Illustration: Sarah Grillo/Axios

Tennessee's proposal to convert its state Medicaid financing into a block grant could become a landmark restructuring of the program.

The big picture: We don't yet know whether the Trump administration will approve the proposal, whether it'll hold up in court or what outcome it'd have on enrollees — but advocates are warning it‘s probably going to lead to benefit cuts.

Driving the news: Tennessee released its proposal yesterday, becoming the first state in the nation to put forward a block grant waiver plan.

  • Medicaid block grants have long been a conservative goal, but Republicans haven't been able to pass them into federal law. They most recently tried and failed during the 2017 effort to repeal the Affordable Care Act.
  • The Tennessee plan would create a cap on federal funding for medical services, although it would increase with price inflation and if enrollment grows. It'd also give the state additional flexibilities over the program's benefits.

What they're saying: "They want to have carte blanche to cut benefits going forward, without having to ask the federal government or letting anybody know they’re doing it," said Joan Alker, the executive director of Georgetown's Center for Children and Families.

  • The state, however, writes that the proposal includes "no reductions in who is eligible for or what benefits are currently provided."

Medicaid funding is typically open-ended and split between the federal government and the state. The proposal asks for Tennessee to instead receive a fixed amount of federal dollars.

  • If Tennessee spends less than it's projected to under the traditional system, the savings would be split 50-50 between the state and the federal government.
  • Some costs — like prescription drugs and administrative spending — would be excluded from the block grant and funded using the traditional method.

Yes, but: This shift in the relationship between state and federal Medicaid funding may be illegal, Nicholas Bagley, a law professor at the University of Michigan, writes in The Incidental Economist.

  • "You can’t use Medicaid waivers to change Medicaid’s financing structure. And that’s exactly what Tennessee is proposing to do," Bagley writes.
  • Not everyone agrees. "The legal aspect isn’t the problem because...they're not doing anything that’s so much different from what's already been done in other states," said Matt Salo, executive director of the National Association of Medicaid Directors.

What we're watching: The proposal is open for public comment until mid-October, and the state must submit the plan to the Centers for Medicare and Medicaid Services by late November, per WashPost.

  • “CMS supports efforts to improve accountability for cost and outcomes in Medicaid, and we look forward to working with Tennessee once they submit their proposal to help them achieve these goals as effectively as possible within our statutory authority," said CMS spokesperson Johnathan Monroe.

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