Tennessee to become first state to seek approval for Medicaid block grant 

Dollar bill with a hole in Washington's face on it and the word "Medicaid" in its place
Tennessee is set to request a Medicaid block grant. (zimmytws/GettyImages)

Tennessee legislators have approved a bill that would make the state the first to request approval from the Trump administration for a Medicaid block grant. 

The bill, which was passed late last week, gives Gov. Bill Lee six months to build a formal waiver request to be submitted to the Centers for Medicare & Medicaid Services (CMS). Lee said the process offers the state an opportunity to issue “a correction to a system that’s broken,” Nashville Public Radio reported

But it's also a major test for the administration, which has touted and strenuously defended its approvals of Medicaid demonstrations like work requirements, on how much authority it has under Section 1115 of the Social Security Act. 

CMS officials have been mulling approvals for block grants over the past several months, and Department of Health and Human Services Secretary Alex Azar confirmed they were in talks with multiple states on the matter

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Under a block grant model, a state would be paid a flat amount of funding for Medicaid, which wouldn't adapt to enrollment changes or other potential upheaval in the program. If a state goes over that block of funding, it's on the hook.

The White House has also built Medicaid block grants into its budget proposals for 2019 and 2020, making clear that it backs the idea. Republicans have long trumpeted block grants as a way to control Medicaid costs and offer states greater “flexibility.” 

But it’s an open question what new opportunities states can pursue under a block grant payment structure compared to traditional Medicaid funding. States already have plenty of leeway to design their programs to fit their populations, Edwin Park, a research professor at the Georgetown University McCourt School of Public Policy, told FierceHealthcare. 

“That’s where there's usually a silence or refusal to answer” from advocates, Park said. 

What a block grant would do, however, is create the potential for states to cut their program in ways that might otherwise be blocked under Medicaid statute, he said. For example, a state that implements block grants—as it would cap federal funding at an inflexible rate—could potentially roll out enrollment caps or reconfigure benefits. 

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Much like with Medicaid work requirements, a block grant waiver approval is likely to face legal opposition, and it’s likely for this reason that the administration hasn’t acted on block grants, Park said. 

“This would likely face a serious legal challenge, and all of the reporting up to this point has indicated that the administration is grappling with that internally,” Park said. 

And indeed, opposition to the plan has already sprung up. The Tennessee Justice Center, a nonprofit, is urging residents in the state to call Lee and ask him “not to cut Medicaid.” 

Park said that negative image has turned more than a few states off moving forward with block grants. In addition to the potential political impacts, many state policymakers—from both parties—are seeing the financial downsides to capped funding that cuts back what they get from the federal government. 

“You’re putting yourself at risk being left holding the proverbial bag with a block grant,” Park said. “It is rightfully scaring some folks.”