NASHVILLE — Gov. Bill Haslam announced Wednesday that a breakdown in negotiations with the federal government means that he won't expand the state's Medicaid program, a decision that will cost Tennessee billions of dollars in federal money and keep 140,000 uninsured Tennesseans from obtaining free coverage.
Haslam told a joint session of the General Assembly that he tried to get approval for a "Tennessee Plan," in which the state would accept the federal money to subsidize private insurance. But he was unable to get the proposal OK'd before his final amendments to the state's annual spending plan came due.
"I cannot recommend to you that we move forward on this plan," Haslam said in a 12-minute speech. "Our budget amendment will not include language to accept the federal funds."
The announcement appeared to catch lawmakers by surprise, as there was only tepid applause by a group heavily dominated by Republican opponents of President Barack Obama and his signature Affordable Care Act.
Democrats said they were perplexed by the decision that they said leaves rural hospitals and the uninsured in the lurch.
"I'm a bit confused, certainly disappointed in what the governor had to say," said House Minority Leader Craig Fitzhugh, D-Ripley. "It certainly doesn't bode well for the Tennesseans that had hoped to have real insurance for their health care."
Republicans, meanwhile, expressed relief that they wouldn't have to spend the rest of the legislative session fighting over a politically unpopular idea.
"If the federal government was looking for true reform in health care they would give us something like a block grant and allow us ... to run an efficient program," said Senate Speaker Ron Ramsey of Blountville. "But they're unwilling to do that."
An expansion of TennCare, the state's Medicaid program, had been estimated to bring in $1.4 billion in federal money in the first year alone. The federal government is covering the entire cost of expansion for the first three years and at least 90 percent thereafter.
"That money could make a huge difference in the quality of life for working Tennesseans," said Michele Johnson, an attorney with the Tennessee Justice Center, a group that supports greater access to Medicaid.
"I'm just really disappointed that the governor couldn't find a way to do the right thing for these Tennessee families."
Haslam was among the last of the Republican governors to declare a decision on expansion. Both the health care program and the Democratic president are widely unpopular in the highly Republican state.
The governor insisted to reporters after the speech that he will continue to negotiate with the federal government.
"This isn't the end of the story," Haslam said. "Quite frankly, a couple of days ago we thought we had this worked out."
The governor pledged to seek lawmakers' approval if anything changes.
Haslam said in the speech that his idea would require co-pays for the expanded group of Medicaid enrollees "so the user has some skin in the game when it comes to health care incentives."
While Republican governors have been highly critical of the federal health care program, a number of them are re-evaluating their opposition to accepting federal dollars to expand health care coverage to the poor as they review the budget implications and face pressure from hospitals that treat the uninsured.
Republicans also are proposing alternatives that would cover fewer people than Obama's plan, guarantee less financial help or rely more on private insurers.
The hospital industry has called expansion crucial to boosting jobs in that sector, and has warned that declining the money could cause some rural hospitals to go out of business.
The prospects of getting the Republican supermajority to agree to an expansion looked daunting, and don't appear to get any more likely as next year's elections draw nearer, when races for governor, all the House and half the Senate will be on the ballot.
"The politics of it are difficult," Haslam told reporters earlier this week. "And we've recognized that from the very beginning."
Haslam has said he pored over the deals struck by other Republican governors who have decided to pursue Medicaid expansion.
Committees in Florida's Republican-led Legislature have rejected a Medicaid expansion for roughly 1 million of the state's poorest residents, even though it is backed by GOP Gov. Rick Scott. Now a Republican state senator is pursuing an alternative that is much like what Haslam said he wanted — using federal funds to provide vouchers for low-income residents to buy private policies.
Ohio Gov. John Kasich, a Republican, also has been in discussions with the Obama administration about providing subsidized insurance instead of full Medicaid coverage for more adults. Republican governors in Texas, Nebraska and Indiana want the federal government to award Medicaid money as block grants to states.
Haslam said after the speech that if he had wanted to choose the politically expedient solution, he simply would have said no to Medicaid expansion at the start.
He also rejected the suggestion that he accept the full funding from the federal government and then withdraw from the program if the state decided it couldn't afford to pick up its share of the cost.
"The whole idea of just take it for three years and then cut the rolls just never felt right to me," Haslam said.