TN Is First State to Seek Block Grant to Lower Medicaid Spending
Tennessee’s block grant proposal calls to split savings from lower Medicaid spending between the state and the federal government.
Source: Thinnkstock
- Tennessee is the first state to seek a block grant waiver for its Medicaid program.
“The traditional model of Medicaid financing is an outdated model of fundamentally misaligned incentives,” the proposal draft explained. “In the current framework, states that spend more money receive additional federal dollars, while states that strive to control costs and reduce spending receive reductions in federal funding. New models of Medicaid financing are needed that reward states for promoting value and health, not merely spending more money.”
The block grant would allocate $7.9 billion in federal dollars to TennCare for the state to use in pursuit of lower cost, high quality care.
The cost is calculated in relation to the average enrollment of the three previous years. The state multiplies this average by the federal government’s estimate on Medicaid costs per member (excluding the current TennCare waiver) to arrive at the total grant. The grant would cover four categories of Medicaid members: adults, children, seniors, and blind and disabled individuals.
The state proposed to split the savings from their approach with the federal government, with each party receiving 50 percent.
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“Any savings achieved under the block grant will be reinvested in the TennCare program with no requirement that the state must first spend state dollars in order to spend these shared savings,” the proposal stated. “The state will also seek the authority to invest in the health of its enrollees, not just their healthcare.”
While the proposal passed in the state’s House and Senate, the Tennessee Star reported that the votes were along partisan lines. Not a single Democrat of the 31 in Tennessee’s Congress voted for the proposal.
While Tennessee is the first to put forward a block grant proposal, it is not the first state to consider the concept. Utah and Alaska have both discussed the possibility as well.
Furthermore, President Trump has suggested implementing block grants to Medicaid nationwide in the 2020 federal budget. And his budget was based on an even earlier model considered in Congress in 2017 called the Graham-Cassidy plan.
Considering that the Graham-Cassidy bill never made it to the floor of the Senate and the opposition to President Trump’s budget has been fiery, the vocal opposition to Tennessee’s proposal is unsurprising.
READ MORE: Trump Budget Proposes Medicaid Block Grants, Big Medicare Cuts
Tennesseans may be anxious about anything resembling Medicaid cuts due to the results of a previous Medicaid rollback.
According to an article published in the American Cancer Society’s journal, Cancer, the Medicaid cuts led to nonelderly women experiencing later cancer diagnoses, longer wait times for treatment, and a 3.3 percent difference in late-stage diagnosis based on zip code, with lower income women having a higher rate.
Primarily, opponents to block grants are concerned about eligibility and benefits changing.
While the Tennessee proposal promised that there would be no changes in eligibility or benefits and established that the grant would be adjusted for enrollment and inflation, opponents are not convinced that this will be sufficient to make up for the drop in federal spending.
Industry experts are still working to determine whether Medicaid block grants would hurt Tennessee. A March report from the Sycamore Institute of Tennessee reviewed the block grant proposal when it was in its nascent stages and was noncommittal on whether the block grant would hamper the Tennessee Medicaid program.
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Under a block grant, states can receive more flexibility to customize their spending cuts. They might use this flexibility to cut spending costs, restrict or expand payments to providers, or to cap spending within the federal limit. The trade-off, though, is that states generally receive less federal funding when they use a block grant, the Sycamore Institute of Tennessee noted.
“Achieving cost-savings for taxpayers and/or providing a slimmer TennCare benefit to more people may have negative effects on current TennCare enrollees,” the institute stated. “Alternatively, any downward pressure on federal TennCare funding might require state policymakers to balance the budget by reducing TennCare eligibility and benefits, cutting provider payments, requiring more of enrollees, shifting money from other priorities, and/or raising taxes. All of these decisions would pose trade-offs.”
In a letter to CMS, 27 patient groups used stronger language to express their opposition. In addressing the Trump administration’s budget and nationwide block grant proposal, the groups said that states may not be able to make up the difference in funding from block grants’ trade-offs and, if that is the case, patient outcomes would suffer.
“As the gap between the capped allotment and actual costs of patient care increases over time, states will likely limit enrollment, reduce benefits, lower provider payments or increase cost-sharing for patients,” said in a letter to CMS. “Simply put, block grants and per capita caps will reduce access to quality and affordable healthcare for patients with serious and chronic health conditions and are therefore unacceptable to our organizations.”
To Tennessee policymakers, however, the proposal demonstrates Tennessee’s commitment to quality healthcare and financial responsibility.
