What a Medicaid Block Grant Would Mean for Tennessee: An Update
This post has been updated since its initial publication on May 30, 2019.
Immediately after taking office, the Trump administration made plain its intention to reduce federal Medicaid spending by restricting eligibility and narrowing coverage. After failing to “repeal and replace” the Affordable Care Act (ACA), which would have capped federal Medicaid spending and cut federal funds to states by more than $1 trillion, the newest effort to curtail Medicaid appears to be block grants (i.e., having the federal government give states a fixed amount of money for specific programs or purposes). The Office of Management and Budget is now readying guidance that will invite states to submit Medicaid block grant experiment proposals similar to its 2018 invitation to propose 1115 work experiment proposals.
Tennessee is already moving in this direction. Earlier this year, state lawmakers enacted legislation — under “chaotic” conditions, according to several reports — instructing the governor to negotiate a Medicaid block-grant deal. The state’s Medicaid program, called TennCare, already is significantly limited in scope. Having refused the ACA expansion, Tennessee also caps eligibility for parents at 95 percent of the federal poverty level (about $20,000 for a family of three) while offering no coverage for nondisabled working-age adults without minor-age children unless they are pregnant.
The state’s refusal to expand Medicaid has left 380,000 uninsured adults who would otherwise be covered. In so doing, Tennessee is passing up an estimated $26 billion in federal payments over the next decade.
Tennessee has now unveiled its initial draft for first public review, after which the state will decide whether to modify its plan before it goes to the Trump administration for additional review. At this point, final negotiations with administration officials would begin. Presumably, federal and state officials have informally conferred regarding what the federal government is likely to approve. This draft should reflect these discussions, at least to some degree.
As with work experiments, the administration would approve the waiver under Section 1115 of the Social Security Act, which allows the HHS secretary to approve Medicaid experiments that are likely to promote Medicaid’s purpose. As the administration has formally acknowledged in three separate federal court rulings involving work experiments, Medicaid’s core objective is medically necessary care for eligible people. As with the work experiment proposals, the state draft is silent on this central question: How is this core purpose furthered by an experiment that threatens to withdraw federal financing that is essential to ensuring beneficiaries get the health care they need?
If the administration were to simply ignore beneficiary impact and proceed to approvaI, the experiment would face a legal challenge similar to those mounted against the work experiments.
Tennessee’s plan would cap federal spending for: currently eligible poor children and adults (including pregnant women); children and adults covered based on disability; and the elderly. The cap would be adjusted over time to reflect annual growth estimates rather than changes in costs, as is the case under current law. During at least the first three years, spending for newly eligible people, prescription drugs, dually eligible Medicaid–Medicare enrollees, payments to disproportionate-share hospitals and critical access hospitals, and program administration would be exempt from the cap. In addition, if TennCare enrollment falls below current levels, the state would not lose its initial federal spending commitment.
In exchange for accepting capped federal spending, the state demands complete, nonreviewable exemption from federal requirements central to the program: the enrollment process (a federal court in 2016 barred the state from defying federal enrollment rules); required and optional coverage (including prescription drug coverage rules) for children, pregnant women, and adults, including those with disabilities; managed care rules including access and network adequacy protections; federal oversight of the state’s coverage, enrollment, and management decisions; and any new federal requirements affecting state Medicaid spending, both within and without the Medicaid program. This could include, for example, changes in civil rights laws protecting people with disabilities, such as those occurred after the Supreme Court’s decision in Olmstead v L.C.
The state draft does not address the impact on beneficiaries. Indeed the fiscal note accompanying the legislation concludes that officials cannot estimate its impact on people, federal funding, or the state’s economy. The draft, like the authorizing legislation, sets minimal ground rules. At the same time, it is clear that the state wants billions of dollars in federal funding with virtually no oversight and with Medicaid’s most critical access and health care protections stripped away. It is unclear how the administration will view a proposal so devoid of safeguards and without adjustments for emerging public health crises. Tennessee’s opioid crisis ranks among the nation’s worst; at least one Tennessee community has been targeted by the president’s HIV initiative.
The shock waves of such an experiment would extend well beyond those immediately affected. Two-thirds of Tennessee’s Medicaid program spending comes from federal contributions. Medicaid revenue is the principal financing source for hospitals, clinics, pharmacies, and other institutions operating in the state’s high-need, high-poverty communities. While supplemental payments to high-volume hospitals may be protected, the loss of enrollment and coverage protections could lead to a major decline in enrollment as well as a total lack of certainty regarding covered benefits and services.
As in the case of work requirements, we should expect to see litigation that raises a fundamental question: Does the law allow HHS to approve experiments that threaten to irreparably harm the very people a program has been designed to help? Given the legal outcome of the Medicaid work cases, we expect the courts to take a skeptical view of an experiment that would exact such a high cost on people and health care.