Tennessee Again Leading the Way in Driving Medicaid Innovation

John Goetz

Last month, Tennessee made history by publishing a draft proposal that would convert a large part of its Medicaid program, known as TennCare, to a “modified” block grant. This action was a result of a law passed by the legislature earlier this year, which directed Governor Bill Lee’s administration to submit such a proposal to the Centers for Medicare and Medicaid Services (CMS) for approval. Tennessee believes it can deliver better, higher-quality care to its TennCare population if the federal government would allow it to operate without the restraints and disincentives required under current law.

Tennessee has operated its Medicaid program under a “waiver” since the early 1990s. The program is nearly 100% managed care, which means that the state contracts with private insurers to administer the program. While there were many bumps in the road for TennCare early on, the program is now seen as a national model for how states should operate their Medicaid programs, and TennCare consistently operates well below the budget set by CMS while providing more services to Tennesseans than required.

A few highlights from the Lee administration’s draft plan:

  • The budget set by CMS under the proposal would be based on TennCare spending from 2016-2018 and adjusted based on national Medicaid inflation each year thereafter. Tennessee is seeking to use the modified block grant for around two thirds of its program, excluding the pharmacy benefit, dual eligibles (those enrolled in both Medicare and Medicaid) and minors in state custody. The reason to exclude these groups from the modified block grant is that TennCare does not have primary control of the benefits and therefore could not properly implement the innovations envisioned in the plan.

  • The state also has asked that it be able to add benefits not traditionally allowed by CMS. These could include transportation services, housing help, nutrition assistance, etc. The Lee administration says it is not their intent to reduce benefits but instead to craft benefits to fit the TennCare recipients it serves. In addition, the state has asked that unless major changes are made to the program after initial approval from CMS, the requirement to resubmit every five years be waived. The administration does not believe TennCare should have to resubmit for approval if there are no significant changes and go through such a time consuming and laborious process.

  • However, the largest benefit to the state beyond the waiver of a number of federal restraints is the opportunity to recoup the savings it believes it will be able to achieve by running its program in a more efficient manner. The Lee administration’s plan calls for the state and federal government to evenly split all savings. Currently, when TennCare comes in under budget, it does not recoup those savings. If the Lee administration plan is approved, the state would be rewarded for generating savings while adequately serving their Medicaid population responsibly.

There is no doubt that this is a major change in how Medicaid programs are traditionally operated, and not surprisingly, the proposal has generated much criticism from those who believe the federal rules should be more restrictive. Provider groups have also expressed concern because reimbursement rates are not directly addressed in the draft plan. And advocates are worried that with much of the law being “waived” under the plan, the protections they have worked to secure over the years could be restricted.

In our view, those with questions and concerns should participate in the public forums being hosted by TennCare and submit comments by the October 18 deadline. The proposal is still in draft form and has not yet been submitted to CMS, allowing ample opportunity for constructive feedback to be incorporated into the final proposal submitted by the Lee administration. There is still a lot of water to go under the bridge before the final plan takes shape, but one thing is for sure: Tennessee is again leading the way in driving Medicaid innovation.

Goetz is senior vice president at Bridge Public Affairs and spends a majority of his time focused on the firm’s growing health care practice. In addition to his significant background in the health care business sector, he is an expert on TennCare and the myriad regulatory details associated with the federal-state program.