Through Block Grant, Trump Administration Attacks Medicaid One Last Time

By Suzanne Wikle

Throughout the Trump Administration, the Centers for Medicare and Medicaid Services (CMS) took unprecedented steps to harm the Medicaid program and make it more difficult for people to access health insurance. In its last weeks in office, the administration continued to tarnish its Medicaid legacy by approving a waiver for Tennessee that limits how much federal money the state can receive for Medicaid. This plan is unlawful and dangerous for Tennesseans, especially Black Tennesseans. Withdrawing this approval – and the guidance that encourages more states to submit similar proposals – should be an immediate priority for the Biden-Harris Administration.

Due to generations of systemic racism, people of color are more likely to be employed in jobs paying low wages that don’t provide steady schedules or benefits like health insurance. Therefore, Black and Hispanic Tennesseans are disproportionately insured by Medicaid and will be disproportionately harmed by changes to the Medicaid program that undermine access to care. Twenty-five percent of Tennessee’s non-elderly Medicaid population is Black, but only about 18 percent of the state’s population is Black. Similarly, 9.2 percent of the non-elderly population is Hispanic, compared to 5.7 percent of the state’s population. The waiver approved for Tennessee makes enormous changes to Medicaid and serves to negatively impact everyone – but communities of color will suffer the most.

Medicaid financing has always been a shared expense between the federal government and states. This arrangement ensures that everyone who is eligible may enroll while assuring states will not be responsible for the full cost of Medicaid. By approving Tennessee’s waiver, CMS has upended this financing structure, risking Medicaid coverage for Tennesseans. The Trump Administration’s CMS tried hard to make the case that this new agreement with Tennessee wasn’t a block grant and instead referred to it as an “aggregate cap.” But, no matter what you call it, the bottom line is that Tennessee asked to limit the Medicaid dollars coming into the state and CMS agreed. In addition to being bad Medicaid policy, most legal experts argue that this arrangement is illegal.

Under the waiver agreement, if Tennessee underspends the estimated Medicaid costs, the state will receive up to 55 percent of the federal dollars that were “saved,” and CMS places few limits on how that money could be spent. This clearly incentivizes Tennessee to reduce Medicaid expenditures. While CMS claims the waiver agreement stipulates that eligibility and benefits can’t be cut and people won’t be harmed, Tennesseans will be harmed in many ways by this new waiver agreement.

Nothing in the waiver prevents the state from implementing red tape and hurdles to enrollment. By keeping eligibility the same but complicating the enrollment process, Tennessee could technically adhere to the terms of the waiver but prevent eligible people from enrolling due to the additional red tape. With fewer people enrolled, Tennessee will underspend and pocket a portion of the “savings” of unspent federal funds.

Another way states routinely reduce Medicaid spending without reducing eligibility or benefits is to cut provider reimbursement rates. This both directly saves the state money and leads to fewer providers taking patients with Medicaid (or providers reducing the number of patients with Medicaid). And that leads to people being unable to find providers who will treat them. The end result is that people with Medicaid have insurance but have a very hard time accessing care, and when people don’t access care Medicaid expenditures go down—which again allows Tennessee to pocket the federal “savings.”

This waiver approval for Tennessee is unprecedented, risks the health of Tennesseans – particularly those of color, and stands to cause significant state budget problems. CLASP urges the Biden-Harris Administration to reevaluate the Tennessee waiver, rescind its approval, and encourage Tennessee to take steps to increase access to care and reduce racial disparities, such as by expanding Medicaid.