Biden administration calls for major changes to Tennessee's Medicaid block grant program

Flags fly over the state Capitol, Friday, Feb.11, 2022, in Nashville, Tenn. Lawmakers held up legislation Wednesday that would create an opening for a TennCare contract to be given to a massive company connected to a bid-rigging lawsuit filed against the state.

NASHVILLE - Citing significant concerns, President Joe Biden's administration has told state TennCare officials it wants Tennessee to make several major changes to the state's Medicaid block grant waiver program that provides health care to 1.6 million low-income children, pregnant women, mothers and disabled Tennesseans.

Federal Center for Medicare and Medicaid Services Deputy Administrator Daniel Tsai said in his June 30 letter to TennCare Director Stephen Smith that while the agency itself is evaluating a range of actions, Gov. Bill Lee's administration taking the actions itself would significantly mitigate the center's concerns.

Federal and state officials are said to have been in discussions for some time. The state has until Aug. 30 to respond to the requested changes, which are aimed at preserving benefits that existed in 2021. An additional period of public comment would come before the waiver would again come before the Center for Medicare and Medicaid Services for approval.

Michele Johnson, executive director of the Tennessee Justice Center, which along with the Tennessee Disability Coalition was among groups that opposed the block grant waiver, called the federal agency's decision "good news for Tennesseans."

"The nation's leading medical experts and the major patient advocacy groups, including the American Cancer Society, American Heart Association and many others, opposed the waiver because of the harm that it would do to the 1.6 million Tennessee children and adults who rely on TennCare," Johnson said in a statement.

She said all the groups warned it would "damage the health care system on which we all depend, and would worsen the rural health crisis across Tennessee.

"I think they're basically saying we can't go forward with this plan," Johnson said in a phone interview regarding the Center for Medicare and Medicaid Services letter. "It violates the legal standard. ... Submit another plan, and let's see if we can find something that doesn't violate the law."

She also said no other state sought such a deal, because they all "realized it would be bad for their people. Waiting on a decision has been a distraction, and now that is behind us, we, hopefully, can all turn to coming up with better ways to improve the health and lives of Tennessee children and families."

Lee's administration sought the waiver after Republican legislators in 2019 directed he do so, based on the idea it would help save money, allowing the state to direct those funds into health care programs and initiatives.

That came following yearslong criticism by GOP lawmakers who have opted not to expand the state's Medicaid program under former President Barack Obama's federal Affordable Care Act. The law provides federal funding to enable low-income, uninsured adults, aged 19-64, who don't qualify for Medicaid to get health coverage.

Tennessee's waiver was submitted in 2020. Then-President Donald Trump's administration approved it on Jan. 8, 2021, days before Trump left office. With Biden's administration cool to the idea, as well as a number of congressional Democrats who charged both before and afterward that the Center for Medicare and Medicaid Services had no authority to approve it, Lee's administration did not implement the waiver, known as TennCare III.

"We are currently reviewing the letter but are encouraged by CMS' continued support for the major concepts and priorities of TennCare III, which rewards Tennessee for the sound, efficient and effective operation of the TennCare program via additional federal dollars," TennCare spokeswoman Amy Lawrence said in a statement Thursday.

Lawrence said those dollars can then be reinvested to enhance TennCare benefits and services and serve additional Tennesseans in need.

Under Medicaid, the federal government pays roughly two-thirds of TennCare's costs. There are no spending caps on state Medicaid expenditures, so Tennessee could boost or even expand the existing TennCare programs if it wishes, depending on how much more of its own money the state was willing to put into it.

Under the block grant program, Tennessee would receive a set amount of funding but have more flexibility in how it spends it, with the state retaining a portion of any savings achieved as a result and empowered to plow that into health care and health-supportive initiatives.

Critics have charged the block grant program would endanger the health and even lives of Tennesseans. During a public comment period in 2019, nine of some 1,800 people and organizations told the Center for Medicare and Medicaid Services they supported it.

Lee said the poor showing was a result of misinformation.

Among other things, Lee's TennCare III waiver sought to have a closed formula that limited access to certain prescription drugs and therapies based on price. It's often used in private health insurance plans, with proponents saying it saves money. Critics including the Tennessee Disability Coalition said it serves to take medical decisions out of the hands of doctors and patients in the name of savings.

The Center for Medicare and Medicaid Services is recommending the state jettison that as well these other provisions:

- The Center for Medicare and Medicaid Services wants the state to submit a new financing and budget model, based on the traditional, per-member, per-month cap instead of the block grant permitted under the Trump waiver. The per-member, per-month model is the amount of money paid or received on a monthly basis for each individual enrolled in a TennCare managed care plan.

- Modify the waiver's special terms and conditions section to "more explicitly state" Tennessee cannot cut benefits or coverage in effect since Dec. 31, 2021, without a procedural amendment subject to additional public comment period and Center for Medicare and Medicaid Services approval.

- The Center for Medicare and Medicaid Services' letter states it supports Tennessee's policy goals to expand coverage and benefits. But the letter says center officials propose that "instead of the current framework for savings and investment," the federal agency will "work with the state on necessary expenditure authorities to meet common goals."

- The Center for Medicare and Medicaid Services says that in place of the structure in the current waiver, the state "should include" a request for expenditure authority for state reinvestments for initiatives that the state would like to support with budget neutrality savings. The agency cites as examples adult dental services, expanded 12-month postpartum coverage and enhanced home- and community-based services.

"This is a huge win for the disability advocacy community," the Tennessee Disability Coalition said in a statement. "The changes that CMS is requesting address some of the most prominent issues with TennCare III for Tennesseans with disabilities. This happened because so many of you spoke up, submitted public comment and organized. That said, it's incredibly important that the disability community continue to advocate and to push for fair, accessible and high-quality health care in Tennessee."

Contact Andy Sher at or 615-255-0550. Follow him on Twitter @AndySher1.