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Tennessee Releases Plan to Turn Medicaid into Block Grant

Michael Rainey

Tennessee officials released on Tuesday details of a proposal to convert the state’s $8 billion Medicaid program into an annual block grant. If approved, the plan would become the first of its kind in the U.S.

A block grant system would provide Tennessee with a lump sum of money from the federal government that the state could use for health care, without many of the current rules and requirements that are attached to the Medicaid program. A portion of any money that is saved through efficiencies could be kept by the state to boost benefits or expand coverage.

Republican Gov. Bill Lee has claimed that the state could save as much as $1 billion a year by running the state’s current Medicaid system, called TennCare, on its own. The proposal could affect roughly 1.4 million people in Tennessee who currently rely on TennCare for health insurance, including half of the children in the state. Tennessee is one of 14 states that have not expanded their Medicaid programs as allowed by the Affordable Care Act.

 The proposal has three main components:

  • A block grant to provide a floor for federal participation in the program, to be adjusted upward with inflation. The state estimates the block grant under current conditions would equal roughly $7.9 billion.
  • A per-capita adjustment to reflect growth in enrollment.
  • A sharing mechanism to measure the savings that “are attributable solely to the state’s hard work.”

Some parts of TennCare would not be affected, including outpatient prescription drugs and services for people with intellectual disabilities.

The politics: Conservatives have long pushed block grants in Medicaid, but the concept is still controversial. “The idea of a Medicaid a block grant to states has been a political flashpoint for decades, back to Ronald Reagan,” Larry Levitt of the Kaiser Family Foundation tweeted Tuesday. “It's a rallying cry for conservatives, and an alarm bell for liberals.” Proponents say that states could save money by running their programs more efficiently, but critics worry that low-income beneficiaries may suffer, especially during economic downturns when the demand for Medicaid services typically increases.

The Trump administration has urged states to move toward the block grant model for the Medicaid systems, and Tennessee is the first state to do so.

What’s next: The draft plan is now open for public comment. Under Tennessee law, the state must submit its final plan to the Centers for Medicare & Medicaid Services by November 20. If approved, the state and the federal government would then have to negotiate the final terms of the agreement, a process that could take many months.

For more detail, read the full proposal here and an analysis in the Nashville Tennessean here.

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