TennCare proposes $600M budget increase

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Tennessee’s TennCare program would like to spend $600 million more next fiscal year than this year, according to a budget request presented Monday to Gov. Bill Lee and Tennessee Department of Finance and Administration Commissioner Butch Eley.

The proposed spending increase in the state's Medicaid program includes a $250 million increase in recurring federal funds and $182 million in nonrecurring federal expense increases.

The spending increase would cost the state $137 million in additional recurring expenses.

“We can provide more services and serve more people, and we can do it without breaking our budget,” TennCare Director Stephen Smith said.

Tennessee is the only state that has been permitted to use a block grant for its Medicare expenses.

The Trump administration approved the grant in its final weeks. It was authorized quickly by the Tennessee Legislature and signed into law in January by Lee.

Under the block grant, Tennessee receives federal money for the state’s Medicaid program in one lump sum instead of periodically. State officials said doing so allows the state more autonomy in running the program and save the state money.

A Medicaid Management Information System accounts for $131 million of the increased spending request with $100.5 million of that coming from federal funds.

The remainder of the spending increase comes from $91.6 million in medical cost increases, $49 million for an Alzheimer's drug, $73 million for the Tennessee Eligibility Determination System, $96 million to decrease an eligibility waitlist for applicants with developmental disabilities and $50 million for a workforce development initiative.

Smith talked about the benefits of the block grant Monday, saying he believed TennCare can control costs and provide better care with the program, which amounts to roughly one-third of the state’s budget. Smith said Tennessee’s program kept costs down better than any in the country from 2000 to 2017 and the proposed spending increases represent a 1.12% recurring expense increase.

If Tennessee had increased Medicare expenses at an average rate nationally between 2012 and 2020, the program would have cost the state an additional $2 billion, Smith said.

“If we don’t do a good job of controlling costs, these education improvements we have seen throughout the years would not have occurred,” Smith said.

Smith said that, 10 months into using the TennCare block grant waiver, he is encouraged by the impact of it despite the unprecedented times in health care, with the federal government halting Medicare eligibility reviews. While the program continues to add recipients, it is not removing recipients who might no longer be eligible, meaning that TennCare now serves 200,000 more members than it did before the COVID-19 pandemic; a 14% increase.

Smith said that federal pandemic funds have covered those costs.

“I am encouraged with what will happen with our waiver going forward,” Lee said. “Keep going with that.”

It has been, however, a complex year for TennCare as the TennCare block grant waiver has been challenged in court by The National Health Law Program, the Tennessee Justice Center and King & Spalding LLP on behalf of 13 Tennessee Medicaid recipients who claim the waiver has limited their access to care and prescriptions.

That lawsuit was placed on hold as the U.S. Department of Health and Human Services went through a public comment period on the waiver that ended on Sept. 9.

A recent federal audit said that Tennessee should repay the federal government up to $767 million in previous TennCare funding because of past federal funding that was not returned.

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