CMS on Friday approved the country's first Medicaid block grant plan in Tennessee, following through on a top priority for CMS Administrator Seema Verma.
Under the plan—dubbed "TennCare III"—Tennessee will accept a fixed budget target for its Medicaid program in exchange for more flexibility in spending its Medicaid money and an opportunity to earn shared savings. According to CMS, the agency will work with Tennessee to evaluate historical enrollment and Medicaid cost information to establish a fixed spending target for its Medicaid program.
"The amount is not unlimited, but the plan does include a 'safety valve' to help increase funding due to unexpected increases in enrollment and ensure that the state is incentivized to control cost growth through efficient administration and reducing unnecessary costs rather than through reduced enrollment. The safety valve will maintain Tennessee's commitment to enroll all eligible Tennesseans with no reduction in today's benefits for beneficiaries," CMS said in a statement.
The pilot starts immediately, and it's scheduled to last 10 years, ending on Dec. 31, 2030.
When the latest iteration of the plan was announced, several experts were baffled Tennessee wanted to move forward with it because it doesn't give the state coverage flexibility, the option with the most potential to save money. Democrats and many healthcare experts worry the plan could threaten the state's Medicaid program if things don't go according to plan and Tennessee can't renegotiate terms with CMS.
CMS offered all states a similar opportunity when it introduced its so-called Healthy Adult Opportunity a year ago. But Oklahoma was the only state to take the agency up on it, and its proposal never saw the light of day after the state's voters approved a straightforward Medicaid expansion in June.
Tennessee's approval allows CMS Administrator Seema Verma to claim victory for Republican policymakers, many of whom have wanted to curb Medicaid spending. She's been on a mission to reshape Medicaid in her image since taking the helm of the agency, introducing a wide range of policy changes to lower federal spending on the program. That included allowing states to apply for Medicaid block grants or adopt work requirements and a failed attempt to unilaterally crackdown on providers' supplemental payments.
But the victory could be short-lived because President-elect Joe Biden's HHS Secretary will have the power to reverse Tennessee's waiver approval.
"We believe that CMS will do their best to tie this up in knots for the next secretary," Joan Alker, executive director of the Center for Children and Families at Georgetown University's McCourt School of Public Policy, said in an email.