On its way out, the Trump administration is approving Tennessee’s request to completely reshape how it provides health insurance to 1.4 million low-income residents. The so-called block grant takes effect immediately and lasts 10 years, making it more difficult for the incoming Biden administration to undo it.
The proposal submitted more than a year ago commits to maintaining the benefits for everyone currently eligible for TennCare, and the stated intent is to only make changes that are “additive in nature.”
Under the Medicaid waver, TennCare also gets to keep 55% of the savings it generates under an agreed-upon cap, which state health officials have said will go toward covering more people or expanding benefits to those already on the program.
“Tennessee officials know the needs of its residents better than any distant bureaucrat in Washington ever could,” CMS Administrator Seema Verma says, calling the program a “national model.”
The Centers for Medicare and Medicaid Services agreed to a block grant that increases “at a reasonable growth rate” each year and also signed off on a “safety valve” provision in the case of an economic recession when Medicaid rolls typically swell quickly. But federal officials also added a provision that will reduce the state’s funding when TennCare enrollment drops by more than 1%, providing a disincentive for finding ways to cut people from the program.
Tennessee already spends far less on Medicaid than federal reimbursement rules allow, so TennCare director Stephen Smith says the state will not have to find new savings to unlock additional federal money, which could generate hundreds of millions of dollars each year.
“The success of this agreement does not depend upon any reduction in spending,” he says. “Really what it requires is us to continue what we’ve been doing.”
The state is given far more flexibility than it currently has, such as:
- No requirement to seek federal approval before increasing benefits
- Authority to suspend benefits to anyone determined to be fraudulently receiving benefits
- Broad leeway to spend Medicaid funding on nutrition, housing and employment programs
- Permission to not to cover certain pricey prescription drugs, akin to commercial health plans, so long as an alternative is available
- Ability to target benefits to certain groups, i.e. dental benefits only for pregnant women
Tennessee was the first and only state to apply for a block grant under the Trump administration, even though Verma encouraged states to submit proposals that would incentivize the quality of care over quantity. In Tennessee, the concept has been popular among Republican legislators who passed legislation in 2019 instructing TennCare to pursue a block grant.
But the specter of giving the state sweeping latitude to change the Medicaid program has been widely opposed by health care advocates, led by the Tennessee Justice Center. Many doctors and health providers also expressed concerns during the public hearing process in late 2019.
Democrats have generally opposed block grants for Medicaid, viewing them as a backdoor method to eventually reduce benefits.
Asked whether the incoming Biden administration could easily reverse this waiver approval, Verma says a reversal would require a legal basis and a process for walking back the approval.
“The federal government has made a commitment, and they’re going to be making significant investments to implement it,” Verma says. “So this program — I think — should not be subject to political whims, and the federal government should see this model through for at least the 10-year approval period.”
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