First-of-Its-Kind Tennessee Block Grant Approved by CMS

On January 8th, 2021, the Center for Medicare and Medicaid Services (CMS) announced the approval of Tennessee’s final Medicaid Block grant proposal[1] which the state had originally submitted in 2019. “Amendment 42” sought $8 billion dollars, with which the state intends to dramatically alter its Medicaid program, TennCare. The waiver’s stated objectives are to capture savings, provide coverage to a broader range of individuals, and give Tennessee new tools to control health care costs. Below is a summary of major provisions of the approved waiver, and the legal challenges Tennessee is likely to face.

One waiver provision of particular note is the state’s request for exemption from “any new federal mandates over the life of the demonstration that would have a material impact on the state’s Medicaid expenditures”—the open-endedness of which could have significant consequences to the citizens of Tennessee over the ten-year demonstration period.[2]

It is likely that this waiver will face legal disputes similar to those raised after the approval and implementation of work requirements/community engagement eligibility standards approved in states like Arkansas and Kentucky. As we reported previously[3], the standard by which those cases were assessed was whether the waivers “[assist] in the promotion of the objectives of Medicaid.” Under that standard, the courts are likely to examine whether Tennessee has put forth a clear evidentiary record that the benefits of the waiver outweigh the measurable harms of changes to the Medicaid program. Additionally, it is important to note that the CMS waiver approval notice sets forth the authority for CMS to withdraw the waiver approval, with a hearing afforded to the state to challenge the determination prior to the effective date of withdrawal.

The block grant significantly alters all aspects of Medicaid delivery for the state of Tennessee, including these major elements:

Scope: All major eligibility groups are included for block grant purposes, including blind and disabled enrollees, low-income children, low-income adults, and the elderly. The waiver includes all “core medical services” and excludes outpatient pharmacy, case management for children in state custody, and all other “costs of services provided under the state’s 1915c waiver.”

Eligibility: The state is permitted to suspend eligibility for any individual convicted of Medicaid fraud for up to 12 months.

Benefits: The state may add TennCare benefits and coverage without seeking prior approval from CMS.

Federal Medicaid Assistance Percentage (FMAP): Tennessee’s FMAP will be 66.1% in 2021, with the  state eligible to receive federal matching funds for waiver expenditures up to the aggregate cap amounts for five eligibility groups: disabled individuals, children, adults over 65, adults under 65, and dual-eligible individuals.

Designated Savings Investment Programs (DSIPs): Tennessee is eligible to receive up to 55% of any savings achieved under the waiver, in the form of additional matching funds, to invest in Designated Savings Investment Programs. DSIPs are defined in the waiver as state initiatives and healthcare providers including: behavioral health safety net programs, school nurses and psychologists, community and faith-based clinics, and prescription drug assistance programs.

Just yesterday (January 28th), President Biden issued the “Executive Order on Strengthening Medicaid and the Affordable Care Act”, in which he directs applicable agency heads (those of Labor, Health and Human Services, and Treasury) to review all existing regulations, orders, guidance documents, policy, and similar agency actions to ensure that they are consistent with the policy set forth in his order: “to strengthen Medicaid and the ACA and to make high-quality healthcare accessible and affordable to every American.” Specifically mentioned as subject to review are demonstrations and waiver policies that undermine Medicaid or the ACA, including waivers that reduce coverage or create unnecessary barriers. It is those two specific points that the DC District Court also outlined when vacating the waiver approvals for the Kentucky and Arkansas work requirements cases.

As we await further health policy actions by the new Biden administration, Health Policy News will continue to follow developments related to this Executive Order, block grant wavier approval and other Trump administration waiver flexibilities, including work requirement/community engagement waiver eligibility criteria.


[1] Tennessee submitted its final proposal on November 20th, 2020, with the 30-day federal public comment period garnering over 1800 comments on the proposed changes to the TennCare Medicaid program.

[2] Tennessee had requested permanent approval of the waiver without the need for future waiver approvals. CMS approved a 10-year waiver.

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