Feds Give Green Light to TennCare Funding Waiver

Jan 8, 2021

The federal government’s Centers for Medicare and Medicaid Services has approved the state’s request to radically change the funding model for TennCare.

The approved waiver, announced Friday, comes more than a year after Tennessee officials submitted a 50-page request to switch TennCare to what's called an "aggregate cap" funding model. Tennessee is the first state to receive approval for Medicaid funding of this type.

The aggregate cap, often compared to a block grant, is a major change from the current funding model for TennCare, the joint federal-state health coverage program created in 1994 that today covers 1.4 million Tennesseans – roughly 20 percent of the people who live in the state. They are primarily low-income people, pregnant women and children.

Under the new arrangement, the federal government will send a lump sum to TennCare each year, creating a spending limit not present under the current open-ended practice. State authorities will get more leeway to suspend benefits, investigate reported fraud, expand the program, or make other changes without first getting federal consent. State officials have said they will consider only changes that are “additive in nature,” and that their goal is not to shrink the program or reduce the number of people it serves.

If the state doesn’t spend all the allotted money in a given fiscal year, the state would split the leftover funds with the federal government. The state’s share might be invested in expanding or tailoring health coverage for Medicaid recipients. Officials have emphasized those potential positives when promoting the plan. However, the proposal does not require the state to re-invest into TennCare. That and other elements of the plan make some health care advocates skeptical the state will follow through.

“No other state has sought a block grant, and for good reason,” Michelle Johnson, Executive Director of the Tennessee Justice Center, said, calling the block grant “a political gimmick that jeopardizes access to healthcare for hundreds of thousands of Tennesseans by creating a state budget booby trap.”

Gov. Bill Lee championed the block grant approach, and found encouragement from the Trump administration. Work on the proposal began in September 2019. While President-Elect Joe Biden could decide to cancel the aggregate cap agreement, Centers for Medicare and Medicaid Services Administrator Seema Verma said doing so would require a legal reason and a process for getting out of the funding model.

Reaction to the proposal and its approval has varied widely. On a conference call with reporters, Verma spoke of the value of local control rather than federal control and hailed the Tennessee plan as a national model. Gov. Bill Lee called the current funding approach “outdated and ineffective” and praised the new strategy as “a continuation of Tennessee’s commitment to innovate, lead and improve.”

TennCare Director Stephen Smith said his team approached the federal government with the mindset of emphasizing benefit to the state, the program and the people it covers. “This gives Tennessee the real opportunity to enhance the services we provide to Tennesseans,” Smith said.

Doctors and others who shared their thoughts in public forums during the drafting stage were skeptical of the touted benefits of the block grant-style approach. Written public comments solicited by the state were overwhelmingly negative toward the change. Legislative Democrats have viewed the shift as a possible backdoor to scaling back Medicaid services or tightening eligibility, in effect cutting people out of the program.

Addressing that point, the federal approval comes with a disincentive for state leaders to throw Tennesseans out of the program: funding will be reduced if TennCare rolls shrink by more than one percent. Verma called that an important safeguard against trimming TennCare as a cost-cutting maneuver. Federal funding would increase if more people enroll in the program.

Moving TennCare to this untested funding model comes as the state struggles with the COVID-19 pandemic and an economic recession that could put more people under the program's umbrella.

“This is an absolutely terrible time to further burden people who have suffered so much during the past 10 months,” Judy Roitman, Executive Director of the Tennessee Health Care Campaign, told WUOT News. “We need more coverage, not less. Block grants cap spending and do not accommodate extraordinary events such as the COVID-19 pandemic.”

The Tennessee Justice Center’s Michelle Johnson also questioned whether now is the right time to shift TennCare to a new funding strategy. “It is telling that [the waiver] says nothing about the pandemic, even though Tennessee has been one of the states that has had the most ineffective response and worst infection rates,” she said.

The change still requires legislative approval. The Tennessee Health Care Campaign wants the General Assembly and the incoming Biden administration to reject the waiver, Roitman said.

But that is unlikely since the General Assembly gave Gov. Lee their blessing to submit the waiver request in the first place. Lee said Friday he is preparing a resolution for their consideration as soon as possible. The General Assembly convenes Tuesday, January 12.