From RADAR on Medicare Advantage: With New Comment Period, CMS Will Reassess TennCare Cap

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With New Comment Period, CMS Will Reassess TennCare Cap

Reprinted with AIS Health permission from the Aug. 19, 2021, issue of RADAR on Medicare Advantage

As the Biden administration continues to dash states’ dreams of implementing Medicaid work requirements — most recently revoking waiver approvals granted to Ohio, South Carolina and Utah by the Trump administration — CMS this month took a critical step in revisiting Tennessee’s plans to use a fixed funding mechanism. With the opening of a new 30-day federal public comment period regarding the approval of TennCare III, experts anticipate a great amount of negative input that will lead the program to a fate similar to that of work requirements.

The Trump administration on Jan. 8 approved Tennessee’s request to use an “aggregate cap” approach to Medicaid funding that many industry observers have likened to a block grant. The outgoing administration approved the state’s section 1115 waiver demonstration for 10 years. Through the unprecedented approach, Tennessee will receive federal Medicaid funds based on a fixed budget target that is determined by CMS and the state using historical enrollment and cost data. If the state spends less than its target cap while meeting yet-to-be determined quality goals, it can earn up to 55% of annual savings to reinvest back into other state health programs. That waiver also allows the state to implement a commercial-style closed drug formulary.

Demo Faces Pushback From Advocates

The approval was met with strong opposition from beneficiary advocates, including 13 Medicaid beneficiaries who filed a complaint challenging the agency’s approval of the 10-year demonstration. Under Tennessee’s longstanding managed Medicaid program, beneficiaries have struggled to get the care they need, the plaintiffs argued, and CMS in its haste to approve TennCare III did not provide the required public comment period. In a letter dated Aug. 10, CMS said the new comment period will not delay or prevent implementation of the demonstration, and that attorneys representing the plaintiffs in the case agreed to pause their lawsuit if a new public comment period was opened.

In a statement emailed to AIS Health, a division of MMIT, a TennCare spokesperson points out that the state provided an “unprecedented public comment opportunity” on the new provisions in TennCare III but welcomes additional input.

“We are encouraged that CMS’ action in no way delays or prevents implementation of TennCare III, and we remain full steam ahead,” adds the spokesperson. “TennCare III provides a tremendous opportunity to enhance the benefits and services we provide to TennCare members as well as serve additional Tennesseans in our program.”

Industry observers aren’t convinced of that opportunity. “What concerns me is if you follow the money, there’s shared savings, depending on quality measures which have yet to be named, and so where the expenses [are highest is] in the disability category and in the duals. So that’s where the money is and there’s a strong incentive to save money with this program,” asserts Jerry Vitti, founder and CEO of Healthcare Financial, Inc., a firm that connects low-income, elderly and disabled populations with public benefit programs. “While the modified version is innovative, you still have this overriding financial model that could have negative implications” for high-cost populations.

“I see this as a real litmus test for the administration [to determine] what they’re willing to accept in terms of waivers,” he continues. “This is a modified block grant, so it isn’t as onerous as traditional block grants, nor does it carry the same risk as traditional block grants. But if they throw this out, any kind of innovation that is coming from the conservative end of the spectrum is probably moot.”

Verma: It’s Not a ‘Block Grant’

Former CMS Administrator Seema Verma at the time of the demonstration’s approval emphasized that the waiver is not a “traditional block grant proposal” in that it features value-based care concepts and proper beneficiary protections. For one, the state may not reduce its current minimum benefits package and can only make benefit changes that are “additive in nature.” And if TennCare enrollment grows by more than 1%, the state would be held harmless for the increase and the aggregate cap would go up. If enrollment drops by more than 1%, some of Tennessee’s Medicaid funding would be reduced, which Verma noted prevents the state from attempting to save money by limiting enrollment.

“Block grants, even Tennessee’s modified aggregate cap plan, will drive a greater divide in health equity — socio-economically and racially,” argues Gary Rosenfield, senior vice president at ConsejoSano, a health equity-focused patient engagement company. “Block grants may promote efficiencies in some areas, but in reality the upshot is that it will narrow already sparse networks even further, creating less access to care, minimal benefits, and ultimately worse outcomes.”

MCOs Worry About Capitation Rates

“From the payer perspective, even though Medicaid plans are happy to work in any environment, the idea of block grants in Tennessee doesn’t fit with ensuring capitation rates are based on actuarial soundness as required by federal regulations,” weighs in Thomas L. Johnson, executive director of the Population Health Alliance, a trade association representing health systems, health plans, academia and biopharma/technology companies.

“Plans and states want to ensure that enrollees are being served. Ultimately, they need to create a situation where everyone — states, plans, and enrollees — wins,” says Johnson. “Block grants, whether it be a pure block grant or an aggregate cap as proposed in Tennessee, creates a harder environment for them to achieve that.”

Vitti says he expects CMS will hear from multiple advocacy organizations, and their comments could inform any modifications requested by the Biden administration, although that’s “the mildest case scenario.”

Given the administration’s clear view on work requirements in Medicaid, CMS is more likely offering the public comment period “as a show of good faith that they’re willing to consider the aggregate cap proposal, but ultimately knowing that it’s a non-starter,” suggests Rosenfield.

“The comments will come in and if many are opposed as the administration anticipates, it sets up CMS to be on firmer footing to revoke the waiver,” he says. “This action will be in line with administration thinking that measures like this harm Medicaid and the people it’s intended to serve.”

The comment period ends on Sept. 9.

Contact Johnson, Rosenfield and Vitti via Joe Reblando at joe@joereblando.com.

by Lauren Flynn Kelly