Tennessee becomes new front in fight to overhaul Medicaid

Tennessee is the latest battleground for the Trump administration as it tries to implement drastic, conservative changes to Medicaid. 

While some red states have begun pushing back from imposing work requirements on Medicaid beneficiaries in the face of lawsuits, Tennessee is forging ahead with an even more controversial proposal.

“Work requirements were a blunt instrument swung too widely,” said Tom Miller, a health policy expert at the conservative American Enterprise Institute.

“There’s an aggressive point of view in CMS [Centers for Medicare and Medicaid Services] leadership which wants to do things with Medicaid. One of them was work requirements, but it hasn’t gone so well,” Miller continued. “Another way is to do some sort of … block grants.”

The administration is currently reviewing a plan from Tennessee to convert Medicaid into a block grant, a proposal that, if approved, could be the first in the nation. 

Imposing block grants in Medicaid has long been a major conservative goal, and with time running down in President Trump’s first term, the administration is facing pressure to approve a plan advocates argue may not be legal without congressional approval.  

Congress already rejected block grants when the GOP’s ObamaCare repeal bill failed in 2017. Allowing states to impose those same changes by statutory waiver would be extremely controversial and have widespread implications about the use of executive power.

In a recent speech, CMS Administrator Seema Verma hinted that the administration was ready to begin approving proposals like the one in Tennessee.

“Many states have expressed a willingness to be held accountable for improving outcomes in exchange for greater flexibility and budget certainty. Block grant and per capita cap proposals are two such alternative financing approaches,” Verma said. “We are encouraged by this interest.” 

Block grants are popular with Republicans who want to constrain Medicaid spending, but are fiercely opposed by Democrats, who argue the changes require harmful cuts in the program.

Under a block grant, states would receive a fixed amount of money from the federal government, regardless of outside circumstances, that they could spend however they see fit. Critics fear a block grant would ultimately lead to states kicking people off their rolls or scaling back services. 

But Tennessee’s proposal is a novel one that departs from some of the more traditional block grant ideas, even as it imposes financial caps on federal spending. 

Gabe Roberts, director of TennCare, Tennessee’s Medicaid program, refuted the link between block grants and work requirements. He told The Hill that unlike work requirements, the block grant proposal is not meant to be punitive. 

“This proposal will not result in any reduction in eligibility, no limits to benefits, and will bring more money into the state,” Roberts said. “We are not looking for flexibilities to deny people access to drugs, or to deny people benefits.”

Under Tennessee’s proposal, the state would receive a nearly $7.9 billion block grant from the federal government, which is based on projected Medicaid costs. The amount would be adjusted for inflation, but unlike a traditional block grant, it could increase in the future based on enrollment. 

If enrollment drops, the block grant amount would not decrease.

Roberts noted that the proposal is about making sure the state has the most control over its own money.

“It’s a cost containment issue,” Roberts said. “We think this is a good proposal, and it will allow us to bring more federal dollars into our state.”

Verma has made state flexibility a priority during her tenure running CMS, and has approved work requirements in 10 states. But the administration has suffered a series of setbacks.

A federal judge blocked implementation of work requirements in Kentucky and Arkansas. An appeals court recently seemed skeptical of the administration’s arguments in the case.

New Hampshire suspended its work requirements in July, and they were also later blocked by a judge.

Last month, Indiana said it would suspend its work requirements until a lawsuit challenging them was resolved. Arizona also quietly announced its work requirements were being suspended. Both programs were slated to start as early as Jan. 1. 

In a recent sitdown with reporters, Verma said she wasn’t discouraged by the states’ decisions.

“When they’re setting up these programs, [states] are making large investments in infrastructure, and I can understand that they want to wait until they understand the outcomes,” Verma said.

But advocates said they are puzzled why, in the face of these setbacks, Tennessee would want to push ahead with so drastic a plan.

A block grant “comes with real risks,” said Patricia Boozang, a senior managing director of Manatt Health Strategies.

“It’s troubling that states might go down this road because it opens them up to higher administrative costs, and also litigation risk and cost,” Boozang added.

Other advocates said they were skeptical of the state’s claims that no beneficiaries will lose coverage.

“There are so many tells in this [application]. How else would you cope with a surge in enrollment? You don’t have a choice” but to cut benefits, said Sara Rosenbaum, a professor at George Washington University’s Milken Institute School of Public Health.

“These are good times. Unemployment is low, Medicaid enrollment is going down,” said Jerry Vitti, CEO of Healthcare Financial, a firm that helps connect low-income beneficiaries to disability benefits. “When a recession hits, you’ll see numbers go up. I don’t think the dollars will be there to cover the costs when enrollment skyrockets.”

Tom Miller from AEI said Tennessee Gov. Bill Lee (R) is taking a calculated risk.

The state’s GOP-controlled legislature has refused to expand Medicaid under ObamaCare, and Miller said Lee might see a block grant as the last opportunity for the state to tap into federal money.

“There’s no 100 percent guarantee in any of this, but this is where Gov. Lee … feels a chance to take a shot. There’s always litigation risks, but they’re risks [worth taking] if they’re not going for a full expansion,” Miller said.