In NEJM: Tennessee's 'opening bid' for a Medicaid block grant

WHAT IS TENNESSEE’S ‘OPENING BID’  in its negotiation with federal officials to change its medicaid program to a block grant?

Tennessee has made an “opening bid” in its negotiations with the federal government about a block grant that could significantly change how TennCare functions for more than 1 million children and low-income individuals, and making sense of the complex proposal can be tricky.

In a new article in the New England Journal of Medicine, Melinda Buntin, PhD, Mike Curb Professor of Health Policy and chair of the Department of Health Policy at Vanderbilt University Medical Center (VUMC), explains the key provisions of the proposal the state has put forward to change its Medicaid program.

Buntin explained that Tennessee’s TennCare program already incorporates much of what other states might seek through a block grant.  Also, the federal government is likely to insist on changes to the proposal as the negotiation continues.

“Tennessee is essentially asking for an increase in its federal funding in return for the risk of accepting a fixed amount for the bulk of people currently enrolled in the program,” she said.

Buntin wrote that while the move is viewed as precedent setting, Tennessee already operates TennCare on a waiver program — known as an 1115 waiver — that allows it some flexibility, and the state already spends less than what the federal government disburses each year.

Because of these factors, both of which make Tennessee unique, it’s unlikely other states will be able to replicate Tennessee’s model directly.

Ultimately, the form of the block grant – if one is granted – will be decided through negotiations with federal officials, not in Nashville, Buntin wrote.

“Negotiations between state officials and the Centers for Medicare and Medicaid Services (CMS) will shed light on how much the Trump administration is willing to concede in order to claim the block-grant mantle,” Buntin writes.

The financial aspects of the state’s proposal are favorable for the state. Specifically, the state wants to get more money and keep more of what they “save” in operating the TennCare program. Tennessee also wants to be excluded from the lump-sum federal contribution elements that create the most risk and cost — like prescription drugs, beneficiaries eligible for Medicare and Medicaid, payments to safety-net hospitals and new enrollees — that could dramatically increase the burden to the state in the event of a recession, an epidemic or new, expensive treatments. 

Opponents of the block grant proposal fear that it will give the state further latitude – and incentives – to cut eligibility and benefits.

“Federal officials, for their part, issued a letter in the summer of 2019 putting Medicaid directors in states such as Tennessee on notice that new guidelines regarding budget-neutrality calculations that benefit the federal bottom line will be imposed when states seek to renew their waivers,” Buntin writes. “Budget hawks within the Trump administration are likely to find Tennessee’s proposed terms hard to accept.”

What that means is the negotiation is just beginning. There is still the state comment period, which is open through Oct. 18, a federal comment period, and negotiations between state and federal officials. The final plan will ultimately need to be approved by the state legislature.