NASHVILLE (AP) — Tennessee's top officials remained encouraged Thursday after reviewing the Trump administration's plan to transform Medicaid funding into block grants, arguing that the state's related but separate proposal is on the right track for approval.

Last fall, Tennessee became the first state in the nation to ask the federal government for funding in a lump sum for its Medicaid program, also known as TennCare.

As officials await a response — which could take at least several more months — Seema Verma, head of the Centers for Medicaid and Medicaid Services, unveiled a complex block grant proposal Thursday. That plan outlined a different focus than specified in Tennessee's proposal.

Tennessee's $7.9 billion proposal would cover core medical services for the disabled and blind, children, pregnant women, adults and elderly — or about 1.2 million people.

Meanwhile, Verma's letter to state Medicaid director said their offer would be restricted to coverage for able-bodied adults under 65. A state could not put nursing home residents, disabled people, pregnant women, or children into the new plan. The federal government would not limit its Medicaid contribution for these groups, considered the most sensitive.

The deal is optional for states but officials would have to apply for a federal waiver to get it.

It's still unknown if the federal government's new guidance will allow what Tennessee is seeking to change.

"While this guidance does not address Tennessee's block grant proposal directly, or require any change in our approach, it is very encouraging that it reflects several of the key innovative principles we identified in our waiver request months ago," said TennCare spokeswoman Sarah Tanksley in a statement.

Republican Gov. Bill Lee thanked Verma in a tweet Thursday, saying the federal government's plan reflects "flexibility, innovation, fiscal sustainability and other key principals" that are key to Tennessee's approach to health care.

Lee has batted away suggestions to expand Medicaid under former President Barack Obama's health care law, saying that would worsen a broken system.

Tanksley added that while Tennessee isn't mentioned, the federal government's new guidance does share several similarities with the state's proposal.

For example, Tennessee designed its proposal to allow Tennessee to keep 50% of any unspent block grant funds.

In 2018, Tennessee came in $2 billion lower than projected. Under the block grant, Tennessee would have been able to pocket $1 billion, depending on what is ultimately negotiated with the federal government.

Likewise, the federal government's new guidance would limit what prescription drugs will be covered. Tennessee's plan includes a controversial component that could limit some prescriptions for those on TennCare to one drug covered per therapeutic class.

"Specifically, it is encouraging that CMS recognizes that states should have the opportunity to earn shared savings through quality-based performance that can then be reinvested in their Medicaid programs and the health (not just health care) of their Medicaid members," Tanksley said. "We are also pleased that CMS recognizes the need for state flexibility regarding prescription drug benefits."

Currently, the federal government pays a percentage of each state's Medicaid costs, no matter how much the costs rise in any given year. For Tennessee, that means receiving approximately $7.5 billion in federal money for its $12.1 billion Medicaid program, or 65%.

Republicans argue this system gives states little incentive to keep expenses under control, because no state pays more than half the total cost. They contend that states need more flexibility to shape their Medicaid programs while also being given the opportunity to rein in spending.

Others, however, warned that Tennessee's block grant proposal would not pass federal government's scrutiny.

"It's clear that the plan Tennessee proposed last year will not be approved as is under this particular set of rules. Based on our initial reading, there are a number of substantive differences between Tennessee's proposal and CMS' guidelines," said Brian Staessle with The Sycamore Institute — a Tennessee think tank.

Democratic lawmakers chided GOP-dominant Tennessee for pursing its block grant proposal.

"Gov. Lee's extreme plan won't meet the ambitious plans to destroy Medicaid put out by the Trump administration," House Democratic Caucus Leader Mike Stewart of Nashville said.

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Associated Press writer Jonathan Mattise in Nashville contributed to this report.