Dive Brief:

• The Biden administration is asking Tennessee to make fundamental changes to its plan to create a Medicaid block grant program in the state.
• The state’s controversial Medicaid plan was approved in the final days of the Trump administration. But the CMS held a federal public comment period through September that resulted in “significant concerns” for regulators about whether Tennessee’s policy promotes the objectives of Medicaid, according to a new letter to the director of TennCare, Tennessee’s Medicaid program.
• The letter sent Thursday requests that Tennessee submit a new financing and budget neutrality model based on a traditional per member per month cap, instead of an aggregate cap, among other modifications.

Dive Insight:

Tennessee took a notable step to realize a long-held conservative goal in early 2021, when the Trump administration greenlit a waiver allowing the state to use a modified block grant in its Medicaid program.

Under the 10-year waiver, Tennessee receives a lump sum of money annually from the federal government. Tennessee can keep up to 55% of any amount spent below the funding cap and reinvest it in other programs, giving it significant power over how it spends federal dollars.

The waiver also allowed the state to create its own commercial-style formulary of covered prescription drugs without federal approval, and granted it authority to negotiate directly with drug manufacturers.

Tennessee said the waiver would allow it to spend money and be more flexible with benefits. But researchers said that capping federal funding — along with codifying incentives to spend below the cap — could result in the state restricting benefits to achieve savings, threatening low-income beneficiaries’ healthcare quality and access.

In an opinion piece published in The Tennessean in September, Karen Camper, a Democratic member of the state’s House of Representatives, called on the CMS to rescind the waiver entirely.

“Not rescinding the waiver undermines President Joe Biden’s health equity agenda, and marginalized Tennesseans will be the first to feel its negative impact. Setting a precedent with a program that wouldn’t need to be renegotiated for another 10 years is reckless and irresponsible,” Camper argued.

The CMS is now requesting that Tennessee make major changes to the proposal. Along with urging the state to find an alternative to its aggregate cap, federal regulators want Tennessee to modify its Medicaid terms and conditions to clarify that the state can’t cut benefits or coverage without amending its demonstration.

The agency also asked Tennessee to remove expenditure authority for pharmacy and associated pharmacy flexibilities from the demonstration. Additionally, Tennessee should include a request in the demonstration amendment for expenditure authority for state reinvestments to support with any savings, such as adult dental care or enhanced home services, the CMS said.

“Making these adjustments would significantly mitigate CMS concerns,” the letter says. The CMS requested Tennessee amend its demonstration by Aug. 30.

Oklahoma also tried for a block grant during the Trump administration, but later rescinded its waiver application.