Tennessee’s Waiver


In November, Tennessee became the first state to submit a request to the Centers for Medicare and Medicaid Services (CMS) to convert the financing of TennCare, its state Medicaid program, into a block grant. Public comment on the proposal closed on December 27, 2019 and you can read CPR’s comments on the proposal here.

This proposed waiver (which the state is framing as an “amendment”) would drastically alter the funding structure of Tennessee’s Medicaid program. Tennessee currently receives 65% federal matching funds for its Medicaid program, based on the costs of the actual services it provides. Under its proposal, the state would receive those matching funds only up to a certain cap, with the only exception being unexpected per capita adjustments. That means the block grant could only be adjusted based on unexpected increases in enrollment, but not based on any other unforeseen costs.

If the state spent more than the cap, it would be responsible for the increased costs. If it spent less, it would be able to retain half of the matching funds that would normally be returned to the federal government and could spend those funds on anything it deems beneficial to the “health” of beneficiaries (specifically noting that “[a]ny savings achieved under the block grant will be reinvested in the health of TennCare members, not just their healthcare.”) The proposal does not expand eligibility or benefits.

Despite being largely opposed at the state level, where out of more than 17,000 comments submitted, only 11 were in favor of the state’s proposal, the key provisions of the state’s proposal remained intact in the version submitted to CMS in November. Those key provisions include:

  • The aforementioned block grant, capping federal Medicaid funding for children, low-income parents, people with disabilities, and aging Americans, and the ability, mentioned above, to spend excess federal Medicaid dollars on whatever the state believes will improve the health of its beneficiaries, without definition or limitation
  • Authority to waive the federal standards set for Medicaid managed care programs, which include standards for benefits and network adequacy
  • Creation of a “commercial-style closed formulary” giving Tennessee the ability deny coverage of FDA-approved prescription drugs based on cost, again without federal oversight
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