The Lee Administration has proposed an innovative, hybrid block grant solution to better address the unique needs of citizens who utilize TennCare for access to quality healthcare. The proposal is currently under a public comment period.

As a background, TennCare is a 12.7 billion dollar program where there is a 65/35 split in federal/state funding. The federal government provides 65% of the funds and the state supplies the other 35% via a required state match. If enrollment increases, the state must increase spending to meet the funding for additional patients unless the state/MCO’s decrease payment rates to providers and hospitals.

Of note, MediCare often doesn’t pay providers or hospitals the amount necessary to even meet the cost of providing the care to those patients. TennCare, which is Medicaid, pays providers and hospitals significantly less than Medicare, sometimes even 40-60% less. TennCare’s motto promotes high quality, cost efficient care. Providers and hospitals provide TennCare patients the same care as privately insured patients, but, often, at a financial loss. It is because of the low reimbursements from TennCare that the third leg of the health care stool-access- suffers.

In order for providers to keep their medical practices open, they must have a positive payer mix. TennCare, for the most part, does not improve a provider’s payer mix; thus, expanding TennCare in any traditional sense isn’t going to improve a payer mix nor improve access. In order to stay afloat, many providers have to limit the number of TennCare patients that they can or will see. More patients without an improvement in reimbursement isn’t going to change the number of TennCare patients that a provider can see.

While the TennCare program is 12.7 billion dollars, Tennessee is currently 6.8 BILLION under our waiver cap. That means that TennCare saves the government 6.8 billion dollars a year(roughly 4.4 federal and 2.4 state). The state receives “credit” for about 1/4 of that when they look at our waiver. So, one way of looking at TennCare’s efficiency is that the state saves federal and state taxpayers 6.8 billion dollars a year. The other way of looking at it is that TennCare has been underpaying hospitals and providers significantly since its inception-roughly $54 billion alone over the last decade.

The hybrid block grant proposal aims to leverage Tennessee’s efficiency into receiving a portion of the saved federal dollars via a mechanism called “shared savings”. If Tennessee saves the federal government two billion, then we should receive half of that in the form of funding without burdening Tennessee taxpayers with an additional match of 35%. The hybrid proposal, also, has safeguards for Tennessee in that if our enrollment numbers increase, our block grant will increase, as well. Additionally, it includes a yearly increase to keep up with inflation or growth.

The current federal system of Medicaid rewards states that overtax and overgrow their Medicaid system while punishing states like Tennessee that are efficient. A proposal that rewards fiscal soundness and conservativeness should be promoted, not punished. In a world where government waste and taxpayer abuse runs rampant, a proposal that protects taxpayers while ensuring constituent services are protected should be applauded.

Of course, the devil is in the details.  If Tennessee is granted the funds, but expands services or enrollees without addressing the payment disparity, especially amongst rural providers, the block grant will not be addressing the third leg of health care which is access.  Any proposal that does not look to improve payments to hospitals and providers who take a disproportionate number of TennCare patients, particularly in rural areas, will be missing an opportunity to better serve Tennesseans.

That being said, I find it ironic that most of those who advance the idea of Medicaid expansion never look to address the access problem current TennCare recipients have.  They just speak about expanding the rolls without regards to the stress on the system due to the payment disparities that lead to poor payer mixes and restricted available appointments.  Expanding rolls without first addressing the underlying problems does not benefit current recipients nor does it protect taxpayers.

A hybrid block grant, if constructed the correct way, has the potential to help address the payment problems that plague rural providers while, also, helping improve access for current recipients.  If Tennessee can accomplish those goals while protecting Tennessee taxpayers, shouldn’t that option be seriously considered?

I’ve attached an article that discusses the block grant proposal, as well as some of the stakeholder’s comments.

From the article:

“The Lee administration argues TennCare’s managed care approach has already led to an estimated $2 billion in annual cost savings for Uncle Sam over what a traditional fee-for-service Medicaid program would cost the federal government.

So Lee hopes to negotiate a 50/50 split on those and additional cost savings in which the state could reap as much as $1 billion, which Lee hopes to plow into improving rural health care and other initiatives.”