The Trump administration has approved a federal waiver to enable Tennessee to convert its Medicaid program into a block grant, the first waiver of its kind to be cleared.
It remains unclear whether the waiver, approved Friday by the Centers for Medicare & Medicaid Services (CMS), will survive under President-elect Joe Biden’s administration set to start in a few weeks.
The waiver, which will last for a 10-year period, would create a budgetary cap for federal spending based on recent historical spending and enrollment in Medicaid in the state. Medicaid is a federal-state partnership where the federal government matches any costs for the program, even if costs unexpectedly go up.
CMS said the cap is not a “block grant” but instead is a defined cap that puts state expenditures “at risk based on both cost and population growth and is consistent with existing CMS policy.”
The state, which first applied for the waiver back in December 2019, can also reinvest any shared savings it receives.
“Tennessee will be eligible to qualify for shared savings on an annual basis when it underspends the ‘without waiver’ aggregate cap and meets quality targets,” the waiver approval notice said. “Up to 55% of any savings achieved may be earned by the state in the form of additional federal matching funds that can be reinvested in its state health programs.”
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The approval comes after CMS released guidance in January 2020 for states to set up a block grant or a per capita cap that limits Medicaid costs based on a state’s population.
Medicaid block grants have gotten major pushback from some healthcare advocacy groups that charge they could lead states to cut services and enrollment in the program.
Some advocates worry that block grants could imperil state finances and coverage if costs unexpectedly balloon.
“Without sufficient federal funding, states would likely have no choice but to make damaging cuts to their Medicaid programs, with cuts growing larger over time,” said Joan Alker, executive director of the Georgetown Center for Children and Families, in a statement in January 2020 after the guidance was released.
Alker’s statement came a few months before the onset of the COVID-19 pandemic, which has caused Medicaid rolls in some states to swell after job losses caused by the outbreak.
CMS’ waiver approval notice shrugged off any concerns that the new program would negatively impact coverage, benefits or access.
“CMS believes that these commenter concerns are misplaced in light of the guarantees under this demonstration concerning the state’s maintenance of effort in providing coverage, and the fact that flexibilities provided on coverage pertain to expansions in coverage, as this demonstration would do generally (e.g., other expanded benefits),” the notice said.
The agency added that the state is required to maintain the levels of benefits and coverage that were in place as of Dec. 31, 2020. But that does not mean there can be reductions.
“No reductions in benefits or coverage can be made by the state without an amendment and additional public comment processes,” the agency’s notice said.