Senate approves Medicaid block grant, paves path for House

The Tennessee Senate pushed a modified block grant Medicaid program to passage Thursday despite concerns it will be rescinded when President-elect Joe Biden takes office Jan. 20.

The Senate voted 25-6 in favor of the move, with only Democrats in opposition. The House is set to consider the measure Friday at 9 a.m. after it rolled through committees earlier in the day.

Republican leaders in the General Assembly say the state will be able to use “shared savings” in the roughly $8.3 billion the federal government allots for TennCare to increase services to some 1.5 million recipients, mainly pregnant women with children and the state’s neediest elderly and disabled residents. All told the state spends $12.7 billion on TennCare.

Under the first deal of its kind nationwide, the state would receive a lump sum from the federal government rather than a percentage of its Medicaid costs. 

The state would get a 50/50 split of $2 billion in annual savings by continuing efficient operations, the amount Tennessee usually spends below federal projections. TennCare will have to meet requirements in 10 areas to get the extra money. 

State Sen. Paul Bailey, a Cookeville Republican who sponsored the block grant legislation, pointed out the state has saved the federal government $40 billion since TennCare started. The state will have access to $6 billion of that total, but the Legislature had to act on the agreement within 30 days of Jan. 8, setting a deadline in early to mid-February.

“We have a $6 billion savings account,” said Bailey, adding Tennessee also has a guarantee the federal government will cover the cost of TennCare growth of more than 1%. The state would have to petition the federal government to draw down the money.

Talk of a lawsuit surfaced in the Senate, but Bailey said Tennessee would simply revert to its current program and negotiate a new deal.

“What’s to litigate?” he asked.

The Senate rejected attempts to amend the measure by delaying its start until March 1 as long as CMS hasn’t withdrawn the deal and to target the state’s “most vulnerable” populations, those who make about $17,000 annually but are ineligible for TennCare.

The Legislature closed its organizational session of the 112th General Assembly and jumped into approval of the Medicaid block grant waiver just days after receiving the agreement from the federal government.

The Legislature heard no testimony from any healthcare advocacy groups or TennCare recipients before considering the federal agreement this week, Senate Minority Leader Jeff Yarbro of Nashville pointed out.

“We wouldn’t amend the beer laws in this state” without taking more time and hearing from witnesses, Yarbro said.

Some 90% of comments during public hearings two years ago opposed the plan, and legislators who oppose it say most healthcare advocates are criticizing the agreement.

TennCare Director Stephen Smith told lawmakers in a series of meetings the state would not cut expenses, recipients or services under the agreement the federal Centers for Medicare and Medicaid Services approved Jan. 8. However, he admitted he has not talked with the Biden transition team about the modified block grant.

Smith also hedged this week when asked if more people would be added to the program as Democratic lawmakers push to provide coverage for about 300,000 uninsured and underinsured working Tennesseans. About 100,000 people have been added to TennCare rolls since March, according to Smith.

The director told lawmakers the state could increase enrollment, likely to the most fragile residents, but he said TennCare would have to be cautious about widening eligibility.

Critics of the program contend Medicaid block grants are illegal and could be approved only by congressional action, not by the director of CMS.

Democrats, meanwhile, are bent on pushing for Medicaid expansion under the Affordable Care Act, which was passed under former President Barack Obama with Joe Biden as vice president. The federal government was prepared to pay 90% of the costs, more than $1 billion annually for expansion, under the Insure Tennessee plan proposed by former Gov. Bill Haslam.

The increased number of TennCare enrollees, especially amid the COVID-19 pandemic, provide ammunition for those seeking to expand Medicaid.

“I just don’t know why we would do something so averse to what the new administration is suggesting,” state Rep. Bo Mitchell, a Nashville Democrat, said Thursday during a House Insurance Committee.

However, House Majority Leader William Lamberth balked at the notion of simply expanding Medicaid, which he said would add able-bodied working people to the TennCare rolls.

“This is a tried and tested program. We know we’ve saved money, but we’re not able to use those savings,” said Lamberth, a Portland Republican.

Opponents of the bill say Republicans, who hold supermajorities in the House and Senate, rushed the resolution to passage in order to take the 10-year agreement to the Trump Administration before it leaves office.

State Rep. Dwayne Thompson, a Cordova Democrat, argued on Thursday that the Legislature has plenty of time to vet the 200-page document before passing it.

“My biggest concern about this whole process is it’s rushing through in an unprecedented way,” Thompson said.

Lamberth, however, contended it has been debated and discussed for years. The Legislature started the block grant process about 18 months ago.

“Years may be a rapid process for you,” Lamberth said.

Tennessee’s current Medicaid waiver is set to run out in six months, and negotiating a new agreement would be difficult and not as beneficial, Smith said.

The state could expand maternal care, increase services for dental care in rural areas and possibly expand to some needy residents and clear a waiting list for elderly sick Tennesseans, as well as use the money to concentrate on crisis situations.

Still, Democrats are leery of the program, largely because of the unknown, saying some of the money could be diverted from TennCare because of the way the agreement is written.

The Sycamore Institute sent out a statement Thursday pointing out Tennessee can get more federal Medicaid dollars without spending any new state money. TennCare also would be able to limit some prescription drug coverage, which has never been allowed by Medicaid, the nonprofit organization said.

The institute said a new federal funding cap could pose less financial risk to the state than a renewal of the existing Medicaid waiver. 

However, it warned that the “shared savings” provisions increase the state’s financial incentive to reduce TennCare spending. But, possibly most important, if the Legislature wants to roll back TennCare III, as it is called, it would take longer to do than under previous waivers because of the decade-long agreement.

“While the Biden Administration could rescind the agreement, the Trump Administration has taken steps to lengthen that process. At the same time, TennCare III will almost certainly face legal challenges in state and federal court,” according to the Sycamore Institute.

Critics also said the agreement would handcuff the state during pandemics and other crises, but the TennCare director said the state would be able to draw more federal money if the rolls increase.

Smith said TennCare would be able to approve medically necessary drugs needed by enrollees as long as physicians determine they are necessary. Democrats questioned whether patients would have to wait and possibly pay for unapproved medications out of pocket if they aren’t approved initially by TennCare.

Sen. Richard Briggs, a Knoxville Republican, said during debate that high pharmacy costs forced the former Bredesen Administration to take 200,000 off the TennCare rolls in 2006.