Tennessee is moving toward becoming the first state to convert its Medicaid program to a block grant, opening up a new front in conservatives’ efforts to give states more flexibility over the health program while also raising concerns about potential cuts in coverage.
Republican Gov. Bill Lee is expected to sign legislation soon seeking Trump administration approval to turn federal funding for the state’s Medicaid program into a lump-sum grant. Currently, Tennessee, like other states, gets open-ended federal dollars because the government matches a percentage of state spending. A switch to block grants would essentially cap funding.
The move comes as the Trump administration has encouraged states to explore block grants as part of a White House effort to overhaul Medicaid. The federal-state program covers about 74 million low-income and disabled people, including almost 30 million children, and several Republican-controlled states have already adopted or are requesting federal approval for work requirements and other ways to rein in costs. Growth in Medicaid means the program is making up a larger share of state budgets.
“This would be a major change in the history of Medicaid,” said Michele Johnson, executive director at the Tennessee Justice Center, a public policy advocacy group, referring to block grants. “Republicans have wanted this for a long time.”
Supporters say block grants would free states from federal requirements that limit the ability to try novel ideas that may increase coverage and lower costs, as well as a way to better control Medicaid spending. Critics say the switch would challenge Medicaid’s guarantee of coverage for eligible low-income and disabled people, because funding amounts would generally be more fixed and wouldn’t keep pace with health-care inflation.
Both sides predict an escalation in the fight over Medicaid and how far the Trump administration can go in putting its conservative imprint on the program. Lawsuits are already underway over the administration’s approval of work requirements in Medicaid, and consumer groups predict litigation if block grants are approved.
“It’s extremely foolish for a state to sign up for this,” said Joan Alker, executive director of Georgetown University’s Center for Children and Families. “No amount of federal flexibility is worth the loss of federal dollars.”
Republican Tennessee state Sen. Paul Bailey, who sponsored the legislation, said guardrails in the block grant would make sure that funding keeps up with population growth, medical inflation, and pharmaceutical costs. Getting out from under federal restrictions on Medicaid would lead to more efficient management of the program, he said.
“The goal of this legislation is to make sure our current Medicaid population in Tennessee continues to receive coverage,” he said. “Our hope is we can create can an innovative system with cost savings that can cover more people.”
Nina Owcharenko Schaefer, a senior research fellow at the conservative Heritage Foundation, said decisions on Medicaid spending needed to be more local.
“Every state is different,” she said. “The statutory limits the federal government puts on is a burden. States want to tailor benefits to deliver better quality at lower cost.”
Tennessee now gets about $7.6 billion in federal funding to help pay for its program.
Health and Human Services Secretary Alex Azar has touted block grants as giving states more flexibility in designing their Medicaid programs, and the Trump administration has invited states to offer ideas to use waivers to change their Medicaid funding formulas. Democrats say the White House is trying to circumvent Congress after Republicans failed to change Medicaid to block grants during a 2017 attempt to repeal the Affordable Care Act.
While Alaska lawmakers said earlier this year they were working on a block-grant plan at the behest of Trump administration officials, Tennessee went first, approving legislation last week. The bill spurred objections from a coalition of patient groups such as the American Cancer Society, which said people could lose their health coverage.
The state’s move leaves a number of unanswered questions. While the administration has encouraged states to come up with proposals, there is no guarantee that Washington will approve specific plans. Tennessee would seek to change its funding for Medicaid by getting approval under a federal waiver, but some legal analysts said it was unclear if a block-grant request would be allowed under waiver requirements, which typically allow flexibility in the way states fund Medicaid as long as specific requirements are met.
“A benefit cut for the purpose of saving money isn’t legitimate,” said Joel McElvain, a lawyer at King & Spalding in Washington who is familiar with waivers.
The federal government spent about $375 billion on Medicaid in fiscal 2017, according to the nonpartisan Congressional Budget Office, and states spent $230 billion.
The administration’s actions have winnowed coverage. In Arkansas, an estimated 18,000 people have lost Medicaid coverage under newly imposed work requirements approved by the federal Centers for Medicare and Medicaid Services. The administration has also backed a plan in Utah that would cap Medicaid enrollment based on state-funding decisions. The approval was seen as the opening salvo in limiting coverage through other initiatives such as block grants.
Luz Belleza-Binns, 53, in Mount Juliet, Tenn, is worried. Ms. Belleza-Binns works for a juvenile court, and her two children have autism and get coverage through Medicaid. She says a move to a block grant could put their insurance at risk. “I don’t have to worry and I can provide them with medication and therapies they need,” said Ms. Belleza-Binns, who opposes the block-grant effort.
