Court places Tennessee’s Medicaid block grant lawsuit on hold

MM Curator summary


The local lawsuit opposing the approved shared-savings waiver is on hold while CMS holds another comment period in addition to the comment period the state already conducted.


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Tennessee Attorney General Herbert Slatery

Manuel Balce Ceneta / AP

(The Center Square) – A lawsuit challenging Tennessee’s TennCare III Medicaid block grant has been put on hold by a federal judge while a public comment period on the funding occurs.

The state became the first to have a Medicaid block grant approved when the Trump Administration endorsed the grant in its final weeks. It was then authorized quickly by the Tennessee Legislature and signed into law in January by Gov. Bill Lee.

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

The lawsuit, filed by The National Health Law Program, the Tennessee Justice Center, and King & Spalding LLP on behalf of 13 Tennessee Medicaid recipients, claimed, in part, the rushed federal approval did not allow for a required public comment period.

The U.S. Department of Health and Human Services recently reopened that federal comment period until Sept. 9. HHS granted an experimental waiver when the program was approved and did not use the full public comment period.

“By rushing the approval of the TennCare III, the Trump administration neglected to open the required public comment period, depriving Tennesseans and other interested parties the opportunity to oppose the project,” said Michele Johnson, Executive Director of the Tennessee Justice Center. “The State’s decision to radically restructure our Medicaid program would harm many low-income individuals and families, including our plaintiffs.”

Tennessee Attorney General Herbert Slatery filed a motion in May to intervene in the case to protect the interests of the state, which was granted. The matter was filed in U.S. District Court in Washington, D.C., naming the U.S. Department of Health and Human Services, the Centers for Medicaid and Medicare Services and several individuals as defendants.

“The corporate plaintiffs behind this lawsuit, who consistently sue the State, are trying to stop a significant and beneficial policy reform for our state with a federal lawsuit filed in D.C.,” Slatery said in a statement when the state intervened. “Our office is intervening to make sure Tennessee’s unique healthcare infrastructure is appropriately defended.”

The complaint is based on the block grant allowing the state to restrict prescription drug coverage, eliminate the three months’ retroactive coverage and require beneficiaries to enroll in managed-care plans, which the state has used since 1994 and more than two-thirds of Medicaid recipients nationally use.

Around 1.2 million low-income and disabled Tennesseans receive TennCare.

“As approved by the Trump administration, the TennCare III waiver contains a number of features that are at odds with how Congress has designed Medicaid coverage, affecting everything from financing and retroactive coverage to prescription drug services and managed care arrangements,” said Jane Perkins, Legal Director at the National Health Law Program. “We think the approval is rife with legal errors – including that the Trump administration approved this waiver without allowing the public to comment as required under the law. Transparency in government is critical, and we welcome this step by HHS to allow the public to be heard.”

The block grant allows Tennessee to keep half of the savings it would get from spending less than the federal allotment, money that could be used on future health care savings initiatives. Over the past five years, Tennessee saved $6 billion compared to the federal cap and will be allowed to use that funding as well.

Those savings previously could be used only against future overages of the federal Medicaid funding cap. The TennCare III funding cap will then reset in 2026 based upon how much the state has spent, per capita, between 2021-24.

“Our State has a lengthy history of mismanaging Medicaid, and the hastily approved changes to TennCare III would make it worse,” Johnson said. “That is why we are heartened by the opening of the federal comment period and the opportunity for our clients and other key stakeholders to make their voices heard regarding the harmful changes to our Medicaid program.”

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