Tennessee Makes Request to Become First Medicaid Block Grant State

Published November 27, 2019

overhaul TennCare, the state’s Medicaid system, by converting it to a “modified block grant” program.

The plan could affect as many as 1.4 million Tennesseans, including low-income families, pregnant women, the elderly, the blind, and the disabled.

Under a new state law, the proposal must be submitted to the federal Centers for Medicare and Medicaid Services (CMS) for approval by November 20. A final decision by CMS is expected to take several months.

Earlier this year, lawmakers in Nashville, supported by Gov. Bill Lee, passed legislation to seek federal approval for funding TennCare through a federal block grant. Proponents argue Tennessee would benefit from the change because the current system fails to reward states that operate their Medicaid programs efficiently.

‘Modified’ Block Grant

The Trump administration has encouraged states to come up with block grant proposals as a way to reduce overall Medicaid costs and put more decision-making authority into state’ hands. Federal block grants are a common way for Washington to hand out dollars to a state or local government, but they are usually done as a single, one-time grant for each project.

Tennessee’s proposal is for a “modified” block grant, not a traditional one. To avoid running out of Medicaid funds at some point in the future, Tennessee would have the federal government provide additional funding in the event of a rise in the state’s Medicaid enrollment resulting from a recession. Tennessee currently spends about $8 billion a year on Medicaid.

“Tennessee’s approach capitalizes on the benefit of a traditional block grant by allowing the state to keep unspent federal dollars when costs decline—but mitigates the risks of a traditional block grant by requiring the federal government to increase the amount of federal money when the enrollment grows beyond the enrollment used to calculate the block grant amount,” say state documents explaining the proposal.

Splitting Medicaid Savings

If the modified block grant works as well as state officials hope, the resulting savings would be split between Tennessee and the federal government. The state’s share would go back into TennCare, where state officials would be free to spend it on almost any program benefitting enrollees’ health.

“While it is anticipated the bulk of the block grant would be spent on traditional TennCare expenses, the state would have the flexibility to spend block grant dollars on other items and services if such expenditures will benefit the health of members or are likely to result in improved health outcomes,” Tennessee officials write.

If approved by CMS, Tennessee’s block grant proposal would give the state government more authority over how it runs TennCare, including control over the amount, duration, and scope of coverage, the Tennessean reported onSeptember 17. TennCare could negotiate exclusive contracts with drug makers to lower costs and reject drugs that are unproven and costly. TennCare would have more flexibility to find better ways to deliver health care to rural areas, such as through telemedicine. TennCare could also suspend anyone convicted of defrauding the program, for up to 12 months.

Long Road Ahead

The scope of the Tennessee proposal is so comprehensive that CMS may take six to nine months or even longer to respond, and the response may trigger lengthy negotiations between federal and state officials. Opponents of the plan can be expected to file lawsuits, causing further delays. The final deal would have to be approved by the Tennessee General Assembly.

The plan makes good fiscal sense says Stephanie Whitt, executive vice president of the Nashville-based Beacon Center of Tennessee. “The governor’s block grant proposal is unique and focuses on delivering high-quality health care through increased flexibility while asking for the state’s share of any savings from running the program efficiently,” said Whitt.

“Those savings should then be reinvested in the program to increase access and innovation to those currently being served,” said Whitt. “We don’t know what the final proposal will look like after negotiations with the federal government, so we are reserving final judgement until then, but this is a step in the right direction for Tennessee.”

Elsewhere, Alaska Gov. Mike Dunleavy, in an effort to curb runaway Medicaid costs, is exploring the feasibility of obtaining a federal block grant for the state’s Medicaid program in order to add work requirements for Medicaid enrollees and move some recipients to private insurance. The Alaska effort is still in the exploratory stages and hasn’t advanced as far as the Tennessee proposal.


Bonner R. Cohen, Ph.D., ([email protected]) is a senior fellow at the National Center for Public Policy Research and a senior policy analyst with the Committee for a Constructive Tomorrow


Internet Info:

Division of TennCare, Amendment 42 to the TennCare II Demonstration, September 2019: https://heartland.org/publications-resources/publications/tennessee-draft-of-medicaid-block-grant-proposal