First State Proposes Move to Medicaid Block Grants

In what’s likely the first in a wave of applications, Tennessee recently announced plans to submit its application to the federal government to receive block grants for most of its Medicaid program. This would make Tennessee the first state to implement such a methodology for funding its Medicaid services. And Tennessee isn’t the only state considering this. Utah has already proposed a per-person cap on the federal Medicaid it receives for low-income adults, and Alaska has been in discussions with CMS on using block grants to fund the state’s Medicaid program since early March. It recently engaged a consulting firm to perform a study analyzing the effect of implementing block grants for federal Medicaid payments. 

The Trump administration and congressional Republicans have been calling for changes to Medicaid funding, which could limit federal Medicaid costs through block grants or per capita caps. CMS has developed guidance it will be releasing to state governments shortly, providing the framework for states to seek and implement block grant waivers. This guidance, which covers all Medicaid services, also is likely to affect support for people with intellectual or developmental disabilities (IDD) who use a significantly disproportionate share of Medicaid resources.  

Proponents of the concept tout the flexibility and efficiencies that block grants would provide. They also feel that because states fund less than half of Medicaid costs, the current system provides little incentive for states to be efficient. Tennessee, which is widely considered one of the more efficient states, routinely returns billions of unused Medicaid dollars to the federal government. The Tennessee proposal includes a plan to share these savings, which could provide Tennessee with a billion dollars of additional funding. Tennessee indicates it will use some of the funding to support rural health transformation efforts, but the money could go to any program with a demonstrable connection to TennCare member health. 

Patient advocacy groups contend that a move to block grants could jeopardize access to care for vulnerable populations. One key change block grants may bring is shifting Medicaid benefits from an open-ended entitlement to being limited by available funding. This could lead to situations where services won’t be covered if a state’s Medicaid funds are exhausted. In addition, critics of the proposal also feel the promised flexibility will mean reductions or limitations on the number of individuals who will get coverage. For example, as part of Utah’s waiver, CMS has already approved the state to deny coverage to eligible low-income adults to keep the state’s share of Medicaid costs within the budget cap established by the state.

BKD professionals are closely monitoring this developing situation and its potential implications. Since Medicaid is the primary source of revenue for people with IDD, if the move to Medicaid block grants continues, providers in many more states may see changes in funding and policies affecting services for IDD populations. 

Expect more updates in the coming months. Please reach out to your BKD trusted advisor or use the Contact Us form below if you have questions.