As this year’s legislative session winds down, details are beginning to surface on a bill authorizing Gov. Bill Lee to ask the federal government to provide TennCare matching funding – currently about $7.5 billion of a $12 billion TennCare budget – as a block grant.

If the legislature passes the bill, it will set up tough negotiations over who pays for the program and who controls where the money goes. Currently, the federal government pays an uncapped matching amount and tells Tennessee how to spend it, although it has given the state some leeway with the rules.

For the feds, a good block grant deal would cap how much it would have to pay for Medicaid programs like TennCare and give states more latitude to decide what to do with the money.

A good block grant deal might look different for Tennessee. It wants to decide how it spends the federal money, but Republican lawmakers have said they want any block grant to grow in some measure to protect state finances.

But the more variation in the amount of money the state receives, the less financial protection the feds receive and the less a TennCare block grant deal looks like a standard block grant that limits what the federal government pays to states. It’s a bit like those trippy Escher drawings that show fish transforming into birds and flying away, or birds becoming fish, depending on the viewer’s perspective.

Does Tennessee want fish or fowl in its block grant? Much is at stake.

TennCare is Tennessee’s version of Medicaid, a federal antipoverty program that started in 1965 to provide health care services. It has a wide reach in Tennessee. Half of all children receive health care through TennCare and half of the state’s babies are born with help from the program.

It pays for care for low-income pregnant women, the elderly and disabled. TennCare covers about 20 percent of the population, close to 1.5 million people.

Nationwide, Medicaid covers nearly 72 million people and uses both state and federal money. In Tennessee, the federal government provides about 65 percent of the TennCare budget as a matching grant that varies from year to year depending on the number of people in the program, state Medicaid spending and average state per capita income.

In a recent meeting with journalists, state Republican lawmakers said they want any block grant to Tennessee adjusted for population growth and for medical inflation, which is generally higher than inflation as measured by the Consumer Price Index.

A population adjustment would ensure that federal revenues to the state were adjusted for a “hiccup in the economy,” state Sen. Jack Johnson of Franklin, a Republican, said in a media availability. “We wouldn’t want to forfeit the elasticity” the state currently has with the federal TennCare match, he added.

The bill authorizing the state to negotiate with the federal government over TennCare block grants has gained approval in the Tennessee House and was to be discussed in the Senate Commerce and Labor Committee this week.

The chairman of that committee, Sen. Paul Bailey, R-Sparta, sponsored the bill in the Senate. In past weeks, he has been working with U.S. Sen. Lamar Alexander and his staff in preparation for possibly requesting a TennCare block grant. Bailey, Lee and Johnson were to meet this week about the progress of the conversation with Alexander, chair of the U.S. Senate Health, Education, Labor and Pensions Committee, Johnson said.

“I have always supported block grants,” Alexander said in a statement. “Last year, I supported legislation in the United States Senate that would have taken Affordable Care Act money and turned it into block grants so Tennesseans could decide how best to spend it in order to make sure that we spend available dollars to provide the largest amount of good health care to the largest amount of Tennesseans.”

The Lee administration said in a statement it has already begun work in addressing costs and funding innovative solutions to improve delivery of care. Lee “is always open to reviewing any thoughtful proposal from the legislature as we explore ways to work with the federal government and achieve more flexibility in funding,” the statement said. That includes working with the General Assembly and the federal government to identify waiver opportunities that are good for Tennessee and do not have big government strings attached.

The bill that could bring block grants to TennCare first appeared in February, sponsored by Bailey and Rep. Timothy Hill, R-Blountville, chairman of the House Commerce Committee.

“Tennessee knows and understands better than the federal government what works best for our citizens, and these block grants will enable us to create a patient-centered system, focused on increasing competition, lowering costs, and improving the quality of care Tennesseans receive,” Hill said in a news release when the bill was introduced.

“A block grant would give us the regulatory flexibility to design an innovative plan that works best for our citizens, instead of a one-size-fits-all plan from D.C.,” Bailey said in the same news release. “Flexibility will help cut costs and be more efficient with existing Medicaid dollars. These cost savings will allow us to invest in better quality care for our citizens.”

Backers of the bill have offered few details on how block grants will improve efficiency in TennCare finances and bring about better care through cost savings.

And even though backers of block grants describe TennCare as a “one-size-fits-all” program, federal officials have waived some of its own requirements to allow TennCare to operate differently in some respects. Tennessee was the first state to place all of its Medicaid enrollees under a managed care system in 1994.

The federal Medicaid program’s online list of state waivers says that TennCare currently operates under four separate waivers. Four waiver-amendment requests are pending, dealing with substance abuse treatment, family planning services, services to people with intellectual disabilities and promoting community engagement and employment among certain enrollees.

In addition, the state files a lengthy annual report with the federal government on how TennCare performed in the previous fiscal year. The most recent report, filed in March, noted new efforts to address opioid misuse, a new medication therapy management pilot project, ongoing payment reforms and progress on a computerized system for eligibility determination.

An annual survey of TennCare participants by the University of Tennessee measured enrollee satisfaction at 95 percent, the ninth straight year in which satisfaction exceeded 90 percent.

In addition, TennCare’s medical inflation rate was 1.8 percent according to data obtained in 2017, the report stated. The national Medicaid inflation rate is 4.5 percent, according to the report.

The block-grant bill has gone through two iterations in the House, both short and simple. The bill initially said the block grant must convert “the federal share of all medical assistance funding … into an allotment that is tailored to meet the needs of this state and … indexed for inflation and population.” It didn’t specify how inflation and population would be indexed.

The second version deleted the indexing requirements and required the legislature to approve any block grant agreement by joint resolution before it could go into effect. It also defined block grant as “an allotment of federal funds for the purpose of providing medical assistance, and for which the state determines how to allocate and spend the allotted funds.”

House committee discussions, although brief, have shed some light on the bill. Its sponsor, Hill, described block grants as a means to return tax dollars to Tennessee, reduce the cost of compliance and serve more people with existing dollars. He didn’t give specifics of how block grants would advance these goals.

“It’s not necessarily the intent to have less funding but (to) use existing resources to serve as many people as possible,” Hill said in an Insurance Committee meeting.

In the same meeting, Democrats offered amendments. One would require that block-grant negotiations include protections for people with pre-existing conditions; another dealt with protections for rural hospitals. A third amendment would have made TennCare available to an additional 200,000 people and a fourth sought protections for elderly people for whom TennCare pays for nursing home care.

One by one, the amendments were tabled, and Hill explained that the intent of the bill was to allow the greatest latitude to the state in negotiating with the federal government.

Hill said those proposing amendments had legitimate concerns that would be taken up in negotiations with the federal government. The intent of the bill was to allow the greatest latitude to the state in negotiations, he said.

Memphis Democrat Larry Miller was concerned that the bill didn’t set a minimum amount for the block grant. Hill replied, “I’m confident that the governor, through the commissioner of F&A, will not accept a proposal for less than what we’re getting now.”

Miller persisted. “In the amendment it doesn’t specifically say to negotiate above the amount currently” provided to the state. “Would you be open to that?” he asked.

“No, sir; no,” Hill said.

Rep. Darren Jernigan, D-Nashville, asked what would happen under a block grant if the state were to fall into a recession.

“It’s a classic concern and a valid concern,” Hill said. “That’s something we would anticipate would be mentioned … but that’s addressed in negotiation.”

Just before the committee voted, Rep. Mike Sparks, R-Smyrna, said “health care was one of the biggest issues in my community, probably the biggest. ... We’ve really got to work on this issue, I mean all of us together in a bipartisan effort.” He thanked everyone who is working on the issue, including the governor, sponsors of the bill and those offering amendments. “We are facing a crisis. … Sometimes I feel like I’m the only one that’s seeing this stuff in my community.”

The bill passed on a voice vote, to move forward in the committee process.