Staff photo by C.B. Schmelter / Gov. Bill Lee speaks during a groundbreaking ceremony for the McMinn Higher Education Center on Friday, Sept. 27, 2019 in Athens, Tenn. The new facility will include the Tennessee College of Applied Technology-Athens, Cleveland State Community College, and the McMinn County UT Extension Institute of Agriculture.

NASHVILLE — Some Tennessee health care provider groups continue to have questions about Gov. Bill Lee's proposed federal TennCare waiver, which seeks to provide the state with greater flexibility in managing the program's $12.7 billion in costs.

But they also see some "positives" in the proposal to overhaul federal financing and state operations in the state's Medicaid health insurance program for 1.4 million low-income children, parents and caretakers, the disabled and some seniors.

"We still have some concerns about it, mostly around what are you talking about when you say 'efficiency,'" said Craig Becker, president and CEO of the Tennessee Hospital Association. "We've gotten some verbal assurances, but you know we will probably comment one way or the other just talking about some of our concerns."

But Becker said there is a potential upside for hospitals.

The state is in the midst of a 30-day public comment period after Lee's administration earlier this month formally unveiled its proposed federal Medicaid waiver to the Trump administration. It could dramatically reshape the state's share of federal funding as well as as alter how TennCare operates, impacting hundreds of thousands of Tennesseans.

In Hamilton County alone, the program has about 65,000 women, men and children enrollees, according to the state's Division of TennCare.

Advocates for the poor have already been ringing alarm bells over its potential impact on a program that provides health benefits to 1 in 5 state residents.

It will also impact providers as Lee, under a directive from fellow Republicans in the legislature, seeks to convert much of the feds' funding into a nearly $8 billion "hybrid" federal block grant waiver with far fewer strings attached.

One of the Tennessee waiver's key proposals is to share cost savings with the U.S. Department of Health and Human Services and the department's Centers for Medicare and Medicaid Services. And that has hospitals' attention.

The Lee administration argues TennCare's managed care approach has already led to an estimated $2 billion in annual cost savings for Uncle Sam over what a traditional fee-for-service Medicaid program would cost the federal government.

So Lee hopes to negotiate a 50/50 split on those and additional cost savings in which the state could reap as much as $1 billion, which Lee hopes to plow into improving rural health care and other initiatives.

And hospitals, which already help prop up state financing of TennCare with nearly $450 million through an annual hospital tax, hope to see some of the anticipated split benefit them.

"We're really intrigued by this shared savings approach," Becker said. "I mean, when you think about it, it makes sense. But I think it's going to be a tough sell to [the Centers for Medicare and Medicaid Services]. But hey, you know, they may like it."

Becker said the shared savings approach "does make sense because we do save the government — much to my members' chagrin, because they don't get the dollars — hundreds of millions of dollars every year."

Hospitals could use funds "to do some innovative things," Becker added. "What we've been told is to work on efficiency things, but obviously it would be things they would work with us on as well."

Officials with Chattanooga-based Erlanger Health Services, a Tennessee Hospital Association member, declined comment.

Medicaid is a federal entitlement program, meaning the federal government provides an opened-ended match rate for covered people, regardless of how many come on or what a state spends. In contrast, a block grant provides a set amount. Right now, for each approximately 35 cents spent by the state, on average, the federal government kicks in another 65 cents.

But under the hybrid block grant proposal, Tennessee is agreeing to a per capita cap with annual inflation-trended adjustments. Lee administration officials have included what they consider is a belt-and-suspenders approach that will not only allow enrollment to grow when tough times spur new enrollment but maintain a steady flow of federal dollars, as well as set a floor below which federal contributions can't dip.

The Trump administration has invited states to seek Medicaid block grants. But critics, including the powerful chairman of the U.S. House Energy and Commerce Committee, charge it's illegal for the administration to waive the entitlement provisions because they're set in federal law and require congressional approval.

Regardless, Lee's proposal has support. Chattanooga-based insurer BlueCross BlueShield of Tennessee, which runs TennCare's largest managed care organization, is backing Lee's waiver.

"BlueCross supports Governor Lee and his team in advancing a very thoughtful proposal to obtain a CMS Medicaid waiver," BlueCross CEO J.D. Hickey said in a statement. "We believe this proposal has the potential to serve more Tennesseans, while improving their health care and protecting the state's financial well-being."

Dave Chaney, vice president of the Tennessee Medical Association, which represents physicians, said the group has generally backed use of federal block grants or a per capita allotment for TennCare.

If adequately funded, Chaney said, Lee's proposal "could allow Tennessee to administer a more efficient and effective Medicaid program" minus what he called "burdensome and costly federal requirements."

But if the federal government's ultimate goal is reducing funding from current levels, Chaney added, "the state would struggle to even maintain current TennCare levels without changing eligibility requirements or cutting benefits, and will certainly be unable to cover more people."

Chaney also said "there are some positives in what we've seen so far of the preliminary waiver request, such as the potential to transform rural health care through electronic consultation and telemedicine."

Still, he noted, "there are still a lot of unanswered details that will determine whether we can realistically improve healthcare access and quality while reducing cost."

Also keeping an eye on the waiver is the Tennessee Health Care Association, which represents nursing homes, and the Tennessee Center for Assisted Living.

The organizations say any alternative Medicaid proposal "must provide and ensure sustainability for the state's most vulnerable elderly population while preserving that population's choice to have nursing facility services or assisted living services when they are needed and appropriate.

"While we are still evaluating the proposal, a number of items we addressed in our earlier issue brief are noted and could lead to positive changes."

That includes a per capita spend, wage index adjustment and the exclusion of people who are dually enrolled in the federal Medicare program for seniors, as well as TennCare. Lee's waiver excludes them.

But, the Tennessee Health Care Association and the Tennessee Center for Assisted Living note, "the waiver by its very nature requests an unprecedented exception from existing federal regulations, some of which are designed to protect both providers and beneficiaries alike from managed care practices that are detrimental to patient care."

In comments to reporters when the waiver was unveiled, TennCare Director Gabe Roberts said of providers that "most people started off saying 'Here are our concerns about a block grant.'"

But he said the bureau pointed them back to the legislation which "clearly didn't envision a traditional block grant. It talked about a set of money that wouldn't decrease." And if enrollment increased, then funding would as well, Roberts added.

"When we talked through that and gave them some really high level goals of what we're trying to do, again, I don't want to speak for any of those individuals, but they all seemed to understand that what we were trying to do was get a good deal," Roberts said.

Gordon Bonnyman, a staff attorney and co-founder of the Tennessee Justice Center, which advocates for TennCare enrollees, and the center's executive director, Michele Johnson, have raised a host of objections to the waiver. Bonnyman pointed to one provision that exempts the state from Medicaid managed care regulations and empowers the state to revamp the "amount, duration and scope" of Medicaid benefits without seeking federal approval.

Hundreds of thousands of Tennesseans "are still at risk for the benefit cuts," Bonnyman warned.

Any number of specifics in the state's plan remain vague, according to both provider groups and health advocates.

The 30-day public comment period ends Oct. 18. And the state must submit its proposed amendment to federal officials by Nov. 20. And some comments could spur changes to the waiver.

"Every waiver is subject to the comments we receive, and we're required by law to evaluate those and respond to those," TennCare's Roberts said. "And we historically often do make tweaks to various designs based on comments that we get."

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