Tennessee unveils plan to change Medicaid funding to block grant program

By | September 19, 2019

Dive Brief:

  • Tennessee on Tuesday unveiled its plan to shake up its own Medicaid funding, seeking approval to move to a block grant system that would cap the federal funds it receives.
  • Switching to this new funding mechanism would allow the state and federal government to better predict the budget for this program, known as TennCare, state officials said. Critics, though, are skeptical of such promises.
  • If Tennessee’s proposal is approved by federal regulators, it would become the first state to use a block grant funding mechanism for Medicaid. A public comment period is now underway and will end Oct. 18. The waiver application must be submitted to CMS no later than Nov. 20.

Dive Insight:

Conservatives for years have backed placing caps on Medicaid funding. The idea caught fire in 2017 as Republicans were attempting to replace the Affordable Care Act. At the time, provider groups like the American Hospital Association and American Medical Association opposed the policy. The AHA said then it “could lead to substantial changes in benefits and payments and limit the availability of care for patients.”

While that effort failed, the Trump administration issued guidance earlier this year to encourage states to apply to make the switch to block grants.

Currently, the federal government reimburses states a percentage of what they spend to provide care to Medicaid beneficiaries. The funding is open-ended with no caps. If enrollment or costs increase, those matching federal funds increase as well.

In 2017, states received a total of $ 375 billion in federal funding for Medicaid, according to the Congressional Budget Office. States spent $ 230 billion on the program to receive those matching funds.

Tennessee’s draft proposal includes three main components for funding. First, it will set up a floor, or the lowest amount the federal government will send the state to help pay for Medicaid coverage. Funding will not fall below this floor, which protects the state from losing funds if enrollment drops.

Second, if enrollment grows, the block grant will be adjusted on a per capita basis to capture that growth, according to the application.

“This per capita adjustment ensures the state will continue to be able to provide medical assistance to all eligible individuals, regardless of changes in the economy or other factors outside the state’s control,” it reads.

Third, any savings would be shared between the state and federal government.

But critics are skeptical of block granting Medicaid, concerned that placing caps on the program will ultimately limit care or enrollment.

When Congress was debating the issue two years ago, the Congressional Budget Office gave credence to some of those concerns. After scoring the Senate bill to replace the ACA, the CBO found that with less federal funding states would have to decide whether to spend more money on the program or find ways to reduce spending.

“States would need to decide whether to commit more of their own resources to finance the program at current-law levels or to reduce spending by cutting payments to health care providers and health plans, eliminating optional services, restricting eligibility for enrollment through work requirements and other changes,” the report found.

University of Michigan professor Nicholas Bagley argued allowing the waivers is not legal under the Medicaid statute.

“You can’t use Medicaid waivers to change Medicaid’s financing structure. And that’s exactly what Tennessee is proposing to do,” he wrote on the Incidental Economist blog. “Maybe Tennessee has an argument for why this proposal is consistent with the Medicaid statute. I’m all ears.”

Healthcare Dive – Latest News