Tennessee’s first-of-a-kind plan to ask the federal government to cap Medicaid funding for some of the 1.4 million Tennesseans covered by the program has hospital leaders hoping it can bring them more money.
But patient advocates are blasting the Medicaid per-capita cap proposal from GOP Gov. Bill Lee as undercutting core guarantees for patients without any accountability.
Many of the specifics of the waiver have yet to be fleshed out. The plan’s release on Tuesday kicked off a 30-day public comment period ending Oct. 18, and the state needs to submit its proposed amendment to the CMS by Nov. 20.
What the state has put on the negotiating table with the CMS is significant. Tennessee wants to be exempt from federal Medicaid managed care regulations and gain authority to change the “amount, duration and scope” of Medicaid benefits — as long as they don’t affect the “overall sufficiency” of the benefit — without CMS approval.
The state also wants to be able to spend federal dollars on “items or services” that federal Medicaid law doesn’t allow for, and to exclude some drugs from the Medicaid formulary — although the pharmacy benefit itself would be carved out from the block grant.
Patient advocates say these requests go far beyond what the HHS secretary can allow.
“Most of it is clearly a violation of federal law and not within the secretary’s authority to waive,” said Hannah Katch of the liberal Center on Budget and Policy Priorities.
Representatives of Tennessee’s hospital community were cautiously optimistic about the plan — mostly around to the prospect of sharing in the savings the state hopes to reap, but acknowledged they still have to dig into the details.
One provision promises hospitals more money out of the state’s two uncompensated care funds, as long as they treat patients in lower-cost settings — inpatient versus outpatient, for example — or make other systemic changes to cut spending.
“The flexibility to leverage existing resources to support and reward hospitals—rather than penalize them—for removing costs from the system by connecting the member with the right level of care in the right setting will reinforce and enhance the overall effectiveness of larger delivery system reform initiatives,” Tennesee’s proposal said.
Tennessee Hospital Association CEO Craig Becker said state officials have been discussing the waiver with the stakeholders all along, and he’s cautiously optimistic. He focused on the shared savings and the fact that the state isn’t moving anyone off the rolls. While he has some concerns that he will delve into during the comment period, he said overall he hasn’t heard much worry from his member hospitals. He discussed the outlines of the plan at a board meeting last week.
“The state spends a lot less money on its Medicaid program than other states,” he said, adding that since the state is saving the federal government money Tennessee should see some of those funds too, which hospitals could turn around and use for other programs.
The proposal doesn’t project how much money the state expects to generate from savings, and Becker said his association hasn’t done any modeling yet of the financial effects.
Michele Johnson, executive director of the advocacy group Tennessee Justice Center, was far more skeptical of the funding promise, which she characterized as the state asking hospitals to “trust us.”
“It seems to be a way to keep hospitals quiet,” Johnson said. “But the bottom line is the math: if the Trump administration wants to take $1 trillion out of Medicaid, who has money they’re willing to give?”
She added: “I imagine they know the hospitals need to be in favor of this. They’re struggling because they didn’t expand Medicaid and there’s lots of uncompensated care.”
On the block-granting proposal itself Melinda Buntin, chair and professor of health policy at Vanderbilt University Medical Center, stressed that the capped payments won’t affect everyone. Children with complex needs and in state custody, Medicare dual-eligibles and pharmacy and administrative costs would be carved out, and she said estimates for who would fall under the caps range from one-half to two-thirds of the current Medicaid program cost.
Like Becker of the Tennessee Hospital Association, Buntin was also optimistic about the money the waiver could generate. She also dismissed comparisons of the state plan to the congressional Republican proposal, part of the failed 2017 Obamacare repeal-and-replace effort which would have retooled Medicaid financing into a per-capita cap proposal for all states.
“The state legislature has passed a law to say Tennessee should try to get a better deal from the federal government,” Buntin said. “The other was a top-down policy, this is one where Tennessee says, We can get a better deal, we can achieve savings and the federal government needs to share them.”
On the insurer side, JD Hickey, CEO of BlueCross Tennessee, said the company “supports Governor Lee and his team in advancing a very thoughtful proposal to obtain a CMS Medicaid waiver.”
“We believe this proposal has the potential to serve more Tennesseans, while improving their healthcare and protecting the state’s financial well-being,” Hickey said.
The state still has to negotiate its proposal with the CMS, so a great deal could change.
Laine Arnold from the governor’s office said that while they have been “encouraged” by the CMS to pursue the policy, the agency hasn’t been involved in any technical structuring of the waiver.
In a statement, Jonathan Mengel, a spokesperson for the CMS, said the agency doesn’t discuss conversations with states but expressed conceptual support. President Donald Trump has laid out a dramatic restructure of Medicaid through block grants as part of his budget proposals.
“CMS supports efforts to improve accountability for cost and outcomes in Medicaid, and we look forward to working with Tennessee once they submit their proposal to help them achieve these goals as effectively as possible within our statutory authority,” Mengel said.
Tennessee is a poor state where about 19% of the population is insured through Medicaid even though it did not expand the program under Obamacare. Nearly one-third of Tennesseans live in rural areas, and those who do are more likely to be enrolled in Medicaid, according to the Kaiser Family Foundation.