- CMS on Friday announced it had approved Tennessee's waiver to create a Medicaid block grant program in the state. It is set to be the first state to implement the policy long pushed by conservatives.
- The program, called TennCare III, uses a modified block grant that increases funding if Medicaid enrollment goes up and decreases if enrollment drops. It also allows the state to create a formulary of covered prescriptions drugs without federal approval and gives it the authority to negotiate directly with drugmakers.
- Tennessee's request is approved for 10 years. The incoming Biden administration could attempt to roll back the program, but the state would be able to challenge such a move.
Conservatives have pursued block grants for Medicaid for a number of years, arguing states can better handle their budgets and should have more flexibility. Opponents say the policy could push states to restrict enrollment and benefits.
Under the waiver, Tennessee can keep up to 55% of any amount spent below the funding cap and use it for other programs.
In an issue brief from December, the Kaiser Family Foundation argued that agreement puts the state's low-income population at risk. "While the state says the intent of the waiver is not to restrict eligibility or benefits, placing a cap on federal funding as well as an incentive to spend below the cap could lead the state to reduce optional eligibility or benefits to achieve these savings (which would not be prohibited under the terms of the waiver)," they wrote.
CMS defended the waiver as having safeguards in place that require Tennessee to maintain a minimum set of benefits.
Sara Rosenbaum of The Commonwealth Fund noted hospitals in high-poverty communities get their principal financing from Medicaid. "While supplemental payments to high-volume hospitals may be protected, the loss of enrollment and coverage protections could lead to a major decline in enrollment as well as a total lack of certainty regarding covered benefits and services," she wrote.
Tennessee has not expanded Medicaid eligibility under the Affordable Care Act and has relatively strict eligibility rules. Its program covers pregnant women and adult parents with incomes at up to 95% of the federal poverty level.
Oklahoma was the first state to apply for a block grant program, but rescinded its application in August without giving a reason. The Trump administration rolled out the guidelines for block grants a year ago.
State Medicaid budgets are especially strapped amid the COVID-19 pandemic. Most states with budget projections expect Medicaid shortfalls in the 2021 fiscal year as more people lose job-based health coverage and enter the safety net program, according to a KFF survey.