Tennessee waltzes down the wrong path with Medicaid block grant proposal

Medicaid is a vital part of the public safety net, providing comprehensive health care to more than 70 million Americans, mostly low-income children, pregnant women, seniors, and individuals with disabilities. Medicaid is a state-federal partnership that lets states decide who they cover, what services they provide, and how their program operates, within the limits established by federal laws and rules. Current efforts to stretch the use of waivers in states like Tennessee bear watching in Oklahoma as state leaders seek alternatives to simple Medicaid expansion as proposed in State Question 802.

[pullquote]Rather than tilting at windmills with a legally questionable approach that poses serious threats for the state’s Medicaid population, our state should focus on tried and tested ways of improving access to care and health outcomes for Oklahomans.[/pullquote]

Waivers let states try new programs, provided they further the goals of Medicaid

One way states can tailor their Medicaid programs to their own residents’ needs is by negotiating waivers with the federal government. Under one kind of Medicaid waiver, known as Section 1115 waivers, the federal Centers for Medicare and Medicaid Services (CMS) are authorized to waive certain provisions of federal law so states can test new approaches to assist promotion of the Medicaid program’s objectives. Most states operate long-standing Section 1115 waivers; in Oklahoma, the Soonercare and Insure Oklahoma programs are run through an 1115 waiver first approved in 1996.

Waivers often reflect changing priorities from one federal administration to another. The Trump Administration has been especially aggressive in encouraging states to develop waivers that step outside traditional Medicaid boundaries, and that may exceed federal waiver authority. Now the Trump Administration is hoping to push even further by encouraging states to seek Section 1115 waivers that would convert their state Medicaid programs into block grants. This would let states bypass various federal standards and beneficiary protections, and avoid federal oversight, in exchange for agreeing to caps on the federal Medicaid funding they receive.

In September, Tennessee became the first state to submit a Medicaid block grant proposal to CMS. Under its proposal, Tennessee would receive a fixed amount of federal dollars that would be adjusted annually on a per-enrollee basis rather than continuing to receive open-ended federal matching funds tied to the state’s Medicaid expenditures. If the state operates the program at less cost than under federal projections, the state and the federal government would share the savings equally.

Tennessee contends that its proposal would recognize “the state’s efforts to contain costs and improve program quality, while providing a meaningful incentive to continue building on those efforts to make TennCare a stronger and more effective program.” However, the reality is that Tennessee’s block grant proposal would pose a serious threat to access to care for the state’s Medicaid population. In addition, the state’s proposal – and the whole block grant approach – rests on extremely shaky legal ground as examined below.

Tennessee’s block grant proposal would threaten access to care

Tennessee’s block grant would give the state vastly expanded authority to redesign its program exempt from traditional Medicaid rules and oversight by limiting the amount, duration, and scope of core benefits; eliminating optional benefits without federal approval; exempting Tennessee from all federal rules and protections for managed care plans; and excluding coverage of FDA-approved prescription drugs.

Of particular concern is the exemption from all minimum coverage requirements for mandatory benefits. Under this exemption, Tennessee could eliminate basic services for children and patients with health conditions considered lower priority, and family planning services. These services and others, such as physical therapy, occupational therapy, hospice, and transplant coverage, could be limited or eliminated entirely without federal oversight or public notice.

Under the block grant proposal, Tennessee would also have a strong financial incentive to eliminate as many services as possible. For every dollar it cuts from the TennCare program, the state would receive 50 percent of the savings. The proposal would allow the state to divert federal Medicaid dollars to a wide range of other state expenditures, such as costs it already incurs for social services or anything else it might deem health related.

At the same time as it incentivizes the state to restrict health care, the block grant also would put Tennessee at risk of inadequate federal Medicaid funding over time to deal with the state’s health needs. Federal Medicaid spending would be limited by annual caps and would not increase further, with dangerous consequences for families.

The proposal rests on shaky legal ground

Tennessee’s block grant proposal would fundamentally alter the Medicaid financing structure in ways that exceed the federal government’s waiver authority. Medicaid Section 1115 demonstration waivers must establish that they are likely to assist in promoting the Medicaid program’s objectives. In striking down Section 1115 work requirement waivers, federal courts in three separate decisions have cited the Trump Administration’s failure to consider the proposal’s impact on beneficiaries. As Sara Rosenbaum and Alexander Somodevilla state in reviewing the Tennessee block grant plan, “It is fundamentally impossible to understand how such an experiment could be found to advance the core purpose of the Medicaid program given its potential to exact significant harm on eligibility, enrollment, coverage, and access to care.”

The Bottom Line

Although Tennessee is the first state to submit a Section 1115 block grant proposal, other states, including Alaska, are said to be considering the idea. There has been speculation that Oklahoma officials, in trying to develop an alternative to the straight Medicaid expansion envisioned by State Question 802 that appears headed for the ballot in 2020, may propose a package that would couple expanded coverage with transformation of Medicaid into a block grant. Rather than tilting at windmills with a legally questionable approach that poses serious threats for the state’s Medicaid population, our state should focus on tried and tested ways of improving access to care and health outcomes for Oklahomans.