Tennessee’s Medicaid block grant: How the TennCare plan is supposed to work – The Tennessean

Tennessee’s Medicaid block grant: How the TennCare plan is supposed to work  The Tennessean

Tennessee Gov. Bill Lee on Tuesday released detailed plans to ask the Trump Administration for a Medicaid block grant. Here are the details.

Tennessee Gov. Bill Lee on Tuesday released detailed plans to ask the Trump administration to transform how it funds TennCare, one of the largest, most expensive and most important government programs in the state.

The governor’s plan has the potential to impact about 1.4 million Tennesseans – mostly poor families and children – who rely on the state for health insurance.

Proponents argue the plan may someday allow Tennessee to expand state coverage to some of the hundreds of thousands of residents who currently do not qualify for state insurance. But many critics worry the proposal will backfire, weakening the TennCare coverage that exists today.

Currently, the federal government provides about $7.5 billion to $8 billion annually to pay for TennCare. This funding increases or decrease as the need grows or shrinks, and the money is theoretically limitless if the state continues to operate TennCare in accordance with federal guidelines.

As proposed, Gov. Bill Lee’s administration’s plan would convert that funding into a “modified block grant,” giving the state government more authority over how this money is spent. Block grants are generally finite, raising concerns this money might run out, but the governor’s proposal asks the federal government to commit to providing more money if it is needed by the state in the future.

How would a ‘modified block grant’ work?

According to a draft proposal released by the governor’s office, the plan is to convert TennCare’s core programs to a block grant. Nearly $8 billion in annual block grant funding would be used to provide health care to low-income children and families, pregnant women, the elderly, the blind and disabled.

THE PROPOSAL: TennCare block grant proposal pushes savings split with federal government

The state believes it can administer this coverage through a block grant more efficiently than it does under federal control. And if TennCare is in fact run more efficiently, then the state and federal governments will split the savings down the middle.

In short, the proposal breaks down into three components

  • A $7.9 billion block grant, which pays for the core functions of TennCare;
  • A per capita funding mechanism, which boosts the block grant funding by $500 to $1,600 per person in a circumstance like a recession;
  • And a shared savings plan, which splits any money saved by TennCare between the state government and the federal government.

Some portions of TennCare would not be affected by the block grant and continue to operate as they do now, including: Outpatient prescription drugs, expenditures on behalf of people who are enrolled in Medicare, services for people with intellectual disabilities, services with children in the custody of the Department of Children Services and administrative expenses that are not treated as medical assistance expenditures.

The block grant plan will also not impact many payments to hospitals, including Disproportionate Share hospital payments, Critical Access Hospital payments, Essential Access Hospital payments and some similar payments made directly to hospitals for uncompensated care.

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What’s wrong with the current funding model?

There are two fundamental problems with the current system under which TennCare is funded, according to the governor’s proposal.

First, the governor believes the state can run TennCare more efficiently with greater flexibility than the federal government allows. Under the proposal, the Tennessee would be freed from “excessive or unnecessary federal intervention in its Medicaid program,” according to the state’s pitch.

Second, the proposal says the current Medicaid system is fundamentally unfair to states. Funding is predicated on how much states spend, so a state that is wasteful is rewarded with more money while a state that runs efficiently is “punished for being financially well managed.”

In theory, a block grant would reverse this because a state with an efficient Medicaid program that saves money would get to share in the savings.

Why are some officials concerned about a block grant?

Outside of Medicaid, block grants are a common funding mechanism. Generally, the federal government gives a set amount of money to a state or local government, which then has a great deal of authority over how to spend the money. But these grants are finite: When the money is gone, the money is gone.

Much of the criticism of the Tennessee Medicaid block grant plan has stemmed from fears of capping the funding for TennCare. If TennCare were to be funded by a traditional block grant, then it could potentially run out of money if costs spike in the future. This scenario would be most likely if an economic recession prompted many more Tennesseans to suddenly enroll in TennCare.

But the governor’s office has stressed that is not asking for a traditional block grant.

Instead, the state’s “modified” block grant proposal requires the federal government to provide additional funding for a scenario in which TennCare’s enrollment increases.

This funding would kick in if TennCare’s enrollment grows above the average enrollment from fiscal years 2016 to 2018. If this occurs, TennCare would get extra money: $513 per extra child, $1,024 per extra adult, $1,193 per extra elderly person and $1,590 per extra disabled person.

“Tennessee’s approach capitalizes on the benefit of a traditional block grant by allowing the state to keep unspent federal dollars when costs decline – but mitigates the financial risk of a traditional block grant by requiring the federal government to increase the amount of federal money when enrollment grows beyond the enrollment used to calculate the block grant amount,” state documents explaining the proposal.

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If the block grant saves money, where does that money go?

A key facet of the block grant proposal is a plan to split savings with the federal government.

For example, under the block grant proposal, Tennessee would receive $3.3 billion specifically for the children’s health insurance. If TennCare manages to instead spend only $3 billion, it will receive half of the reminder – or $150 million – from the federal government. Right now, those savings would all go to the federal government. 

Most of the money would go back into TennCare, but the state could spend its savings on just about any programs with a “demonstrable connection to TennCare member health,” according to documents release by the governor’s office.

“While it is anticipated the bulk of the block grant would be spent on traditional TennCare expenses, the state would have the flexibility to spend block grant dollars on other items and services if such expenditures will benefit the health of members or are likely to result in improved health outcomes,” the documents state.

For example, money could be diverted to mental health programs or housing support, but not road maintenance or tourism development, the governor’s proposal states.

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How does the state want to change TennCare?

The block grant proposal impacts more than just funding. If approved, the state government would also gain more authority over how it runs TennCare and spends TennCare money.

The governor’s plan lays out several pages of ideas on how to wield this new authority. These are just a few:

  • TennCare would no longer need federal approval to change the limits of its health care insurance. Under the proposal, the state could change “amount, duration and scope” of coverage without having to submit the changes to the Centers of Medicaid and Medicare Services for review. TennCare could also add or cut optional benefits without seeking federal approval.
  • Instead of covering many drugs that perform the same function, TennCare wants to negotiate exclusivity agreements with drug manufacturers in an effort to lower the cost of drugs. This flexibility would also allow TennCare not to cover new drugs that may be unproven and very expensive.
  • TennCare would spend some block grant money to “support rural health transformation efforts,” possibly in investing in telemedicine programs so far-flung patients can get access to specialists.
  • The state government could take a firmer hand against anyone convicted of TennCare fraud, suspending them from the program for up to 12 months.

How long will the block grant process take?

At this point, nobody knows. But there are a lot of steps between now and a final agreement.

Per state law, the governor’s office is required to submit its block grant proposal to the Centers for Medicare & Medicaid Services (CMS) by Nov. 20.

Tennessee officials and the federal government will then begin negotiating the terms of a block grant. The governor’s office has said this process could take six to nine months but could also last even longer because Tennessee is the first state to submit a Medicaid proposal like this one.

If the state and CMS are able to reach an agreement, the federal government will then host a public comment period to collect feedback on the proposal.

At this point, public comment could potentially spur the plan to be revised again.

If the governor’s office and the CMS are still in agreement, the deal still needs to be approved by the Tennessee General Assembly. If negotiations push past the spring, when lawmakers typically wrap up work, the legislature may need to convene for a special session to vote on the deal. 

How can I give feedback on the block grant plan?

Before the governor’s office submits its block grant proposal to the federal government, TennCare will hold a 30-day public comment period.

Three public hearings are scheduled over a three-day period in Tennessee’s Grand Divisions:

  • Nashville: Oct. 1, 2 p.m., in Training Room B of The Honey Alexander Center at 2400 Clifton Avenue
  • Knoxville: Oct. 2, 2:30 p.m., in the community meeting room of the Knox County Library Burlington Branch at 4614 Asheville Highway
  • Jackson: Oct. 3, 2:30 pm, in the Jackson-Madison County Library at 433 East Lafayette Street

Public comments can also be submitted by emailing public.notice.tenncare@tn.gov or sending postal mail to TennCare Director Gabe Roberts at 310 Great Circle Road, Nashville, 37243.

Brett Kelman is the health care reporter for The Tennessean. He can be reached at 615-259-8287 or at brett.kelman@tennessean.com. Follow him on Twitter at @brettkelman.

Published 12:07 PM EDT Sep 17, 2019