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This story was updated at 3:32 p.m. on Wednesday, Sept. 18, 2019, with a comment from a TennCare spokesperson.

NASHVILLE — A University of Michigan law professor questions whether Tennessee Gov. Bill Lee's proposal to switch much of the federal funding for the state's Medicaid health care program into a $7.9 billion annual block grant is even legal.

In a blog post, UM Prof. Nicholas Bagley, who teaches and writes about administrative law, regulatory theory and health law, states that "setting aside the dubious policy merits of block grants, however, I don't think the proposal is legal.

"I don't even think it's close," added Bagley, who posted his views Tuesday on The Incidental Economist, a health policy blog.

(Read more: Tennessee Gov. Bill Lee urges flexible approach with Medicaid block grant)

A spokesperson for Lee did not immediately respond to a Times Free Press reporter's inquiry Wednesday morning about Bagley's assertions.

TennCare spokeswoman Sarah Tanksley said that "if" the federal Centers for Medicare and Medicaid Services (CMS) "has questions about any provision in the block grant proposal, we will address those questions with CMS."

Lee is seeking to make Tennessee the first state in the country to get a good portion of its federal share of funding for TennCare through a block grant in exchange for new leeway in how it operates the program.

The Republican governor is also proposing a first-of-its-kind 50/50 share with the federal government on savings for the program which pays for health care services to some 1.4 million low-income children, mothers and other caretakers and disabled residents.

Lee on Tuesday issued the formal public notice which triggers a 30-day clock for public comment. Following that, the Lee administration could revise its proposed Section 1115 waiver to the federal Medicate statute before pressing forward with review and likely negotiations with the U.S. Department of Health and Human Services and its ancillary agency, the Centers for Medicare and Medicaid Services.

The state's current $12.1 billion TennCare program includes $7.5 billion in federal money.
Lee's proposed waiver excludes some portions of TennCare, including prescription drugs and persons who are eligible for both Medicare, the health insurance program for senior, and TennCare.

With the Trump administration advocating the use of block grants to save money on Medicaid, a jointly funded entitlement program involving the federal government and states, the Tennessee's Republican-controlled General Assembly this year passed a law ordering Lee to seek the waiver to the Section 1115 and try to obtain a block grant.

Proponents say it will free the state up from a number of Medicaid regulations and provide flexibility. Advocates, however, charge it could harm enrollees and also question why Tennessee, which has refused to extend health care to an estimated 300,000 low-income adults under the Affordable Care Act, is attempting it.

Bagley, a former appellate staff attorney in the Civil Division at the U.S. Department of Justice who previously served as a law clerk to U.S. Supreme Court Justice John Paul Stevens, says he sees a problem in the state's concept for the waiver.

Under section 1903 of the Medicaid statute, he says, the federal government "must pay a fixed 'match rate' (known in the statutory lingo as 'the Federal medical assistance percentage') to every state that participates in Medicaid."

Tennessee's match rate is now 65.21%, meaning that for every $1 the state spends on TennCare, Uncle Sam provides a little over $2. That, however, would change under a number of different TennCare programs under Lee's proposed waiver.

"As Tennessee recognizes," Bagley writes, "it'll need a waiver from HHS to make these changes. And section 1115 of the Medicaid statute does allow HHS to waive lots of the law's restrictions in connection with experimental projects that are likely to assist in promoting Medicaid's objectives."

Acknowledging that he's previously written he isn't sure "block granting Medicaid counts as an experiment that serves Medicaid's purposes," the New York University of Law graduate whose writings have appeared in the Harvard Law Review, Columbia Law Review, Georgetown Law Journal and New England Journal of Medicine, goes on to say "there's a more fundamental problem with Tennessee's proposal.

"You can't use section 1115 to waive section 1903," he says. "To the contrary, section 1903 is pointedly omitted from the list of statutory provisions that HHS is empowered to waive.

"So you can't use Medicaid waivers to change Medicaid's financing structure. And that's exactly what Tennessee is proposing to do," Bagley adds.

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

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