A group of 13 Medicaid recipients represented by Tennessee Justice Center and two other groups filed suit Thursday in U.S. District Court challenging federal approval of a TennCare block grant through 2030.

“The hardships experienced by the plaintiffs who brought this case show the harm caused by the state’s decision to radically restructure TennCare. Tennessee has a long history of mismanagement and bad Medicaid policy,” said Michele Johnson, executive director of the Tennessee Justice Center, in a statement. “Tennessee is the last state that should have an experimental waiver that puts vulnerable populations at risk. We stand with our clients and all Tennesseans against the further restriction of life-saving healthcare services and prescription drugs.”

Michele Johnson, Executive Director of the Tennessee Justice Center
Michele Johnson, Executive Director of the Tennessee Justice Center

The modified block grant program caps the amount of federal funding for Medicaid services and allows the state to restrict coverage of prescription drugs, according to the statement released by the Tennessee Justice Center, National Health Law Program and King & Spalding LLP, which filed the complaint in the District of Columbia.

The plaintiffs’ legal counsel said the program permits Tennessee to keep “troublesome” parts of TennCare such as the elimination of three months of retroactive coverage as well as the requirement that beneficiaries enroll in managed care plans, which they said the state has been “testing” on low-income people since 1994.

Filed on behalf of TennCare recipients with chronic, disabling conditions, a rural pediatrician and the Tennessee Justice Center, the lawsuit claims the Trump Administration failed to give enough time for public comment, hurting people’s ability to object. The plaintiffs also claim the Department of Health and Human Services exceeded its authority in an “arbitrary and capricious manner” by authorizing the project as an “experimental waiver” affecting more than 1.5 million Tennesseans.

Jane Perkins, legal director at the National Health Law Program, said the Trump Administration “overstepped its authority” when it approved TennCare III less than two weeks before the Biden Administration took office. Tennessee had been negotiating with the feds for almost a year when the plan was approved just as Trump left the presidency. 

Perkins said the decision by the Department of Health and Human Services allows Tennessee to “ignore” funding and coverage provisions set by Congress in the Medicaid Act.

“In a rush to approve the project in its waning days, that administration also stepped out of bounds by shutting the public out and approving TennCare III without giving public notice and opportunity to comment as federal law requires,” Perkins said.

  Tennessee has a long history of mismanagement and bad Medicaid policy. Tennessee is the last state that should have an experimental waiver that puts vulnerable populations at risk.   – Michele Johnson, Tennessee Justice Center

Rather than expand Medicaid at the Biden Administration’s request and with the offer for more funding, most Republican state leaders have said they want to stick with the modified block grant. They say “shared savings” through the federal government will provide the state with extra funds based on efficient operation of TennCare to provide more services to needy women, children and disabled residents.

In March, Lt. Gov. Randy McNally opened the door to President Joe Biden’s plan to offer states more money to cover the working uninsured. McNally, R-Oak Ridge, said a proposal within the American Recovery act to increase Medicaid payments by 5 percentage points and bring $1.2 billion more to Tennessee over two years should be studied.

House Speaker Cameron Sexton, R-Crossville, balked at the idea and said he’s “not willing to cut a deal on expansion for a shared savings plan. 

“Shared savings is a great plan for all Tennesseans. There’s no need to negotiate on that,” he said.

Sexton predicted Medicaid expansion wouldn’t pass the House anyway. 

Gov. Bill Lee has stood by the modified block grant program.

During his State of the State, Lee said, “Let me be clear: if partisan attacks that call for this block grant to be rescinded prevail, the state will not get these shared savings dollars that we plan to use to improve healthcare for vulnerable Tennesseans.”

Tennessee is the first state in the nation to receive approval for a block grant program, and Democrats say it is a mistake to gamble on the health of the state’s poorest and sickest residents.