CMS approves ‘unprecedented’ demo to create Medicaid block grant program

Tennessee has been approved by the Centers for Medicare & Medicaid Services to run a demonstration project that will make it the first state to simulate a Medicaid block grant program.

The “unprecedented” action means that the state can instead receive its Medicaid funding under an aggregate cap financing model, or block grant with a fixed amount. CMS said it plans to work with Tennessee to evaluate its historical Medicaid enrollment and cost data to create a financial structure that “establishes a fixed spending target to provide under the demonstration, which will increase at a reasonable growth rate over time.” 

“This groundbreaking waiver puts guardrails in place to ensure appropriate oversight and protections for beneficiaries, while also creating incentives for states to manage costs while holding them accountable for improving access, quality and health outcomes. It’s no exaggeration to say that this carefully crafted demonstration could be a national model moving forward,” CMS Administrator Seema Verma said in a statement Friday. 

The state first released a first-of-a-kind proposal to convert its Medicaid program into a block grant system in September 2019. The effort has typically been opposed by long-term care providers, who fear it could wind up limiting reimbursements.

State operators have stressed that any alternative to Medicaid must ensure sustainability for the state’s elderly population and preserve their choice to have nursing or assisted living services when necessary. 

Tennessee’s program was authorized to begin Friday and lasts through Dec. 31, 2030. 

The Trump administration has pushed Medicaid block grants on a national scale. Last year, CMS announced its “Healthy Adult Opportunity” (HAO) program, which allowed participating states to receive a block grant for a specific population enrolled in Medicaid. That initiative was met with backlash from long-term care providers, among many others. 

CMS noted that Tennessee’s program “leverages many of the flexibilities outlined in the HAO guidance.” 

“The HAO gives states a broad suite of flexibilities along with certain performance and spending targets, with a focus on fixing administrative processes to allow the state to focus on improving the health of Medicaid populations,” the agency explained.