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Short on details: Report analyzes what block grant proposal could mean for TennCare

Zach Vance • Apr 8, 2019 at 7:24 PM

At just one page long, state Rep. Timothy Hill’s House Bill 1280 is short on details, but if signed into law, it could result in lasting implications for TennCare, the state’s Medicaid program. 

As amended, the bill calls for the governor, acting through the commissioner of Finance and Administration, to seek approval from the Centers of Medicare and Medicaid to begin receiving federal TennCare funding by means of a block grant. 

Despite numerous Democratic attempts, Hill has rejected no fewer than four amendments that would have established parameters around the negotiations of the block grant waiver, such as the inclusion of pre-existing conditions coverage and guarantees the elderly in nursing homes would keep their coverage. 

“Part of the reason the legislation is drafted the way it is is to provide as much negotiation room for the governor and commissioner of (Finance and Administration),” Hill told a House committee. 

The bill does specify that, should a deal be reached between the governor and federal government, the Tennessee General Assembly must pass a joint resolution approving the new waiver before it could take effect. 

As of Monday, the proposal has cleared four House subcommittees and committees, and a House floor vote is scheduled for Thursday. The Senate Commerce and Labor Committee plans to hear the legislation on Tuesday. 

To provide some insight into the proposal, The Sycamore Institute, a nonpartisan public policy research center based in Nashville, released a report last week explaining what a block grant might mean for the state and how the missing details could affect the state budget, as well as the 1.3 million Tennesseans who receive health insurance from TennCare. 

A block grant essentially means federal funding to state Medicaid programs, such as TennCare, would be capped at a certain amount, according to the “Medicaid Block Grants: The Unknown Details Matter” report written by Sycamore Institute Policy Director Mandy Pellegrin. 

While this would lower federal costs, most block grant proposals are intended to give states more responsibility and broad flexibility in designing the programs, such as determining the type of benefits offered and what the eligibility criteria is. 

“Federal funding for TennCare would depend on details that are not yet known. The degree to which states would gain flexibility on program design rules is even less clear,” Pellegrin wrote. “These policies could create challenges, opportunities and difficult trade-offs for state policymakers required to balance the budget.” 

Since Medicaid is an entitlement program, as the report notes, the costs are difficult to predict because it depends on how many people enroll, what their health needs are and how much those services cost. Under the current program, the federal government pays roughly 65 percent of TennCare, while the state pays the rest. 

As far as how TennCare benefits and eligibility might change, current federal law and regulations defines what populations must be covered, and which populations are optional. The same goes for what kind of benefits are offered to those populations. 

“More flexibility could allow states to deviate from those requirements and still receive federal Medicaid dollars,” Pellegrin wrote in the report. “This may allow states to use their own discretion to cut costs to stay within federal funding caps.” 

Several federal proposals, including the Graham-Cassidy plan considered in 2017, would have capped the amount of federal dollars going to state Medicaid programs based on a lump sum or a per capita basis.  

According to the Sycamore Institute’s analysis, the amended version of Hill’s legislation seems to envision a lump-sum grant with discretion on how the state can spend it.

“Federal funding caps are often based in part on how much a state spent in a designated year, known as the base year. Over the last decade, Tennessee has been relatively effective at cost-containment, which could generate a comparatively lower base than other states,’” the report states. 

Once a base year is determined, the funding cap for any given year would be configured using a “growth rate,” which can be tied to general inflation, medical inflation or medical inflation plus 1%. 

The original language of Hill’s bill would have indexed the block grant based on inflation and population growth, but the amended version of the legislation nixed any mention of a growth rate. 

Most of the unknowns outlined in the report revolve around the Medicaid program design, such as what current rules would be open to state discretion and how would state discretion over its Medicaid program affect enrollees and providers? 

Pellegrin wrote that states seeking flexibility with Medicaid programs likely have at least one of three goals in mind: To reduce costs; to limit or enhance provider payments or coverage for certain populations; and/or to keep spending within federal caps, should caps be established. 

The one thing for certain, as Pellegrin notes in the report, is a Medicaid block grant will likely come with some serious trade-offs.

“For instance, achieving cost-savings for taxpayers and/or providing a slimmer TennCare benefit to more people may have negative effects on current TennCare enrollees,” Pellegrin wrote. 

“Alternatively, any downward pressure on federal TennCare funding might require state policymakers to balance the budget by reducing TennCare eligibility and benefits, cutting provider payments, requiring more of enrollees, shifting money from other priorities, and/or raising taxes.”

 

 

 

 

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