December 03, 2019
On November 20, 2019, Tennessee submitted a Section 1115 waiver application to the Centers for Medicare and Medicaid Services (CMS), which, if approved, would implement a block grant for the state’s Medicaid program (TennCare). The final waiver application is very similar to the proposed plan the state released in September, with a few minor adjustments. To view our summary of the initial proposal, click here.
Below is a summary of the key provisions of the final waiver application. CMS will accept comments on the proposal through December 27, 2019.
Tennessee’s proposed block grant system would apply to the traditional Medicaid population – low-income adults, children, pregnant women, and people with disabilities. The waiver would establish a cap on federal Medicaid funding for the state, calculated based on four discrete member categories that have a history of different expenditures: 1) blind and disabled; 2) elderly; 3) children; and 4) adults. For each category, the state would calculate the average TennCare enrollment during State Fiscal Years 2016, 2017, and 2018, and then multiply by the federal government’s projections of what Medicaid costs would be in Tennessee without the existing TennCare demonstration. The amount of the block grant would then be adjusted in future years based on inflation. Based on the state’s initial calculations, Tennessee would receive approximately $7.9 billion in the first year of the program.
All expenses beyond the core medical services for the core Medicaid population would be excluded from the block grant calculation and be funded under existing mechanisms (see Excluded Expenditures section below). Additionally, any year in which the state’s Medicaid enrollment grows beyond its average enrollment during the base period of 2016 through 2018, the block grant amount would be adjusted on a per capita basis. (Thus, despite being framed as a block grant, the program acts more like a traditional per capita cap).
Finally, the proposal includes a shared savings provision, which would allow Tennessee to retain 50% of the savings in any year that the state underspends the block grant amount.
As noted above, certain services would be excluded from the block grant calculation and continue to be funded under existing mechanisms. These include:
The waiver also requests that Tennessee be exempt from any new federal mandates over the life of the demonstration that could have a material impact on the state’s Medicaid expenditures, such as new coverage requirements. If the federal government were to impose such mandates, the block grant amount would have to be adjust to account for it. Additionally, if the state were to elect to expand coverage to a new population, that population would be excluded from the block grant calculation for up to three years.
Although the state is excluding outpatient prescription drugs from the block grant formula, it is proposing to adopt a closed formulary that has at least one drug available per therapeutic class. The state proposes to exclude new drugs from its formulary until market prices are “consistent with prudent fiscal administration,” or the state determines that sufficient data exist regarding the cost effectiveness of the drug. The application notes that the state will ensure that the selected drugs in each therapeutic class meet the clinical needs of the vast majority of beneficiaries and that they are cost effective. In addition, the state will maintain an exceptions process to cover drugs that are not on the formulary when medically necessary, including but not limited to exceptions to address adverse drug reactions, drug interactions, or specific clinical needs of a patient.
In addition to establishing a block grant funding structure and a closed drug formulary, the waiver application requests several new state flexibilities, which fall into four broad categories:
Flexibility to spend Medicaid dollars on things beyond basic health services:
Flexibility to alter benefits packages:
Reducing administrative burden:
Reducing fraud and abuse: