Tennessee’s recent proposal to turn its Medicaid system into a block-grant program raises more questions than it answers, and some experts think the move is more about politics and philosophy than it is about policy.
State officials unveiled the plan in September, claiming that Tennessee could provide its Medicaid-eligible population with quality healthcare coverage at lower cost if the CMS granted it more flexibility in how it provides low-income people with health insurance. The state had planned to ask the federal government to allow it to change or cut certain benefits and use the cost savings to pay for other coverage or services. But that part never made it to the CMS following pushback from patient advocates, legal experts and other stakeholders.
“If they didn’t pull (the additional coverage flexibility) back voluntarily, they were going to be pulled back by CMS,” said Joseph Antos, a resident scholar at the conservative American Enterprise Institute and former assistant director for health and human resources at the Congressional Budget Office.
Many healthcare experts thought the flexibility in coverage was vital to the original plan since that had the most potential to generate cost savings. It’s unclear how much savings the proposal submitted to the CMS could create because it maintains the status quo in terms of who and what it covers. It only allows the state to cover more people or add services. That’s left some people wondering why the state is moving ahead with the plan at all.
“It’s a head-scratcher in terms of why they’re going forward,” said Sara Rosenbaum, a health law professor at George Washington University and former chair of the Medicaid and CHIP Payment and Access Commission.
TennCare already caps Medicaid spending on a per capita basis, so moving to a block grant system doesn’t seem to have any significant or obvious benefits, Rosenbaum said.
Some observers think that the state expects to save money, even if it’s not apparent how the plan accomplishes that goal. Tennessee officials must believe that the plan will help them increase coverage, help hospitals deal with uncompensated care or alleviate state budget pressures, Antos said.
“It has to be about the money,” he said.
But a lot of people are missing the point because the proposal’s purpose is to free up existing cost savings for other purposes like funding hospital investments in addressing the social determinants of health, said Dr. Wendy Long, president and CEO of the Tennessee Hospital Association. It’s not about changing Medicaid to create new cost savings. It’s about capitalizing on current savings.
“The hospitals are going to benefit from the (additional) funding,” Long said. “That’s the big win.”
Conservative policymakers have long supported block grants to control Medicaid spending, at least in theory. But Tennessee’s proposal doesn’t resolve practical issues that could impact the effectiveness of the plan in achieving its stated goals, such as increasing the state’s flexibility to run its Medicaid program or how to evaluate whether the program is working.
Neither Tennessee nor the CMS will know for a few years how the program is working, even if they can agree upon how to evaluate it. Would Tennessee be able to renegotiate with the CMS if things don’t go accordingly to plan? Nobody knows.
“The problem with moving to a block grant system is that you are squeezing the states if you aren’t very careful about how you do it,” Antos said. “Is there credible evidence that this will really work out? I think there’s a question about that.”
There are also questions about whether the CMS has the power to approve Tennessee’s waiver request. The matching federal Medicaid payments that the CMS makes to states, as well as what must be covered, are enshrined in the 1965 law that created the program. The Medicaid 1115 waiver program allows the CMS to permit pilot projects that “are found by the Secretary to be likely to assist in promoting the objectives of the Medicaid program,” according to the CMS.
It’s doubtful that Tennessee’s block grant plan fits that mold, Rosenbaum said.
“They don’t seem to be experimenting with anything but putting in jeopardy the funding the state receives to run its program,” she said.
The state could face other legal hurdles if it’s aiming to provide Medicaid coverage by subsidizing employer-based coverage or through the exchanges established under the Affordable Care Act.
“There are numerous other grant proposal elements that could trigger a legal challenge,” said Ellen Bonner, a healthcare attorney with Epstein, Becker and Green.
Experts have mixed opinions on how the pilot would impact coverage and access because there’s a lot of uncertainty about how much savings the plan could generate for the state if it went into practice, as well as what the state would do with those savings.
The lack of details has left them wondering why Tennessee is going forward with the proposal when there are so many unanswered questions.
The answer could be both philosophical and political. The Trump administration has publicly supported Medicaid block grants and wants to encourage states to submit proposals to the CMS. It pushed Tennessee to submit its proposal, according to Antos.
But the CMS recently withdrew its block grant guidance from the Office of Management and Budget, which suggests that the administration is having second thoughts about Medicaid block grants.
Antos speculated that the CMS received pushback from OMB budget experts who may have projected that block grants would increase spending. He also hazarded that outside legal experts might have told HHS that it will probably lose in court if its legal authority is challenged.
But he thought it was equally likely that the administration is more interested in claiming a policy win than achieving a policy outcome. “It’s usually better to have a press release than to have some change take effect because a press release is all positive. Reality often has a few spots on the skin of the apple,” Antos said.