The Obama administration and Tennessee officials have broken their impasse over the future of federal funding that subsidizes uncompensated care provided by the state's hospitals.
The funding pool is part of a larger waiver that allows the state to continue its Medicaid managed-care model, known as TennCare. Disagreements about the structure and amount of uncompensated-care funding has held up the renewal of the entire waiver for six months.
TennCare was authorized in 2002 under a Section 1115 waiver that expired June 30 but has been extended several times. The CMS has now agreed to extend the waiver through June 30, 2021.
Under the new agreement, the CMS will continue the uncompensated-care payments through June 30, 2017, at current levels, which have averaged around $500 million a year.
During a one-year transition period, the total possible payments will ramp up to $708 million.
After that, Tennessee must submit a revised methodology for distributing the money that limits the subsidies to care provided to people who wouldn't be eligible for Medicaid if the state agreed to expand the program under the Affordable Care Act.
“Coverage is the best way to assure beneficiary access to healthcare for low income individuals, and uncompensated care pool funding should not pay for costs that would otherwise be covered in a Medicaid expansion,” Eliot Fishman, director of the CMS' State Demonstrations Group wrote in a letter to the state in November 2015.
Tennessee hospitals are nervous about how the allocations will change. It's "a whole new ballgame with a new distribution system of funding for hospitals," said Craig Becker, CEO of the Tennessee Hospital Association. "We have some concerns about precisely how this will work, but we have a couple of years to work with state and federal officials to nail down details and secure needed funding for hospitals in the state."
The CMS has increasingly resisted paying for healthcare for the uninsured now that most of them have access to coverage under the Affordable Care Act. That issue has been an obstacle to renewing waivers in other states, including California, Florida and Texas.
California, Florida, Tennessee and Texas have heavily relied on uncompensated-care pools under Medicaid waivers.
Last summer, Tennessee hired a consulting group at the request of the CMS to analyze the need for the pool. The firm found the funding remained critical to ensure access to care and would be necessary even if the state expanded Medicaid.
“Even with Medicaid expansion, at least $229 million in uncompensated-care shortfall remains,” concluded the March 2016 report by the Public Consulting Group.
Last year, the Tennessee Legislature rejected a proposal by Republican Gov. Bill Haslam to extend Medicaid coverage to 280,000 low-income residents.
New attempts to expand Medicaid in Tennessee or in any other state are unlikely with the incoming Trump administration committed to repealing the Affordable Care Act.
It's unclear how the new administration will view the uncompensated-care pools, but Republican congressional leaders and President-elect Donald Trump's pick for HHS secretary, U.S. Rep. Tom Price (R-Ga.), have signaled they are eager to restructure Medicare and Medicaid. It would be possible for either the administration or the state to initiate new negotiations on the waiver.
TennCare members mostly are low-income pregnant women, children and people who are elderly or have a disability. The program covers approximately 20% of the state's population, 50% of the state's births and 50% of the state's children.