee was $1,463 in 1992 compared to average insurance cost of $2,346 for all Tennesseans. Tennessee Governor Offers Plan That Would Scrap Medicaid Program, 1 HEALTH CARE POL’Y REP. (BNA) No. 6, at 262 (April 12, 1993).

¹⁶⁸ Breakthrough or Blackmail, supra note 137, at 2. Before TennCare, Access Med Plus served 35,000 Medicaid clients.

¹⁶⁹ See, e.g., TennCare’s First Four Months Fraught with Complaints from Hospitals, Doctors, 2 HEALTH CARE POL’Y REP. (BNA) No. 20, at 880 (May 16, 1994) [hereinafter TennCare Fraught with Complaints]; GOOD INTENTIONS GONE BAD, supra note 3; NATIONAL ASS’N OF PUB. HOSPS., supra note 110, at 9; Medicaid: Problems Plague TennCare Program, Result of Hasty Planning, NAPH Says, 5 MEDICARE REP. (BNA) No. 18, at 540 (May 6, 1994); Medicaid: TennCare Likely to Cost Less Than Budgeted Amount, Director Says, 5 MEDICARE REP. (BNA) No. 24, at 705-06 (June 17, 1994).

¹⁷⁰ For a detailed discussion of the problems, see NATIONAL ASS’N OF PUB. HOSPS., supra note 110.

¹⁷¹ Breakthrough or Blackmail, supra note 137, at 1.

¹⁷² TennCare Fraught with Complaints, supra note 169, at 881. By May 1994, the number of calls to the TennCare hotline was down to 800 an hour. Id.

¹⁷³ See Problems Plague TennCare Program: Result of Hasty Planning, NAPH Says, 5 MEDICARE REP. (BNA) No. 18, at 540 (May 6, 1994).

¹⁷⁴ Id. With little or no state oversight in place, some MCOs engaged in questionable marketing practices including offering insurance policies and secured credit cards, paying agents commission, and providing turkeys, hams, and even cash to individuals as inducements to enroll. Id. Other MCOs were months late in paying providers, even though their contracts with the state required them to reimburse providers within 30 days. Medicaid: TennCare Likely to Cost Less Than Budgeted Amount, Director Says, 5 MEDICARE REP. (BNA) No. 24, at 706 (June 17, 1994).

¹⁷⁵ William F. Fox ' William Lyons, A Survey to Determine Insurance Status of Tennessee Residents, A Report Prepared for the Tennessee Department of Finance and Administration 2- 3 (Aug. 25, 1994) (on file with author).

¹⁷⁶ GOLD ET AL., supra note 164, at 7-8.

¹⁷⁷ Fox ' Lyons, supra note 175, at 3-4.

¹⁷⁸ Id. at 10.

¹⁷⁹ Id.

¹⁸⁰ Id.

¹⁸¹ Medicaid: Tenn. Gov. McWherter Announces Plans to Pump $340 Million More into TennCare, 5 MEDICARE REP. (BNA) No. 35, at 1015 (Sept. 2, 1994).

¹⁸² TennCare Beneficiaries Happy with Plan, See Physicians More Often, Survey Finds, 2 HEALTH CARE POL’Y REP. (BNA) No. 37, at 1622 (Sept. 19, 1994) [hereinafter TennCare Beneficiaries Happy with Plan].

¹⁸³ Fox ' Lyons, supra note 175, at 5.

¹⁸⁴ Id.

¹⁸⁵ TennCare Beneficiaries Happy with Plan, supra note 182, at 1622. In a similar study in 1993, 72% of the insured population said they were satisfied with their coverage; that number rose to 82% in the 1994 survey. Id.

¹⁸⁶ See Tony Garr, TennCare: A Consumer’s View, HEALTH SYS. REV., Mar.-Apr. 1994, at 22 (while there was confusion at first, “it quickly became apparent that TennCare offered opportunities for consumer participation and expansion of health care that Medicaid could never offer.”).

¹⁸⁷ By early April every hospital in the state was participating in TennCare. According to the THA many hospitals felt they had no choice but to participate given the high number of uninsured and Medicaid patients some hospitals treat. Hudson, supra note 2, at 45. The hospital association estimated that hospitals’ payments from TennCare MCOs were 35 to 40% less than payments under Medicaid, when disproportionate share payments were calculated into the Medicaid rates. Id. But while MCO payments may be less than under Medicaid, hospitals receive payment from more patients because an additional percentage of the population now has insurance. In addition, hospitals no longer pay the 6.75% provider tax that helped finance Medicaid. Breakthrough or Blackmail, supra note 137, at 8.

Although the hospitals may be willing to live with the payment rates, they are still concerned about the overall financing of the program. THA predicts a $300 million to $500 million shortfall this year on a $2.9 billion budget. Hudson, supra note 2, at 45.

¹⁸⁸ See, e.g.. GOOD INTENTIONS GONE BAD, supra note 3.

¹⁸⁹ See Tennessee: TennCare Providers to Receive $180 Million in Additional Funding, 5 MEDICARE REP. (BNA) NO. 39, at 1121 (Oct. 7, 1994). TMA represents two thirds of Tennessee’s physicians, approximately 6,700 of the state’s 10,000 doctors. Medicaid: Tennessee Doctors Dealt Blow as Judge Dismisses TennCare Suit, 5 MEDICARE REP. (BNA) No. 33, at 975 (Aug. 19, 1994).

¹⁹⁰ See, e.g.. GOOD INTENTIONS GONE BAD, supra note 3.

¹⁹¹ See Michael Finn ' Chris Sherrill Vass, Forum to Probe TennCare Woes, CHATTANOOGA FREE PRESS, Jan. 23, 1994, at Al (“In Hamilton County, hundreds of doctors have dropped out of TPN, saying they resent being forced to participate in TennCare.”).

¹⁹² See, e.g., Medicaid: TennCare Likely to Cost Less Than Budgeted Amount, Director Says, 5 MEDICARE REP. (BNA) No. 24, at 705-06 (June 17, 1994). Physicians, like hospitals, are concerned that the entire system may be seriously underfunded because TennCare’s initial capitation rates may be unrealistically low. The TMA claims that the $1,214 annual reimbursement to MCOs may be 20 to 30% too low. In addition, the capitation payments made to MCOs rely on $595 million in charity care that hospitals now provide to indigent patients. Id. at 706.

¹⁹³ Hudson, supra note 2, at 44. Physicians complain that payments they receive from the MCOs are 30 to 60% less than previous Medicaid payments. Id.

¹⁹⁴ See Survey Shows Limits’ Effect, supra note 163, at 1173-74. In a study conducted in October 1994, 93% of physicians surveyed said that their ability to practice effective medicine was compromised by MCO-imposed drug formularies. Id. at 1173.

¹⁹⁵ See Medicaid: Chancellor to Hear Arguments in Suit Filed by TMA over TennCare Program, 5 MEDICARE REP. (BNA) No. 28, at 838 (July 15, 1994). The TMA expressed concern about how the supplemental pools would be distributed between physicians and other providers and among physicians. TMA lawyer, Richard Raskin, said that physicians provide almost onethird of the uncompensated medical care under TennCare, but that only 5% of the supplemental funds are earmarked for physicians. Id.

¹⁹⁶ TennCare Fraught with Complaints, supra note 169, at 880-81. Because Blue Cross/Blue Shield does not have gatekeepers, physicians are worried that TennCare patients will become the bulk of their practice. Id. The state claims that 10 of the 12 MCOs do have gatekeeper physicians. Hudson, supra note 2, at 45.

¹⁹⁷ See White, supra note 4, at 29-30.

¹⁹⁸ Id. at 28-29.

¹⁹⁹ See GOLD ET AL., supra note 164, at 2-3.

²⁰⁰ Telephone Interview with Blue Cross/Blue Shield (Jan. 1995).

²⁰¹ See Breakthrough or Blackmail, supra note 137, at 2.

²⁰² The TMA and the AMA filed complaints with HCFA challenging the TennCare program. In a May 19, 1994 letter to HCFA, the TMA and AMA accused Tennessee of using erroneous figures to arrive at the capitation rate, alleged that Tennessee failed to comply with certain federal requirements not waived, and charged that the state had failed to disclose publicly how the funding from the supplemental pools would be distributed. Tennessee Official Calls AMA Charge of False TennCare Information Ridiculous, 2 HEALTH CARE POL’Y REP. (BNA) No. 25, at 1086 (June 20, 1994).

²⁰³ Tennessee Medical Ass’n v. Manning, No. 93-3839-1, slip op. at 2 (Tenn. Ct. Ch. Div. Aug. 8, 1994). The suit was filed December 30, 1993. Medicaid: Tennessee Judge Set to Rule Whether TennCare Case Goes to Trial, 5 MEDICARE REP. (BNA) No. 30, at 901 (July 29, 1994).

²⁰⁴ Plaintiff’s Reply Memorandum in Support of Their Motion for Summary Judgment and Response in Opposition to Defendant’s Motion for Summary Judgment at 27-29, Tennessee Medical Ass’n v. Manning, No. 93-3839-1 (Tenn. Ct. Ch. Div. Aug. 8, 1994) [hereinafter Plaintiff’s Reply Memorandum]. The TMA also alleged that the tie-in violates 42 C.F.R. 447.204, the equal access regulation. The TMA’s other claims included allegations that the TennCare enabling legislation is unconstitutional because it gives the executive branch inappropriate powers not reflecting the checks and balances in state government, and that the State failed to comply with federal mandatory advance notice and comment periods before the enactment of new regulations.

Courts have held that both Medicaid providers and recipients have a cause of action under Section 1983 to enforce Section 30(A)’s equal access requirement. Arkansas Medical Soc’y Inc. v. Reynolds, 6 F.3d 519, 524-25 (8th Cir. 1993); Visiting Nurse Ass’n v. Bullen, 866 F. Supp. 1444, 1448-49 (D. Mass. 1994); Sobky v. Smoley, 855 F. Supp. 1123, 1131-33 (E.D. Cal. 1994); Pennsylvania Ass’n of Home Health Agencies v. Snider, 826 F. Supp. 948, 950-51 (E.D. Pa. 1993) (holding that home health providers have an enforceable right under section 1983 although erroneously concluding that section 30(A) was part of the Boren Amendment); see also Fulkerson v. Commissioner, Me. Dep’t of Human Servs., 802 F. Supp. 529, 533 (D. Me. 1992) (holding that recipients have right to enforce the equal access provision of 30(A), but not the portion of the statute that requires that payments be consistent with efficiency, economy, and quality of care because that provision is too amorphous and thus beyond the competence of the judiciary to enforce); Illinois Hosp. Ass’n v. Edgar, 765 F. Supp. 1343 (N.D. 111. 1991); Clark v. Kizer, 758 F. Supp. 572, 575 (E.D. Cal. 1990), aff’d in part and vacated on other grounds sub nom. Clark v. Coye, 967 F.2d 585 (9th Cir. 1992); Ohio Hosp. Ass’n v. Ohio Dep’t of Human Servs., 579 N.E.2d 695 (Ohio 1991), cert, denied, 503 U.S. 940 (1992). But see Methodist Hosps., Inc. v. Indiana Family ' Social Servs. Admin., 860 F. Supp. 1309, 1332 (N.D. Ind. 1994) (equal access provision not within the competence of the judiciary to enforce because the statute, legislative history, and HHS regulations do not provide a benchmark for defining the term “geographic area.”).

²⁰⁵ Plaintiff’s Reply Memorandum, supra note 204, at 27-29.

²⁰⁶ Tennessee Medical Ass’n v. Manning, No. 93-3839-1, slip op. at 6-8 (Tenn. Ct. Ch. Div. Aug. 8, 1994). The court also rejected TMA’s claim that the state failed to engage in notice and comment rulemaking as required by 42 C.F.R. 447.205 when setting capitation rates. The court found that because the State made TennCare payments on a capitation basis to managed care organizations rather than on a fee-for-service basis directly to providers that rulemaking procedures were not required. In reaching this conclusion, the court relied on an opinion issued by the Office of General Counsel of the HHS that 42 C.F.R. 447.205 “does not apply to changes in standards or methods by which the state pays MCOs, or other entities paid on a risk basis, since such rates are not ’payment rates for service.’” Id. at 5; Letter from U.S. Dep’t of Health and Human Services, to Manny Martin, defendant (June 30, 1994) (on file with author).

The court rejected the plaintiffs’ claim that the State failed to engage in notice and comment rulemaking for distributions from the two supplemental pools. The court found that rulemaking procedures were followed for the “unallocated pool” and that the State had not and would not distribute money from the “reserve pool” until rules were correctly promulgated. Manning, No. 93-3839-1, slip op. at 5-6.

The court also rejected plaintiffs’ claims that the Tennessee legislation authorizing the TennCare program was an unconstitutional delegation of power. The court found that the act contained sufficient guidance for the agency to exercise the authority delegated to it. Id. at 8-9. Finally, the court found that there was no private right of action to enforce provisions of the Medicaid waiver. Id. at 9.

²⁰⁷ Tennessee Medical Ass’n v. Corker, No. 01-A-01-9410-CH00494, 1995 WL 228681, at *2 (Tenn. Ct. App. April 19, 1995).

²⁰⁸ Id.

²⁰⁹ Supplement to Plaintiffs’ Motion for Summary Judgment at 1-2, Tennessee Medical Ass’n v. Manning, No. 93-3839-1 (Tenn. Ct. Ch. Div. Aug. 8, 1994). These percentages do not take account of the supplemental essential provider direct payments made by the state to physicians who see a larger than average number of TennCare patients. Id.

²¹⁰ 500 F. Supp. 541 (E.D. Pa. 1980).

²¹¹ Id. at 547. As the court remarked, “If during periods of high demand, Medicaid reimbursement was required to mirror rates charged private patients, the margin of profit in the treatment of Medicaid recipients would necessarily expand.” Id.

²¹² Id. at 550. The claim in DeGregorio was brought under the equal access regulation. The statute had yet to be promulgated.

²¹³ See, e.g., Clark v. Kizer, 758 F. Supp. 572, 576 (E.D. Cal. 1990), aff’d in part and vacated in part sub nom. Clark v. Coye, 967 F.2d 585 (9th Cir. 1992) (examining physician participation rates as well as rates of payments); DeGregorio, 500 F. Supp. at 550 (evaluating nursing home participation rates with no comparison of payment rates); District of Columbia Podiatry Soc’y v. District of Columbia, 407 F. Supp. 1259 (D.C. 1975) (examining podiatrist participation rates).

²¹⁴ See, e.g., Clark, 758 F. Supp. at 580; DeGregorio, 500 F. Supp. at 551. In managed care systems the actual number of participating providers is not necessarily the crucial issue. Some MCOs use a relatively limited number of providers. It matters only that they have a sufficient number of providers in accessible locations to deliver services in a timely fashion. JANE PERKINS ' MICHELE MELDEN, SECTION 1115 MEDICAID WAIVERS: AN ADVOCATE’S PRIMER 20-30 (1994).

²¹⁵ See Clark, 758 F. Supp. at 576; DeGregorio, 500 F. Supp. at 550. The courts have tended to defer to guidelines defining equal access developed by HHS. See, e.g., Clark, 758 F. Supp. at 576 (“[I]t appears that determining the means of measuring compliance with the federal Medicaid program falls within the expertise of the agency charged with its administration. Accordingly under ordinary principles of administrative law, this court will use the factors established by the agency for measuring compliance.”); DeGregorio, 500 F. Supp. at 550.

HHS first developed criteria for implementing the equal access regulation in 1966. DEPARTMENT OF HEALTH EDUCATION AND WELFARE, HANDBOOK OF PUBLIC ASSISTANCE ADMINISTRATION, SUPPLEMENT D: MEDICAL ASSISTANCE PROGRAMS pt. 7-5340 (1966-67); see Clark, 758 F. Supp. at 576. HHS’s original criteria was a two-thirds requirement: if two-thirds of practicing physicians participated in Medicaid then the equal access requirement was presumably satisfied. But this guideline tends to exaggerate Medicaid enrollees’ access to physicians because HHS defines as a “Medicaid participating physician” any practitioner who files one Medicaid claim annually.

HHS, aware of the problems inherent in the two-thirds rule, has articulated a more refined guideline for purposes of monitoring obstetrical and pediatric Medicaid participation pursuant to the 1989 amendments. DRAFT STATE MEDICAID MANUAL, supra note 82, § 6306.1.

²¹⁶ For example, in Clark, the court found a violation of section 30(A) when 40% of licensed dentists and 54% of practicing dentists were Medicaid participating physicians. A review of Medicaid claims data revealed that 11% of these participating dentists treated only one Medicaid recipient, 21% treated two to five recipients, and 21% treated 6-19 recipients out of a typical caseload of 1,300 different patients. Only 12.5% of practicing dentists accepted new patients through the Medicaid referral line and many dentists limited their Medicaid practice. 758 F. Supp. at 576-77. The Medicaid reimbursement rates were half that of private insurers, one-third of previously participating dentists had dropped out of the program, and evidence indicated that Medicaid enrollees could not find dental treatment. Id. at 577-78.

But in District of Columbia Podiatry Soc’y v. District of Columbia, a 60% rate of provider participation among podiatrists in the District of Columbia satisfied the equal access requirements because the number of participating podiatrists steadily increased, almost doubling in six years, from 30 in 1968 to 57 in 1974. 407 F. Supp. 1259, 1268 (D.C. 1975).

In contrast, a 70% participation rate among Pennsylvania skilled nursing facilities was found to violate the equal access provision because of the shortage of nursing home beds, in general, and the fact that the homes that participated in Medicaid rarely, in fact, admitted Medicaid recipients. Nursing home payment rates averaged $30.50 compared to $45 for private patients. DeGregorio, 500 F. Supp. at 550.

²¹⁷ Defendant’s Memorandum in Support of Supplemental Motion for Summary Judgment at 4, Tennessee Medical Ass’n v. Manning, No. 93-3839-1 (Tenn. Ct. Ch. Div. Aug. 8, 1994) (noting that the HCFA survey of TennCare recipients concludes that “the majority of the contacted beneficiaries … indicated no problem with provider access.”). Of the 122 recipients that HCFA contacted, only six had significant problems to raise to “problem referral,” two of those involved access problems, and were resolved satisfactorily. Id. at 5.

²¹⁸ Plaintiff’s Reply Memorandum, supra note 204, at 27-29.

²¹⁹ Older cases talked about a wrongful act or threat which overcomes the free will of a party constituting duress. The real issue is not determining whether a free will has been overcome, but which acts are deemed to be wrongful. See JOHN D. CALAMARI ' JOSEPH M. PERILLO, CONTRACTS 337 (3d ed. 1987).

²²⁰ RESTATEMENT (SECOND) OF CONTRACTS § 175(1) (1981).

²²¹ Id. § 176 cmt. f (1981)- Duress can consist of threatening to do something that one has a legal right to do, such as threatening to bring a valid criminal prosecution, threatening to bring a valid civil claim in bad faith, or exploiting monopoly power. Id. § § 176(l)(c) cmt. d, 176(1)(f), 176(2)(c), 176(2)(c) cmt. e, illus. 16.

²²² See id. § 176 cmt. f. “A threat is improper if the resulting exchange is not on fair terms, and the threatened act would harm the recipient and would not significantly benefit the party making the threat.” Id. § 176(2)(a).

²²³ Kartell v. Blue Shield, Inc., 749 F.2d 922, 925 (1st Cir. 1984), cert, denied, 471 U.S. 1029 (1985); Sausalito Pharmacy, Inc. v. Blue Shield, Inc., 1981-1 Trade Cas. (CCH) ¶ 63,885, at 75,604 (N.D. Cal. Mar. 16, 1981), aff’d, 1982-2 Trade Cas. (CCH) ¶ 64, 766, at 71,713 (9th Cir. May 10, 1982); Medical Arts Pharmacy v. Blue Cross ' Blue Shield, Inc., 518 F. Supp. 1100 (D. Conn. 1981), aff’d, 675 F.2d 502, 506 (2d Cir. 1982).

²²⁴ Kartell, 749 F.2d at 925. “Blue Shield in essence ’buys’ medical services for the account of others.” Id. “Blue Shield pays the bill and seeks to set the amount of the charge.” Id. at 926. “Whether or not that price margin is, in fact, reasonable, is legally speaking, beside the point even in the case of a monopolist.” Id. at 928.

Vertical restraints on trade, such as most favored nation clauses and refusing to deal with facilities that contract with other HMOs, raise different issues and may be subject to a different analysis. See Reasin v. Blue Cross ' Blue Shield, Inc., 899 F.2d 951, 964-970 (10th Cir.), cert, denied, 497 U.S. 1005 (1990). But see Ocean State Physicians Health Plan, Inc. v. Blue Cross ' Blue Shield, 883 F.2d 1101 (1st Cir. 1989), cert, denied, 494 U.S. 1027 (1990).

²²⁵ Kartell, 749 F.2d at 927.

²²⁶ For a thorough discussion of theories of coercion see Sullivan, Kathleen M., Unconstitutional Conditions, 102 HARV. L. REV. 1413, 1442-55 (1989)Google Scholar.

²²⁷ As a condition of its TennCare waiver, the State must assure that each MCO provides services that are “available, accessible, and adequate.” Some MCOs, like Blue Cross/Blue Shield, contract with a large number of providers, while others contract with a more limited network. Each MCO, though, contracts with the State to provide “available, accessible, and adequate numbers of … professional, allied, and paramedical personnel … .” TennCare Demonstration Fact Sheet, supra note 129, ¶ 41,908. The TennCare Waiver sets forth specific criteria for evaluating whether MCOs have adequate provider networks to satisfy the requirements of Section 30(A). It provides:

In general, contractors shall provide available, accessible, and adequate numbers of institutional facilities, service locations, service sites, professional, allied, and paramedical personnel for the provision of covered services, including all emergency services, on a 24-hour-a-day, 7-day-a-week basis. At a minimum, this shall include: Primary Care Physician or Extender:

• (a) Distance/Time Rural: 30 miles or 30 minutes

• (b) Distance/Time Urban: 20 miles or 30 minutes

• (c) Patient Load: 2,500 or less for physician; one-half this for a physician extender.

• (d) Appointment/Waiting Times: Usual and customary practice (see definition below), not to exceed 3 weeks from date of a patient’s request for regular appointments and 48 hours for urgent care. Waiting times shall not exceed 45 minutes.

• (e) Documentation/Tracking requirements:

• + Documentation—Plans must have a system in place to document appointment scheduling times. The State must utilize statistically valid sampling methods for monitoring compliance with appointment/waiting time standards as part of the survey required in special term and condition 3.

• + Tracking—Plans must have a system in place to document the exchange of client information if a provider, other than the primary care provider (i.e., school-based clinic or health department clinic), provides health care.

Specialty Care and Emergency Care: Referral appointments to specialists (e.g., specialty physician services, hospice care, home health care, substance abuse treatment, rehabilitation services, etc.) shall not exceed 30 days for routine care or 48 hours for urgent care. All emergency care is immediate, at the nearest facility available, regardless of contracts. Waiting times shall not exceed 45 minutes.

Hospitals:

• (a) Transport time will be the usual and customary, not to exceed 30 minutes, except in rural areas where access time may be greater. If greater, the standard needs to be the community standard for accessing care, and exceptions must be justified and documented to the State on the basis of community standards.

General Dental Services:

• (a) Transport time will be the usual and customary, not to exceed 30 minutes, except in rural areas where community standards and documentation will apply.

• (b) Appointment/Waiting Times: Usual and customary not to exceed 3 weeks for regular appointments and 48 hours for urgent care. Waiting times shall not exceed 45 minutes.

General Optometry Services:

• (a) Transport time will be the usual and customary, not to exceed 30 minutes, except in rural areas where community standards and documentation shall apply

• (b) Appointment/Waiting Times: Usual and customary not to exceed 3 weeks for regular appointments and 48 hours for urgent care. Waiting times shall not exceed 45 minutes.

Pharmacy Services:

• (a) Transport time will be the usual and customary, not to exceed 30 minutes, except in rural areas where community access standards and documentation will apply.

Lab and X-Ray Services:

• (a) Transport time will be the usual and customary, not to exceed 30 minutes, except in rural areas where community access standards and documentation will apply.

• (b) Appointment/Waiting Times: Usual and customary not to exceed 3 weeks for regular appointments and 48 hours for urgent care. Waiting times shall not exceed 45 minutes.

All other services not specified here shall meet the usual and customary standards for the community.

Definition of “Usual and Customary"—access that is equal to or greater than the currently existing practice in the fee-for-service system.

²²⁸ Indeed, doctors have no affirmative legal duty to provide either charity or fee-forservice care. Physicians are free not to render aid even in an emergency. See RESTATEMENT (SECOND) OF TORTS § 314 cmt. c (1965). The classic statement of this nonduty rule comes from Hurley v. Eddingfield, 59 N.E. 1058 (Ind. 1901), in which the Indiana Supreme Court ruled that a physician had no duty to treat anyone. Id. The court saw no common law duty, even though the would be patient was very sick and later died, was a former patient of the physician, offered payment in advance, and further, the doctor was not otherwise occupied. The court rejected any medical analogy with the common law duty of innkeepers to serve all comers as well as the argument that the then recently enacted state regulatory scheme of physician licensure had created such a duty. Id.

²²⁹ AMERICAN MEDICAL ASS’N, PRINCIPLES OF MEDICAL ETHICS 6 (1985). This no-duty view of physicians’ obligations to treat has become an accepted tenet of organized medicine.

²³⁰ The very existence of Medicaid has undermined any concept of a moral responsibility of private doctors to treat Medicaid patients because Medicaid coverage at least guarantees patients treatment at public hospitals and public clinics, the overcrowded, underfunded providers of last resort.

²³¹ When TennCare was first unveiled it included a provision requiring that any MCO which insured state employees must provide services to TennCare enrollees. However, this provision disappeared before the waiver request was submitted to Washington. While Blue Cross maintains the link between state employees and TennCare enrollees it is under no state law obligation to include the tie-in.

In the fall of 1994, Tennessee officials proposed a state regulation which would have mandated that TennCare participating physicians make their practices fully available to TennCare enrollees. Popularly known as the “anti-discrimination rule,” the proposed regulation would have prohibited physicians and other providers from discriminating “based upon source of payment.” The purpose of the proposed regulation was to prevent doctors from capping or otherwise limiting their TennCare patient load. Tennessee Department of Health/Bureau of TennCare, Notice of Rule-making Hearing (filed Sept. 30, 1994) (Proposed Rule 1200-13-12-06 applied to MCOs; Proposed Rule 1200-13-12.08 applied to physicians and other providers of care).

Not surprisingly, the TMA opposed the proposed regulation. See Proposed TennCare Equal Access Rule Raises Concerns for Tennessee Doctors, 5 MEDICARE REP. (BNA) NO. 42, at 1209 (Oct. 28, 1994). In the face of this opposition, Tennessee’s new governor, who received widespread support and large campaign contributions from physicians, withdrew the proposed anti-discrimination regulation. Duren Cheek, A Win for the Doctors, TENNESSEAN, Mar. 1, 1995, at 2A.

²³² State imposed tie-ins and full access requirements are not unconstitutional. Tie-ins and full access provisions are already used in federally funded health care programs to increase access for the publicly insured and such requirements have withstood constitutional challenge. See American Hosp. Ass’n v. Schweiker, 721 F.2d 170, 182-83 (7th Cir. 1983), cert, denied, 466 U.S. 958 (1984) (upholding the community service and uncompensated care regulations as constitutional as an “exercise of the federal government’s authority under the spending power to bring about certain public policy goals.”); see also Clair v. Center Community Hosp., 463 A.2d 1065, 1072 (Pa. 1983) (rejecting a constitutional challenge to a Hill Burton hospital’s requirement that each of the three obstetrician/gynecologists on staff accept as a patient every third indigent obstetrical or gynecological patient seeking care at the hospital. Although the court recognized the requirement to be “onerous” and “severe,” it still upheld the rule as reasonable in light of the important state interest in providing medical care to indigent people); Whitney v. Heckler, 780 F.2d 963 (11th Cir. 1986), cert. denied, 479 U.S. 813 (1987).