While the country was distracted and reeling in the aftermath of the violence that had been perpetrated just days earlier at the United States Capitol, the Centers for Medicare and Medicaid (CMS) on Jan. 8 approved Tennessee’s 1115 Medicaid block grant proposal. CMS administrator Seema Verma has long aspired for such waivers to be implemented, releasing guidance in January 2020 to serve as encouragement for states to submit proposals, and she made it happen with a little over a week left in the administration’s term. During the public comment period, over 1,800 Tennessee consumers and health advocates expressed concerns over the harm this waiver could pose to the state’s Medicaid program, TennCare, and all of the individuals and families that depend on its services.  

What is a block grant? 

A block grant can be likened to a funding cap. If a state chooses to opt into the block grant funding structure for their Medicaid program, they would receive capped federal Medicaid funding “in exchange for less federal oversight and the ability to impose reductions in coverage, benefits, payment rates, and access to care to keep costs below the cap.” If a state spends less than a prescribed capped amount, they could retain the federal savings for the state.  

The problem with block grants is that during periods of financial strain (such as a global pandemic that is decreasing state revenues and increasing the unemployment rate), states are then boxed into making cuts to their Medicaid budgets to stay within their capped allotment. This will inevitably lead to some or all of the following: cuts to benefits, restricting of enrollments for eligible beneficiaries, increases to a beneficiary’s out-of-pocket costs, restricting of mandatory or optional benefits, decreases in provider reimbursement rates (which may lead providers to abandon the program), restricting prescription drug coverage, and other limitations that thwart the core purpose of Medicaid – to provide health care coverage. 

What does Tennessee’s block grant entail?  

Tennessee’s waiver application has many seemingly positive and protective statements that might lead one to believe that TennCare would not abide by typical block grant structures. For example, Tennessee’s waiver considers potential enrollment increases when setting a federal cap – if enrollment increases, the federal funding cap increases. The waiver application further states that “any coverage or benefit changes to existing populations covered are limited to those that are additive in nature, and the state is not authorized to make reductions to its current approved coverage or benefits package without approval of an amendment.” However, these statements must be read and understood along the backdrop of an already restrictive Medicaid program. Tennessee currently does not cover the optional benefits that other states often slash when faced with a budget crisis (e.g., dental benefits). Tennessee is also a non-expansion state, whereby childless adults under the age of 65 with low incomes have no avenue for Medicaid coverage. It is, therefore, hard to decipher what Tennesseans actually gain from such a waiver.  Instead of the predicted benefits boasted by CMS and Tennessee’s administration in the waiver application, it is likely to cause more uncertainty among eligible Medicaid enrollees as they seek health coverage. Our Tennessee partner, Tennessee Justice Center, indicates that this “block grant is just another example of putting politics ahead of health care during this pandemic” and allows state officials to “inflict further damage on Tennessee’s health care system.” In fact, this waiver could thwart future progress in Tennessee’s Medicaid program, such as Medicaid expansion, that would ultimately have far greater benefits for Medicaid beneficiaries. 

Furthermore, if Tennessee spends less than the allotted federal funding cap while meeting certain quality targets, the state can retain 55% of the annual savings, incentivizing cuts to Medicaid spending. These savings can then be attributed to state health programs, not limited to Medicaid, which could free up other parts of Tennessee’s state budget. The approved waiver explicitly states that TennCare has the flexibility to retain savings from restructuring their pharmacy benefit as a closed formulary, meaning that they could “exclude certain new drugs from its formulary, with an exceptions process for specialty drugs.” Some comments submitted during the comment period indicated that this could lead to harms to specific high-risk populations who may depend on a particular drug not listed in the formulary for their treatment. 

Other concerns addressed in the comment period ranged from potential cuts to provider payments to the potential for large-scale coverage reductions. 

What are the next steps for this waiver?  

This block grant waiver serves as a distraction from Tennesse’s central health care problem: it is estimated that more than 675,000 Tennesseans – or about one in 10 state residents – are uninsured. Of note, more than half of the uninsured Tennesseans meet the income requirements for Medicaid if Tennessee were to expand its Medicaid program, exposing a major gap in coverage for low-income Tennesseans. The waiver does little to address the high volume of uninsured Tennesseans, keeping them from access to critical health services, especially during a deadly pandemic.  

The CMS-approved waiver is now set to appear before the Tennessee General Assembly for authorization. If authorized, the block grant would span 10 years and last through December 31, 2030. One can only hope that when the Tennessee legislature convenes, legislators will consider how the COVID-19 pandemic has affected their constituents and instead choose to expand Medicaid, a proven model for positively impacting consumers’ health and economic statuses.