Health Tennessee becomes first state with a plan to turn Medicaid into a block grant

September 23, 2019

Health Tennessee becomes first state with a plan to turn Medicaid into a block grant

Reprinted with AIS Health permission from the September 23, 2019, issue of Health Plan Weekly

On Sept. 17, Tennessee became the first state to unveil a plan to convert the federal share of its Medicaid funding into a block grant rather than an open-ended entitlement.

Tennessee would calculate its block grant by taking the average TennCare enrollment in fiscal years 2016 through 2018, then multiplying that by the federal government’s projections of what Medicaid costs would be in Tennessee absent the state’s existing Section 1115 waiver.

The block grant amount also would be adjusted on a per-capita basis if TennCare’s enrollment grows beyond its average enrollment from 2016 to 2018, ensuring that the state “will continue to be able to provide medical assistance to all eligible individuals, regardless of changes in the economy or other factors outside the state’s control.”

In any year when the state underspends its block grant, the state and the federal government would share in the resulting savings. “This innovative proposal reimagines the Medicaid financing structure in ways that emphasize state accountability for effective program management, while incentivizing performance and ensuring that financial responsibility for Tennessee’s Medicaid program continues to be equitably shared between the state and the federal government,” the plan states.

At least one expert, though, worried about the implications of such a program if it receives CMS approval.

“Tennessee’s plan for a Medicaid block grant, even though it’s not a pure version, will have the potential to limit services offered and the number of individuals covered,” says Jerry Vitti, founder and CEO of Healthcare Financial, Inc., a company that connects low-income, elderly and disabled populations with public benefit programs.

“With a fixed amount of federal revenue per person, the role of a state Medicaid program becomes much more focused on cutting costs than ensuring access or improving population health,” he adds. “There is a reason the federal Medicaid program was not block granted in the first place — it was to ensure access.”

Tennessee’s proposal comes as Medicaid stakeholders continue to await guidance that CMS is expected to release outlining how states can use 1115 waivers to implement Medicaid block-grant financing structures (HPW 8/26/19, p. 1).

View the draft proposal at


by Leslie Small