Federal Medicaid Block Grant Offer Could Reset Tennessee Plan

(CN) – Last year, Tennessee became the first state to attempt to make Medicaid block grants, a long-time conservative health care policy proposal, a reality.

In November, the state asked the Centers for Medicare and Medicaid Services for a waiver to receive $7.9 billion used to fund the state’s Medicaid program, TennCare, as a block grant. The state, which elected not to expand Medicaid, said the flexibility would save it money and would split the savings with the federal government and reinvest its share back into TennCare, which covers 1.4 million people.

On Thursday, CMS offered states its own deal.

States who apply for a waiver would get a cap on spending and the flexibility in how to spend the Medicaid dollars in exchange for more federal oversight to ensure services don’t decline, according to a plan released by the agency.

In prepared remarks introducing the Healthy Adult Opportunity initiative, CMS Administrator Seema Verma described it as “new policy that holds the potential to transform the Medicaid program.”

Across the nation, Medicaid has become one of the largest items in states’ budgets, Verma said, and spending for the program is set to grow fivefold in 30 years as the baby boomer generation ages.

Verma placed part of the blame for the expansion of Medicaid on the Affordable Care Act.

“Since 2014, Medicaid has added approximately 15 million new working-age adult enrollees who primarily qualify as part of Obamacare’s expansion of the program,” she said. “The program was not originally designed for this group.”

CMS’ policy has received criticism from people who argue a spending cap on Medicaid must be set by Congress.

“While those that want Medicaid to be business as usual are willing to weaponize the legal system to thwart state innovation at every turn, our administration is committed to protecting and improving the lives of Medicaid recipients,” Verma said.

While CMS’ policy and Tennessee’s proposal both advocate for Medicaid block grants, they differ on which groups a state would have more flexibility in managing.

Tennessee’s plan encompasses more of the TennCare program, leaving out funding for prescription drugs, for instance. Its block grant would cover individuals it is mandated to cover with TennCare.

Meanwhile, the Healthy Adult Opportunity initiative would only deal with a narrower group covered by Medicaid: adults under 65 who do not need long-term care or have a disability.

According to the agency, the oversight would be continual to ensure there is no drop in coverage with a new plan.

“CMS recognizes that states, as administrators of the program, are in the best position to assess the needs of their respective Medicaid-eligible populations and to drive reforms that result in better health outcomes,” Calder Lynch, director for CMS, wrote in a 38-page letter sent to the state directors of Medicaid.

Tennessee’s plan faced harsh criticism when the state solicited public comment before submitting the plan to the federal government. In listening sessions around the state, residents went up to microphones and near universally lambasted the proposal, worried that they wouldn’t get the proper medication for their children with complex medical conditions, or concerned the mental health services they relied on would be placed onto the chopping block.

The proposal by CMS has garnered more criticism for Tennessee’s plan.

Michele Johnson, executive director of Tennessee Justice Center, criticized Tennessee for floating out a Medicaid block grant proposal that “unnecessarily terrorized families” and was ultimately a waste of resources in a state dealing with the opioid epidemic and the closure of rural hospitals.

“This means we will go back to square one,” Johnson said in a statement. “Anything they come up with now to try to fit their waiver proposal into the terms of the guidance would be substantially different from what they first proposed and must go back through new state and federal comment periods.”

The Trump administration’s announcement comes soon after the director of TennCare, Gabe Roberts, announced he was stepping down on March 2. The state’s Medicare block grant was listed as one of his innovations in the press release announcing his departure.

CMS determined Tennessee’s proposal is complete and is speaking with the state about it. In the federal comment period, CMS received 6,000 comments.

Stephanie Whitt said Tennessee’s proposal to CMS was unique because the flexibility might give the state extra funds to reinvest into TennCare.

Whitt, executive vice president of the Beacon Center of Tennessee, a Nashville-based think tank that advocates for free-market ideas, said the center had yet to analyze CMS’ rollout.

“We don't know what the final proposal will look like after negotiations with the federal government, but as currently proposed this is a good start towards the direction we should be heading as a state,” Whitt said in a statement.

For its part, TennCare said it was encouraged by CMS’ guidance. It said in a statement that the rollout of the Healthy Adult Opportunity initiative would not require TennCare to alter its proposal.

“We are also pleased that CMS recognizes the need for state flexibility regarding prescription drug benefits. We look forward to future discussions with CMS on Tennessee’s innovative modified block grant proposal,” the department said.

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The Associated Press contributed to this report.

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