“Restoring Medicaid,” What happens when states switch to Block Grants? I came across a NYT article citing Seema Verma’s approval of the Tennessee’s Block Grant recently. The Tennessee Block Grant is mentioned in section ” Revoke The Block Grant Initiative” of my post Restoring Medicaid.
What Are Block Grants?
Government funded normal Medicaid has established rules for coverage and benefits. In an exchange for greater freedom offered to states and an open-ended payment commitment, states pay a share of Medicaid. Using the Block Grant initiative and capped federal funding , states can decide what services to provide.
If the Block Grant spending is less, Tennessee can keep 55% of any savings. Savings can be used for anything related to healthcare and not just Medicaid. If the spending increases beyond the Cap, Tennessee makes up the difference. Program limitations can change to allow the spending cap to grow if enrollment increases such as what is happening during the Pandemic.
Medicaid pays for a wide variety of pharmaceuticals and pays the lowest price “today” of any pharmaceutical purchase in the United States. Under a Block Grant, Tennessee negotiates the drug pricing. One danger is if a drug is too expensive, Tennessee can reject covering it in its formulary.
Why Can Block Grants Be Bad?
Savings can be used for anything healthcare and also end up not being used to treat Medicaid patients.
Tennessee negotiating pharmaceutical pricing is similar to a corner store attempting to negotiating prices for product. It is one store or state. We have seen during the pandemic how states have struggled to lock in healthcare supplies and pricing Lone states do not have the same leverage as Medicaid negotiating prices for all of the states. Medicaid “today” secures the best pricing regardless of value.
HHS has extended the term of Block Grants to 10 years. A state can cancel it after giving a nine month notice. Such a delay in cancellation is an attempt by the present administration to lock states into the contract blocking the Biden Administration.
Puerto Rico’s experience with Block Cap funding ended up shifting significant costs to itself resulting in cuts to eligibility, benefits, and provider payments. Promised additional Medicaid funding increases to cover funding short fell over the past decade resulted in modest improvements and access.
Using a Block Grant system, the state could impose personal spending caps. It could exempt itself from following Medicaid policy such as standardized eligibility requirements for the needy ensuring coverage and reimbursement rates reflecting the actual cost of care.
One of a dozen states, Tennessee hopes to abandon the normal Medicaid structure with its wavier. The Block Grant is in lieu of the Medicaid expansion and also the normal Medicaid structure still leaving a gap of uninsured from 101% to 138% FPL.
$ Left on the Table?
Tennessee wants the block grant to result in “significant federal funding” which it will control. The state will use the money gained to provide additional services, such as nutritional assistance, housing support, and dental care.
In 2016, the federal government paid 100% of the cost of covering expansion-eligible Medicaid enrollees from 2014 through 2016. In 2016, the amount paid by the federal government gradually decreased to 90% by 2020. The state’s cost share for expanded Medicaid will never exceed 10%. By leaving 380,000 people uninsured in old Medicaid, Tennessee left a windfall ~$26 billion in federal funding (over a decade) on the table.
The state wants the billions of dollars of federal funding, no oversight, and all the critical access and health care protections stripped away.