Tennessee could expand Medicaid and save $900M
Tennessee could offer Tenncare coverage to hundreds of thousands of moderately poor residents while also saving as much as $900 million in state money over two years if lawmakers expand Medicaid under a sweetened deal proposed by the White House.
These new incentives, offered by President Joe Biden's coronavirus stimulus law, have prompted at least one prominent Republican leader to reconsider expansion after his party opposed it for a decade.
Lt. Gov. Randy Mcnally, one of the two most powerful officials in the Tennessee General Assembly and who for years has stood by his conservative colleagues against Medicaid expansion, said the new incentives warrant a fresh look at the possibility of expansion.
“I think we're going to take a very serious look at it and see what the federal government is offering, and also see what kind of flexibility, if any, the states have in expanding,” Mcnally, R-oak Ridge, said Monday, adding a moment later: “I think that most of the legislators are probably willing to take a look and see what it would mean.”
While Mcnally's statement falls miles short of support, it signals a rare crack in a near-insurmountable opposition that has kept Medicaid expansion out of Tennessee.
The state's Republican majority has rejected all efforts to expand, turning away billions in federal funding that almost certainly would've improved the health of Tennesseans and could have bolstered struggling rural hospitals.
Biden's strategy appears persuasive in Alabama and Wyoming, where conservative lawmakers are now reconsidering expansion, but the policy change still faces long odds in the Volunteer State despite the new financial incentives. Tennessee is not hurting for money: the state has raked in billions in surplus funding in recent years, including an unexpected $1 billion in tax revenue last year.
A spokesperson for Gov. Bill Lee signaled continued opposition to Medicaid expansion without addressing the issue directly. House Speaker Cameron Sexton said he was momentarily unconvinced because the new incentives only last two years, after which Tennessee must pay for a small portion of the cost of expanded Tenncare enrollees.
"We'll see what they have to offer. I'm not sure anything will pass," said Sexton, R-crossville. "You don't do a policy just based off them trying to throw some money at you. That's not the right direction to go."
COVID-19 stimulus law will pay states to expand
Medicaid expansion, first allowed R-oak Ridge under President Barack Obama and the Affordable Care Act, allows states to offer government health insurance to residents who are not poor enough to otherwise qualify.
Under the terms of the original law, states can expand their Medicaid program to include residents who live within 138% percent of the poverty line, with the federal government covering 90% of the cost of insuring these new enrollees. Most states leapt at the opportunity to expand, and numerous studies show expansion has transformative impacts on the health of low-income residents.
Tennessee and 11 other states, all controlled by Republicans, have rejected Medicaid expansion largely because of its association with the Obama administration.
Public polling shows a majority of Tennesseans support Medicaid expansion, but numerous efforts to expand Tenncare – mostly from Democrats and a few from Republicans – have failed.
Biden, who campaigned on a promise of bipartisanship, now seeks to woo states that haven't expanded their Medicaid programs by offering a new deal. The American Rescue Plan Act, more commonly known as Biden's coronavirus stimulus law, which took effect on March 11, offers billions in new incentives to expand Medicaid.
If the 12 non-expansion states choose to expand Medicaid under the new law, the federal government will still pay for 90% of the cost of the expansion population. But it will also increase its share of the cost of traditional Medicaid by 5% for a period of two years.
In Tennessee, expansion is estimated to extend Tenncare to about 300,000 people, many of whom make too little money to afford private insurance. The state would be required to cover 10% of the cost of these enrollees, but this spending would be more than offset by additional federal funding from the new expansion incentives.
In summation, for two years Tenncare would be able to insure many more people for less money. How much less? A lot.
If Tennessee expanded under the terms of the new law, the state is estimated to receive $1.26 billion in additional federal funding and be required to spend an additional $360 million in state dollars over the two-year span, according to an analysis by the Kaiser Family Foundation, a nonprofit health policy organization. The net gain to Tennessee would be approximately $900 million, the analysis states.
Brian Straessle and Mandy Pellegrin, two policy experts from the Sycamore
Institute, a nonpartisan think tank in Nashville, said Tennessee would become responsible for some new costs in the third year after expansion, but it could potentially reinvest some of the new federal dollars to cover these costs for an estimated five to eight more years.
If Tennessee leaders have opposed Medicaid expansion out of fear of the cost, the Biden incentives should alleviate their concerns, at least for a while, they said. However, leaders opposed Medicaid expansion because they felt it was bad policy, the new incentives were unlikely to change their minds.
“If you are on the fence about the policy, then the additional money could potentially tip you over to be in favor of it,” Straessle said. “But if you just don't think this is what a state government should be doing … then I don't know if this is necessarily a slam dunk that is going to persuade everybody."
Melinda Buntin, a health economics expert at the Vanderbilt Department of Health Policy, confirmed the new expansion incentives would allow Tenncare to cover more people for less money for two years.
As Biden woos, Alabama and Wyoming are listening
If Biden's plan was to offer an expansion deal that is too tempting to be ignored, it appears to be working.
In both Alabama and Wyoming, two deeply conservative states that have rejected Medicaid expansion for a decade, legislators are now reconsidering expansion in light of the new incentives.
A spokesperson for Alabama Gov. Kay Ivey said this week the state is “open to discussions” about expansion. Lawmakers in the Wyoming House of Representatives advanced a bill to expand Medicaid on Monday, according to the Casper Star Tribune.
Tennessee Democrats pleaded with Republicans to consider a similar change of heart on Tuesday. Senate Minority Leader Jeff Yarbro and Rep. John Ray Clemmons, both Nashville Democrats, said the state's conservative supermajority is out of excuses not to entertain expansion.
"If these conversations, looking at these dollar amounts that are on the table, are not being discussed on the first floor of the Capitol in the Department of Finance and Administration, in the Department of Tenncare, then somebody's not doing their job," Clemmons said. "This is a win-win-win in all scenarios."
After this story first published on Tuesday, several organizations that have long advocated for Medicaid expansion voiced support for the new incentives.
The Tennessee Hospital Association said Biden's stimulus law makes expansion a “better option” than before. The Tennessee Justice Center expressed gratitude Mcnally was willing to consider expansion, adding that “it would be unwise not to consider accepting billions of dollars from the federal government that would cover 300,000 Tennesseans, shore up rural economies, and keep healthcare providers in business.”
Sen. Richard Briggs, R-knoxville, one of the few Republican lawmakers to support expansion, said this week he believed his colleagues could be convinced to expand Tenncare if they viewed the proposal “objectively" and with "emotions aside."
Briggs said he had not yet resumed discussions with other Republicans about expansion because he wanted them to consider the Biden incentives “gradually” and avoid a knee-jerk rejection.
“The incentives now are just so good, it's hard to turn your back on them,” Briggs said. “If we're ever going to do it, now would be the time to do it. It would take both the legislature and the governor's support to do it.”
The Lee administration, which has vocally opposed expansion in the past, did not provide comment directly on the new Biden-backed incentives, but appeared to signal they are still against Medicaid expansion.
When asked about the new incentives this week, Casey Black, a spokesperson for Lee, said the administration is “currently focused on the successful administration of the block grant waiver” but ignored all questions about expansion.
The “block grant” is an effort to reshape Tenncare that is often seen as a conservative alternative to Medicaid expansion, but is not technically mutually exclusive. In theory, the state could do both. The block grant gives state officials more authority over Tenncare, including the power to stop covering some medications, and allows the state to keep about half of any money saved under its leadership.
The Lee administration proposed a block grant to the federal government in November 2019, and the proposal was approved in the final two weeks before President Donald Trump left office. Biden is expected to revoke this approval by the end of this year.
The Associated Press contributed to this report.
Brett Kelman is the health care reporter for The Tennessean. He can be reached at 615-259-8287 or at brett.kelman@tennessean.com. Follow him on Twitter at @brettkelman. Reach Natalie Allison at nallison@tennessean.com. Follow her on Twitter at @natalie_allison.
“I think we’re going to take a very serious look at it and see what the federal government is offering, and also see what kind of flexibility, if any, the states have in expanding.” Lt. Gov. Randy Mcnally