The latest legislative iteration in the move to receive billions in federal TennCare funds as a block grant would curb new federal mandates, add flexibility for the state to control pharmacy costs, set a floor for federal funding and remove previous requirements for state legislators to approve any TennCare deal that Gov. Bill Lee negotiates.

State senators were working on the amended bill this week, about two weeks before the General Assembly is set to adjourn. At stake are more than $7.5 billion in matching funds that the federal government provides to TennCare, a $12 billion program that covers more than 1.3 million state residents, according to the latest TennCare figures.

The amendment varies considerably from the bill that the Tennessee House had overwhelmingly approved the week before, following 45 minutes of discussion. At least three times during that discussion, House sponsor Rep. Timothy Hill, R-Blountville, said any agreement that Gov. Bill Lee negotiates with the federal government would be subject to the General Assembly’s approval.

Under this week’s Senate amended bill, the Lee administration has 180 days to submit its TennCare waiver request to the federal Center for Medicare and Medicaid Services. The amendment includes many specific parameters to block grant negotiations but information on the dollar effects of these parameters wasn’t available at press time.

The amendment specifically states the waiver would “provide assistance to the TennCare II waiver population.” It requires adjustment to the state’s Medicare wage index, which the amendment says is “inadequate.” The amendment requires the block grant be indexed for population growth, “inflation and other costs.”

Not included in the block grant are “any expenses ...not included in the state’s existing 1115 waiver.” Administrative costs wouldn’t be block granted and would be paid as matching funds.

The block grant would either exempt the state from new regulations, mandates and federal court orders, or the federal government would cover the cost of complying with them. The block grant wouldn’t decrease from deflation or population loss.

The timeline for requesting and implementing block grants isn’t fully clear. Federal Medicaid regulations do require public hearings and the opportunity for people to comment on proposed changes. TennCare is Tennessee’s Medicaid program.

The state currently receives more than $7.5 billion in TennCare matching funds, and the exact percentage of the roughly 65 percent match varies depending on TennCare enrollment, state per-capita income and other factors. Two years ago, Congress considered block-granting its Medicaid match, but the proposal failed.

Since that time, the federal government has encouraged states to request block grants through Medicaid waivers as a means to gain greater state control over how the money is spent. Tennessee’s Republican legislators have found the prospect of increased control appealing, while Democrats are concerned about the level of coverage for enrollees and changing a currently open-ended federal match.

“It’s not my intention that anyone lose coverage that they currently receive through TennCare Medicaid,” the sponsor Sen. Paul Bailey of Sparta, said before the amendment was filed.

It’s possible that the state could expand TennCare coverage if the state could save money in administering the program with less regulation, he said.

Bailey has been meeting weekly on block grants this year with representatives from U.S. Sen. Lamar Alexander’s office, representatives of TennCare, the Center for Medicaid Services and other legislative leaders. Alexander, a Republican, chairs the Senate Health, Education, Labor and Pensions Committee. He has represented Tennessee since 2003 and will not seek re-election in 2020.

“We believe that by removing some of the federal regulations that each program currently has, (TennCare can be) administered more efficiently,” Bailey said.

He said the state might be able to reduce TennCare costs if it could require copayments and monthly premiums from those TennCare recipients with the ability to pay, Bailey said.

For example, TennCare enrollees have co-pays for prescription drugs, but they’re not enforceable, he continued. If an enrollee goes to the pharmacy with a prescription and says he cannot pay, the pharmacy has to give him the medications and the pharmacy cannot recover the amount of the unpaid copay from the state. Bailey would like to see greater ability to enforce co-pays as part of any Tennessee’s block-grant waiver request.

Some TennCare enrollees, with incomes at or above the federal poverty level, currently have income-based co-pays for medical care, according to the TennCare website. The co-pays start at $5 and can go up to a high of $100 for hospital inpatient admission.

AThe TennCare program has been well-run and is considered a Medicaid model for the nation, Bailey said.

Two fellow Republicans with backgrounds in health care agree.

Sen. Richard Briggs of Knoxville, a cardiac surgeon, said that from a policy standpoint, “TennCare is one of the better programs in the country in terms of keeping costs down.” Its medical inflation rates are less than those of Medicaid programs in other states, and three managed-care organizations administer TennCare and help keep costs down, he said. He has served in the legislature since 2015.

Problems with TennCare include low hospital reimbursement rates, he said. Low reimbursement rates for physicians have led some physicians to decide not to participate in TennCare, which can require patients to travel a longer distance to see a doctor or wait longer for an appointment.

“I think that (an economic downturn) could very quickly get the state into a very bad situation (in which it) couldn’t take care of patients,” Briggs said.

Block grants may work, he said, as long as the economy remains fairly strong. There is full employment in Tennessee, and the number of TennCare enrollees is at a low point.

There’s an inverse relationship between the economy, tax revenues and the number of people on TennCare, Briggs said. If the economy declines, tax revenues will drop because much of Tennessee’s state tax revenues come from the sales tax.

The state constitution also requires a balanced budget and forbids an income tax. At the same time, he said a declining economy would prompt more people to seek health care through TennCare.

Any block grant proposal would have to include at least four safeguards, he said.

One safeguard, he said, would be a per-capita cap block grant, in which the state would receive a set amount of money for each person enrolled in TennCare. Second, any per-capita amount would have to factor in the varying costs of treating four basic groups of TennCare patients: indigent elderly people receiving care either at home or in a nursing home, at an average annual cost of just under $16,000 each; disabled people, at the same average annual cost; children, whose care costs about $2,000 per year each; and other eligible adults, whose care costs about $3,000 per year each.

Third, the amount of any block grant would also need to be indexed to the rate of medical inflation, Briggs said.

Finally, any block-grant waiver should give Tennessee greater control over Medicaid’s minimum essential benefits, especially as they relate to pharmacy and drug benefits, he said.

Sen. Ferrell Haile (R-Gallatin), a pharmacist who has served in the legislature since 2011, says that while TennCare overall is a good program and has had less growth in its Medicaid program than other states, the state is probably spending a lot more money than it should.

“The real question is, are we doing the best that we can? Are we working together or working in silos?” Haile said. “…We have the expertise to do a block grant. (Tennessee is) every bit as wise as folks are in Washington, D.C.

“We need to be protected against an extreme (economic) downturn in which many people would be coming onto TennCare rolls, or a catastrophic event or major outbreak of a disease,” Haile continued. And all the details have to be right in making a switch to a block grant, he said.

The details concern attorney Michele Johnson, co-founder and executive director of the Tennessee Justice Center, where she has advocated on behalf of TennCare enrollees.

The safeguards that block-grant backers mention – such as indexing the federal TennCare match to medical inflation and to growth in the Medicaid population – are available in TennCare as it exists now, she said.

Moreover, she said, “we’ve operated in a flexible waiver (program) for 25 years. … We’re Exhibit A of wide flexibility. (We’ve) pretty much (received) everything we’ve asked for” in waiver requests.

Tennessee needs the financial format of the current Medicaid system, in which federal matching grants are open-ended, because the state’s tax structure would make it difficult to maintain services in a time of financial stress.

In the event of a natural disaster, such as the forest fire in 2016 in Sevierville, there has been “huge growth in the need for Medicaid,” Johnson said. People become “disconnected from their jobs and need a safety net. (The disasters are) not predictable and not permanent. If the safety net is not there, it’s harder to bounce back.”

Johnson said that changing TennCare’s method of receiving matching funds would affect other safety net institutions such as community clinics and nonprofits that serve TennCare enrollees and other low-income people.