Gov. Bill Lee Unveils Controversial $7.9B TennCare Medicaid Block Grant Plan

NASHVILLE -- Tennessee on Tuesday formally became the first state in the nation to start the process of seeking a controversial federal Medicaid block grant waiver pushed by the Trump administration.

Republican Gov. Bill Lee is asking to convert much of the federal share of costs in the jointly state and federally funded TennCare health care program for the poor into what state modeling projects as a $7.9 billion annual lump sum.

The governor is also making a novel request to share future anticipated savings in TennCare on a 50/50 basis with the federal government. Lee says if the past is any guide and U.S. Health and Human Services officials agree, it could provide upwards of $1 billion for Tennessee.

Lee proposes to plow the money into health care, including rural health initiatives, and also is not ruling out select expansion of TennCare to new population categories.

"We're excited about the prospects, and we think we have crafted a waiver that is going to really mitigate the risk that Tennesseans have [from a block grant] but actually give us an opportunity to benefit from the efficiencies that we have and from the way that we run our program," Lee said during a Monday roundtable with Tennessee reporters.

The governor, who was joined by TennCare Deputy Commissioner Gabe Roberts, said if the waiver is accepted by the Trump administration as the state envisions, "that benefit will give us an opportunity to provide enhanced services to our TennCare population at the very least and potentially, for the same money, provide additional services to more people.

"So this could be a big win for the state."

(Read more: Lee vows to pursue Medicaid block grant but not accept one 'that would be bad for Tennessee')

TennCare now covers some 1.42 million low-income children, mothers, seniors and disabled Tennesseans at a total projected cost this year of $12.7 billion in state and federal dollars as well as other funding sources.

According to the waiver, the block grant is projected to impact about 1.3 million people, based on a three-year monthly averaging calculation.

Tennessee's block grant waiver proposal includes core medical services and related expenditures for TennCare's four core population categories. These are: the blind and disabled; the elderly; children and adults, which includes pregnant women; and caretaker/relatives of minor children.

Excluded from the waiver are special federal payments to hospitals providing large amounts of otherwise uncompensated care, critical access and essential hospital payments and similar payments.

Also excluded are people who are enrolled in both Medicare and Medicaid; services that are now carved out of TennCare's current waiver, such as those for individuals with intellectual disabilities; children in state custody; outpatient prescription drugs and administrative expenses that are not treated as medical assistance expenditures.

(Read more: Tennessee lawmakers pass controversial TennCare block grant bill, adjourn for year)

Lee initiated the process Tuesday morning by providing notice of his plans for the managed care program. A 30-day public comment period is in place before the actual Medicaid Section 1115 waiver for TennCare can be submitted to federal officials.

The Republican-controlled General Assembly ordered Lee this year to seek the federal waiver. It came as health care advocates have continued to attack them for refusing to take advantage of the federal Affordable Care Act and extend coverage to an estimated 300,000 working adult men and women, as most states have done. The federal government under the ACA would pick up 90 percent of the cost, or about $1.4 billion annually.

For his waiver, Lee is proposing to plow the money into health care, including rural health initiatives. He is not ruling out expanding TennCare to new population categories.

Sen. Lamar Alexander said in a statement that he welcomes Lee's proposal to give Tennessee more flexibility in spending federal Medicaid dollars and that he will encourage federal officials to consider it seriously.

"Last Congress, I supported legislation in the United States Senate that would have taken Affordable Care Act money and turned it into block grants that states, including Tennessee, could decide how best to spend," Alexander, who is chariman of the health committee in the U.S. Senate.

The state could make changes in response to questions and criticisms raised during the 30-day comment period. State officials would need to submit the waiver request to the U.S. Centers for Medicare and Medicaid Services by Nov. 20.

But Lee's proposals have already come under fire even before he made full details public.

"I think the issue is that when they say that they've created all these 'savings' for the federal government, that includes like the 220,000 children that were cut off even though tens of thousands of them were eligible," said Michele Johnson, executive director of the Tennessee Justice Center, in an early September interview.

"Here's the bottom line," Johnson said. "The Trump administration has said they're going to cut over a trillion dollars out of the [national] Medicaid program through block grants. The Lee administration says we're going to be able to get all this money, an expansion of health care? The math doesn't work out."

This is a developing story. Stay with the Times Free Press for updates.

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

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