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NASHVILLE — Tennessee Gov. Bill Lee still plans Wednesday to submit his proposal to convert much of TennCare's federal funding into a modified "block grant" despite the federal Centers for Medicare and Medicaid Services withdrawing its proposed guidance to states on the issue.

"We are on track to submit Amendment 42 to CMS [Wednesday]. There is no change there," TennCare spokeswoman Sarah Tanksley said in an email Tuesday evening.

Tanksley did not respond to further Times Free Press inquiries about CMS' withdrawing the proposed guidance from before the White House Office of Management and Budget last Friday, as first reported Monday on Bloomberg Legal's website.

That came just four days after CMS Administrator Seema Verma told the National Association of Medicaid Directors that new regulations were in the works with regard to states pursuing block grants or, as in Tennessee's case, a modified "per capita cap" proposal.

"You will soon see guidance from us that lays out initial opportunities to test new approaches to delivering and financing care for certain optional adult populations," Verma said in her prepared remarks, citing block grants and per capita cap proposals as "two such alternative financing approaches."

Acting at the direction of fellow Republicans in the Tennessee General Assembly, Lee is seeking to convert some $7.9 billion of the state's $12.7 billion program providing health coverage for 1.4 million low-income Tennesseans.

But unlike a majority of states, Tennessee — where legislative Republicans have refused to expand Medicaid to low-income working-age adults — has few of the "optional adult populations" cited by Verma.

Medicaid is a federal entitlement program for low-income children, their mothers or caretakers, the disabled and some elderly residents. The federal government provides matching funds on a percentage basis based on what states spend to provide care. That enables the program to grown during times of disaster or high unemployment.

Under Lee and TennCare officials' proposed "waiver" of rules for the Medicaid program, the state is not seeking a traditional block grant, which is a fixed sum of money coming from the federal government.

Rather, state officials are still seeking a set amount per enrollee coming into the program. Lee's administration is also seeking a share of savings officials here say the state's managed care version of Medicaid already saves the federal government. The Lee administration pegs that at about $2 billion a year. And they are asking for up to half of that back along with greater flexibility to pursue health-related improvements.

Among other things, Lee is hoping to bolster some programs and expand rural health initiatives. He also hasn't ruled out using some of the money to extend coverage to others.

During required public hearings and submitted comments by Tennesseans, Lee's proposal was heavily criticized. Some providers are nervous, but the Tennessee Hospital Association is open to it in hopes some of that money will make its way to member hospitals.

But in September, U.S. House Energy and Commerce Chairman Frank Pallone, D-N.J., called efforts to block grant Medicaid "illegal," a view held by others.

In an interview Tuesday night, Michele Johnson, executive director of the Tennessee Justice Center which has been fighting the state's proposal, said state officials should take heed from the withdrawal of CMS' proposal before OMB.

"If I'm Tennessee I would take that as a serious concern from the federal government about whether or not what they're selling is something the federal government feels they can buy," Johnson said.

But she said, "I guess the fact that Tennessee does not seem to be taking it that way highlights the fact that this is all an exercise about politics. It isn't about policy and it isn't about people. And it isn't even about figuring out how they do things in ways they think will be lasting."

Johnson noted some states that expanded Medicaid coverage to working-age adults are now trying to implement work requirements at CMS' encouragement. But she said they're already running into trouble in federal courts. Tennessee is also seeking a work requirement.

"Do we really want two court cases saying we're violating the law?" Johnson asked.

In an interview earlier on Tuesday, TennCare Director Gabe Roberts said he expected he and a large team of top TennCare staffers and others would be "burning the midnight oil" to ensure the waiver proposal is ready for submission Wednesday.

There will be "some" major changes in the proposed waiver, Roberts said. But a "lot of them are clarifications" made in response to the public input process, he noted.

Many concerns were voiced about issues the state has no intention of pursuing, Roberts said, calling the waiver "kind of a nuanced process and you only put things in the waiver that you want to change. For example, there's nothing around medical appeals in the waiver. We weren't planning to change it. But we're going to go back and make those clarifications."

Roberts made no mention of CMS' withdrawal of its proposed changes of Medicaid rules, which weren't widely known at that point.

Contact Andy Sher at asher@timesfreepress.com or 615-255-0550. Follow on Twitter @AndySher1.

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