Tennessee is first to be approved for Medicaid block grant

FILE - In this Nov. 10, 2020, file photo, Tennessee Gov. Bill Lee speaks with reporters in Nashville, Tenn. A federal appeals court ruled Friday, Nov. 20, 2020, that Tennessee can begin outlawing abortions because of a prenatal diagnosis of Down syndrome, as well prohibit the procedure if it is based on the race or gender of the fetus. Earlier this year, Lee enacted the so-called "reason bans" as part of a sweeping anti-abortion measure that he signed earlier this year. (AP Photo/Mark Humphrey, File)

NASHVILLE, Tenn. (AP) - Tennessee has become the first state in the nation to be approved to receive funding in a lump sum for its Medicaid program through a block grant program, Gov. Bill Lee said Friday.

Republicans contend that states need more flexibility to shape their Medicaid programs while also being given the opportunity to rein in spending. Democrats, however, have expressed concern that spending caps might cause states to purge their rolls or reduce services. They instead want to widen Medicaid eligibility.

President-elect Joe Biden has opposed block-grant efforts and can rescind the change.

Addressing concerns about the block-grant model, Steve Smith, director of Tennessee's Medicaid program, said there will be no reduction in services, in eligibility or in the amount paid to providers.

"For the first time, we have an agreement that rewards efficiency," he said on a conference call with reporters. "This is about more, not less."

TennCare, Tennessee's Medicaid program, provides health insurance to approximately 1.5 million low-income Tennesseans, including pregnant women, children, caretaker relatives of dependent children and older adults, and disabled adults.

Michele Johnson, executive director of the Tennessee Justice Center, which represents TennCare recipients, said she thinks the agreement is "bad policy."

"As far as I can see, the agreement gives Tennessee a lot of flexibility to do things that would result in less people covered and less protection for those people who are covered," she said in an interview. "If they don't intend to do that, why seek the flexibility to do it?"

Lee and Centers for Medicare and Medicaid Services administrator Seema Verma, speaking to reporters on a conference call, said the state's funding would be reduced if the state's baseline enrollment were to drop by more than 1%, so there is no incentive to purge the rolls. Funding can also be increased if enrollment increases by more than 1%, providing a buffer in case of an emergency like the pandemic, Verma said.

Currently, the federal government pays a percentage of each state's Medicaid costs, no matter how much the costs rise in any given year. For Tennessee, that means receiving approximately $7.5 billion in federal money for its $12.1 billion Medicaid program, or 65%.

Republicans argue this system gives states little incentive to keep expenses under control, because no state pays more than half the total cost.

Smith said Tennessee has historically kept expenses low, and as long as the state continues that trend, it will be rewarded under the new agreement. If Tennessee's rate of growth in expenditures is below the national trend, the state will receive a portion of the savings that it can reinvest in health initiatives.

Asked whether Biden's administration might try to undo the agreement, Verma reiterated her opinion that the new administration should see the 10-year demonstration project through to the end. Verma said the agreement with Tennessee had been carefully vetted and crafted to address criticism. However, she acknowledged that there is a process to terminate such an agreement.