Tennessee making TennCare changes after federal officials raise concerns

Jul. 23—Tennessee has begun the process of submitting changes to how it operates TennCare just weeks after the federal government raised concerns about certain aspects of the health care program for the poor and disabled.

The state's action comes in response to a June 30 letter from Daniel Tsai, deputy administrator for the U.S. Center for Medicare and Medicaid Services, to TennCare Director Stephen Smith stating "CMS has significant concerns" about what is known as TennCare III, the one-and-a-half-year-old waiver approved in the waning days of the Trump administration.

Among CMS' concerns are the state's plan to save money by limiting access to certain prescription drugs and therapies based on price and the way that the program demonstrates budget neutrality.

CMS also states that Tennessee should modify the waiver's special terms and conditions section to "more explicitly state" Tennessee cannot cut benefits or coverage and "instead of the current framework for savings and investment" work with CMS to ensure those investments "meet common goals."

Gov. Bill Lee's administration taking actions itself to correct these issues would "significantly mitigate CMS concerns," according to the letter.

TennCare is the state and federally funded health insurance program that covers more than 1.6 million low-income Tennesseans — mostly women, children and people with disabilities. The federal government funds 66% of the program.

In 2019, Tennessee's Republican-controlled General Assembly passed a bill directing the governor to submit a waiver amendment to the federal government seeking permission to convert its portion of TennCare funds to a "block grant," which lawmakers contended would give the state more flexibility to tailor the program to meet the state's needs and save money by freeing Tennessee from federal regulations that came with the previous system.

Tennessee's waiver was submitted in 2020. Then-President Donald Trump's administration approved it on Jan. 8, 2021, days before Trump left office.

Many patient advocacy groups, including the Tennessee Justice Center and Tennessee Disability Coalition, have long opposed TennCare III and the block grant concept over fear that it would result in reduced coverage and limit future TennCare funding.

In the amendment, TennCare officials agreed to demonstrate that the program remains budget neutral for the federal government — a condition of operating under a Medicaid waiver — on a per capita cap basis, which according to the amendment TennCare would modify to satisfy CMS. Currently, TennCare III demonstrates budget neutrality on an aggregate cap basis.

The amendment also states that Tennessee "has no objections" to stating more explicitly that any proposed benefit reductions would be subject to the standard amendment process and that it would no longer "exclude certain drugs from the state's Medicaid prescription drug formulary."

In a public notice dated July 19, TennCare officials state the prescription drug change is "not an indication that Tennessee's concerns with the rising cost of prescription drugs or the lack of mechanisms to meaningfully control drug costs within the existing Medicaid policy framework have been alleviated," encouraging CMS to use its own power to address this issue.

Gordon Bonnyman, staff attorney for the Tennessee Justice Center, said in a phone interview that the new funding mechanism laid out in the amendment will bring much better long-term stability to TennCare.

"I think that's a positive, and I think it really is a win for the state, no less than for the people who are in the program," he said.

Changes to TennCare III's pharmacy formulary provisions, which Bonnyman said are particularly damaging to patients with complex medical needs, laid out in the amendment are also a positive.

"They were going to sharply curtail the range of drugs that were going to be available to people," he said, noting TennCare was already among one of the most restrictive state Medicaid programs in terms of its pharmacy benefit.

In an emailed statement, Jeff Strand, coordinator of government and external affairs for the Tennessee Disability Coalition, said that it's "encouraging to see TennCare respond to CMS's justified concerns raised by thousands of public comments submitted by individuals and organizations across Tennessee, including many in our own membership."

While advocates celebrate the amendment, Bonnyman said the group still has some major concerns about how the TennCare program operates, including that the TennCare III waiver lasts for 10 years. Waivers are supposed to be granted just for the length of time needed to test a new strategy for administering their Medicaid programs, he said.

"If you are testing something for 10 years, you're not testing it anymore. You're setting it in place," he said, noting that before the Trump administration Medicaid waivers were never granted for more than five years. "Once you get out beyond that, you're just basically giving the state a 'Get Out of Jail Free' card."

The amendment process includes a public comment period from July 19 to Aug. 19.

Contact Elizabeth Fite at [email protected] or 423-757-6673. Follow her on Twitter @ecfite.

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