Governor Haslam Announces Details of His Tennessee Medicaid Expansion Waiver

Yesterday, Governor Haslam put some meat on the bones of the “Insure Tennessee” plan when he released more details about his version of Medicaid expansion. The Governor also called for a special session of the legislature to consider his plan to commence on Feb. 2nd.

One highly publicized feature of the Tennessee plan is that the hospitals have agreed to support the state match though an assessment on hospitals. And the proposal includes a trigger for the state to end the program if the federal match rate drops or the revenues from the hospital assessment fall below what is needed for the state share.

The Governor’s plan was released in the form of an amendment to the state’s current Section 1115 waiver. Upon its release, the state opened a 30-day public comment period on the plan for which they should be commended – such a comment period, while good practice, is not currently required by federal regulations on Section 1115 waivers.

There are two main parts to the proposal – the “Volunteer Plan”, which is a premium assistance program initially focused on buying employer sponsored coverage, and the “Healthy Incentives Plan”, which would impose greater cost-sharing requirements and offer ways to reduce those costs by engaging in healthy behaviors. The new charges are largely directed at those over the poverty line.

As an aside — a welcome feature of the plan is that Tennessee will put 19 and 20 year olds, who are in the newly eligible group, into the regular Medicaid program because they are considered children under Medicaid rules and are entitled to receive EPSDT services. I like this idea because I believe it is very difficult to do an EPSDT wraparound well.

But back to the main show – let’s focus on the “Volunteer Plan” piece of the puzzle. As I said above, this premium assistance approach is focused at least initially on buying a worker’s employer-sponsored plan for them. The state will pay a set amount towards the premium for each Volunteer Plan member who CHOOSES to participate. The employer must contribute at least 50% of the premium and large employers will need to attest to covering Essential Health Benefits. Small group plans will be eligible for premium subsidies if they are playing the 50% share of the premium.

Depending on the set amount or defined contribution that the state pays and how much the employee’s premium share is, it is possible that some of this state’s contribution would be available to pay some of the worker’s copays. After that the worker has to pay any additional cost-sharing charges.

Many states already run programs sort of like this in Medicaid as authorized by Section 1906 of the Social Security Act. A 2010 GAO report found that 29 states were operating 1906 programs (Tennessee was not on the list). The difference here is that under regular Medicaid law beneficiaries are guaranteed that the same cost-sharing protections and benefit rules apply. (Note: Whether that is happening in reality is a different matter – I am doing some research in this area so stay tuned!)

This is known as the “wraparound” and Tennessee’s plans seeks a number of waivers to allow these benefits to be waived – the rationale being that this is voluntary and the state will provide beneficiaries with options counseling to make the best choice.

Those choosing this route would have to follow the appeals process of their ESI rather than Medicaid appeals. If they were denied a service after final appeal to their ESI insurer they could move to the Healthy Incentives Plan.

In the past, CMS has granted permission for this kind of approach and I suppose they may be inclined to do so here. The state of Florida ran such a program in its waiver that I studied carefully some years ago and it was not a great success as few participants chose to enroll and, as a result, the administrative costs were huge.
And the concept of applying the defined contribution approach to the Medicaid program raises many questions in the bigger picture.

There are a lot of issues to think through in this choice approach – one of which always concerns me is that there is no guarantee that choice will be truly informed – especially in states where there is a lot of rhetoric denigrating Medicaid. But in any event, that is a subject to be explored in more depth at a future point. Let’s get back to Tennessee’s plan.

The second main feature is the Healthy Incentives Plan which will be run through Tennessee’s Medicaid managed care organizations (MCOs). The benefits package, which is described as an Alternative Benefits Plan, will cover all TennCare services. (Note: There is to my mind a rather strange waiver request to allow the Healthy Incentives Plan to mirror coverage in the TennCare program, which I don’t quite understand.)

So pretty much like regular Medicaid so far but, as is faddish these days, Tennessee wants to set up a “HIT (Healthy Incentives for Tennesseans) Accounts.” In another complicated system, enrollees will have a small amount pre-loaded” into their HIT and can earn additional credits if they engage in “certain desirable behaviors” or enroll in “certain population based health programs” including getting an annual health risk assessment.

Beneficiaries with incomes between 100-138% of FPL would have to pay enforceable premiums and copayments for inpatient and outpatient services, drugs and non-emergency use of the ER. Those below poverty won’t have premiums but will have pharmacy copays. The HIT accounts can be used to offset premiums and copays.

On this piece there are certain details that I have omitted and that will need to be negotiated further, but the state’s proposal generally seems to be in line with recent CMS approvals such as Iowa, Michigan and Arkansas. For example, the state is not requesting the ability to charge premiums below poverty.

Finally, followers of the Florida Medicaid and Low Income Pool (LIP) situation should take note – Tennessee also had a pool for uncompensated hospital costs, which existed pre-ACA and CMS had only extended for one year. The waiver requests to increase that pool to $600 million. Sound familiar? Seems to me that CMS will look more favorably upon Tennessee’s request for this pot of money since the state is trying to move ahead with Medicaid expansion.

Joan Alker is the Executive Director of the Center for Children and Families and a Research Professor at the Georgetown McCourt School of Public Policy.

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