Feds order changes to TennCare block grant program

The federal government is ordering TennCare to change its modified block grant program a year and a half after the Trump Administration approved it just days before leaving office in early 2021.

The Centers for Medicare & Medicaid Services sent a letter to TennCare Director Stephen Smith last week notifying him of adjustments the state must make to the insurance program for its neediest residents.

Notably, TennCare is being required to end a closed formulary for pharmaceuticals that enabled the state to cut coverage for expensive drugs and therapies deemed necessary by physicians, according to the letter first reported by the Tennessee Journal.

Although Gov. Bill Lee and Republican lawmakers contended the new program would enable the state to offer more services, Democrats argued it could lead to reductions in health care.

"Doctors should be able to tell patients what they need in terms of prescriptions without the interference of the state," said state Sen. Heidi Campbell, D-Nashville. "Legislators and bureaucrats don't know as much about health care as trained, professional doctors do."

Campbell, who is running for the 5th Congressional District seat, said cuts in services through the block grant program could affect the state's overall health.

The Tennessee Disability Coalition, which opposed the state's move to a modified block grant, called the federal decision "a huge win for the disability advocacy community."

"These changes had the potential to negatively impact Tennesseans with disabilities who received services and benefits from the state," the organization said in a statement.

Besides the order to open the prescription formulary, CMS asked TennCare to submit a new financing and budget model based on the number of enrollees each month instead of an "aggregate cap" of money. The state planned to provide services under a block of funds and then "repurpose" any savings.

In addition, the feds told TennCare the state can't cut benefits or coverage in effect Dec. 31, 2021, without making an amendment that would be subject to public comment and CMS approval.

"We support the state's policy goals to expand coverage and benefits and propose that instead of the current framework for savings and investment, CMS will work with the state on necessary expenditure authorities to meet common goals," the letter from Deputy Administrator and Director Daniel Tsai says.

The letter encourages the state to make a formal amendment to its plan by Aug. 20 for initiatives such as adult dental treatment, expanded 12-month postpartum coverage and improved home and community-based care.

When the Legislature approved the program in early 2021, Republican leaders said the state would be able to use "shared savings" in the $8.3 billion the federal government allots for TennCare to increase services to 1.5 million recipients, mainly pregnant women with children and the state's neediest elderly and disabled residents. The state spends about $12.7 billion on TennCare.

Democrats contended the state would wind up cutting services and possibly enrollees.

TennCare is reviewing the letter from CMS, according to spokeswoman Amy Lawrence, but it is "encouraged" by support for "major concepts and priorities" in what is called TennCare III, which has been operating under a spending cap since 1994.

The program "rewards Tennessee for the sound, efficient and effective operation of the TennCare program via additional federal dollars that can then be reinvested to enhance TennCare benefits and services and serve additional Tennesseans in need," Lawrence said.

She pointed out the governor and Legislature have made "substantial" investments in TennCare since the block grant program started, including shorter waiting lists for home and community-based services, improved maternal health benefits and new adult dental services.

Any revisions the state makes in the program will keep the "major principles, goals and objectives" of the state's TennCare III agreement with the federal government, she said.

Spokesman Adam Kleinheider said Lt. Gov. Randy McNally would have preferred a "full embrace" of the block grant waiver but was "encouraged that it was not an outright rejection."

McNally hopes TennCare and CMS can reach an agreement that incorporates the "general principles" of the state's original application, Kleinheider said.