Tennessee unveiled a plan on Tuesday to convert Medicaid into a block grant — an idea long supported by conservatives that would rupture the federal government’s half-century-old compact with states for safety-net insurance for the poor.
Tennessee is setting up the nation’s first test case of how far the Trump administration is willing to go to allow a state the “flexibility” that has become a watchword of the administration’s health care policies.
If TennCare, as that state calls its Medicaid program, wins federal approval for its plan, it could embolden other Republican-led states to follow suit. It also almost certainly would ignite litigation over the legality of such a profound change to the country’s largest public insurance program without approval by Congress.
Medicaid, originated as part of President Lyndon B. Johnson’s Great Society of the 1960s, is an entitlement program in which the government pays each state a certain percentage of the cost of care for anyone eligible for the health coverage.
Under block grants, first broached during the Reagan administration, the government would instead pay a state a lump sum each year while freeing it from many of Medicaid’s rules, including who must be allowed into the program and what health care is covered. Proponents contend the model would save money and let states run the program more efficiently; opponents contend it would strand states and vulnerable residents during economic downturns or as expensive new therapies emerge.
Medicaid block grants were part of unsuccessful Republican legislation two years ago that would have dismantled major parts of the Affordable Care Act, although block grants do not inherently conflict with the law. Internal GOP disagreements over the idea were a significant reason those bills failed.
Since then, President Donald Trump has called for Medicaid block grants in his budgets, though Congress has ignored the idea. Seema Verma, administrator of the Department of Health and Human Services’ Centers for Medicare and Medicaid Services (CMS), has urged states to move toward block grants, although guidance she has written for states has been under review for months at the White House’s Office of Management and Budget.
Tennessee is the first state that is coming forward.
Its draft proposal would affect more than 1 million of the 1.4 million state residents on TennCare, according to the state’s Medicaid director. The block grant would be used for medical services for children, pregnant women, parents and other core groups of people such as those who are blind and disabled. Some aspects of Medicaid would be excluded from the change, such as coverage of prescription drugs and payments to hospitals that treat a large share of low-income patients.
GOP Gov. Bill Lee said Trump administration officials “need some examples to show the rest of the country how to do this, and we have an example. … We consider ourselves as leaders,” having run Medicaid in cost-efficient ways for years, he said.
“It would be very important for the country to see an opportunity to lower the cost of Medicaid services without changing the quality or level of those services to the Medicaid population,” Lee said. “For Tennessee to be an example of how we can deliver that would be a very big deal.”
The draft plan is not a pure version of a block grant. It would rely on fixed annual payments, adjusted yearly for inflation. The state would get extra money per person in years in which enrollment grew but would not get less money if enrollment shrank.
If the state spent less in a given year than it would have under the traditional Medicaid system, Tennessee would split those savings with the government, according to the draft plan, in another departure from a classic block-grant approach. It is proposing not to cut back on eligibility rules or benefits.
TennCare Director Gabe Roberts said in an interview that he and his staff have had several conversations with CMS officials, giving them “a sense of what to expect … from a conceptual level.” Roberts said that the federal officials have largely listened without providing feedback.
A CMS spokesman, Johnathan Monroe, declined to discuss the agency’s interactions with TennCare, saying, “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.”
Under a law the Tennessee legislature adopted in May, the state must submit a final version of its plan to CMS by late November. Starting Tuesday, the draft is open to a month of public comment.
National patient-advocacy organizations already have been protesting. A dozen groups wrote to the governor in late April that, for sick and vulnerable patients, changing to a block grant “jeopardizes their access to treatment and, in turn, their health.” More than two dozen groups wrote to CMS’s Verma in July, urging her to reject states that ask for block grants.