Bill Lee

Gov. Bill Lee announces in a video statement in January that Tennessee’s Medicaid block grant waiver amendment was approved by the federal government.

A group of Tennessee Medicaid recipients has filed a complaint in U.S. District Court alleging the U.S. Department of Health and Human Services’ decision to approve a TennCare block grant waiver violates federal rules.

The lawsuit came after Tennessee Democrats asked President Joe Biden’s administration to reverse the decision.

The basis of the complaint — filed late last month by the National Health Law Program, the Tennessee Justice Center and King & Spalding LLP on behalf of 13 recipients — is that the decision allows the state to restrict prescription drug coverage, it eliminates the three months’ retroactive coverage and it requires beneficiaries to enroll in managed-care plans.

Tennessee has used manage-care plans for Medicaid since 1994. More than two-thirds of Medicaid recipients nationally receive care through managed-care plans.

“The hardships experienced by the plaintiffs who brought this case show the harm caused by the state’s decision to radically restructure TennCare. Tennessee has a long history of mismanagement and bad Medicaid policy,” Tennessee Justice Center Executive Director Michele Johnson said. “Tennessee is the last state that should have an experimental waiver that puts vulnerable populations at risk. We stand with our clients and all Tennesseans against the further restriction of lifesaving health care services and prescription drugs.”

A TennCare block grant was approved in the final weeks of former President Donald Trump’s administration and then authorized by the Tennessee legislature before it was signed into law by Gov. Bill Lee.

Under the block grant, Tennessee would receive federal money for the state Medicaid program all at once instead of periodically. Tennessee is the first state to receive a Medicaid block grant.

“Our TennCare system is one of the top Medicaid programs in the country and this new flexibility under the block grant model allows us to improve the health of Tennesseans and our communities,” Lee tweeted after signing the legislation.

TennCare provides health care services to about 1.2 million low-income and disabled Tennesseans.

The complaint says HHS’ decision to grant a Section 1115 experimental waiver for TennCare violated federal Medicaid requirements.

“The Trump administration overstepped its authority when it approved TennCare III, allowing Tennessee to ignore funding and coverage provisions in the Medicaid Act that Congress does not allow states to ignore,” said Jane Perkins, legal director at the National Health Law Program. “In a rush to approve the project in its waning days, that administration also stepped out of bounds by shutting the public out and approving TennCare III without giving the public notice and opportunity to comment as federal law requires.”

The complaint also alleges the Trump administration installed added measures to delay a reversal of its decision.

The block grant would allow Tennessee to capture half of the savings, if it spends less than the federal allotment for the program, and in turn spend that money on future health care savings initiatives. Previously, those savings could only be saved to use against future overages of the federal Medicaid funding cap.

The state still can use its $6 billion in savings compared with the federal cap collected from the past five years.

The TennCare III funding cap will then reset in 2026 based upon how much the state has spent, per capita, between 2021 and 2024.

Before the approval in January of the block grant, the TennCare program agreement with the federal government was set to expire June 30.

The federal government covers about 65% of Medicaid costs for Tennessee recipients, according to the Sycamore Institute of Tennessee.

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