TennCare officials propose using year‑3 shared savings to expand home‑ and community‑based care and workforce supports

TennCare Director Steven Smith told the Finance, Ways and Means Committee on the floor of the Capitol that TennCare’s 10‑year waiver “TennCare 3” has produced nearly $1 billion in shared savings over the last three years and that the agency is proposing to reinvest part of the year‑3 savings in long‑term services, workforce supports and facility improvements.

Smith said the state has already used $100 million of the year‑3 shared savings to provide immediate hurricane relief through a program called HEAL and is proposing to use the remaining roughly $240 million to address long‑term services and supports, including expanding Choices 3, workforce retention payments and nursing facility grants.

The proposal would: expand Choices 3 — a home‑and‑community‑based program that serves adults with physical disabilities and seniors who can remain in the community with supports — to serve an additional 2,000 people; provide $50 million (structured as $10 million per year for five years) for workforce and retention payments to providers serving impacted populations; and provide $50 million in nonrecurring funding for nursing facility infrastructure and workforce needs. Smith said the Choices 3 expansion builds on prior investments that enrolled 1,750 new members and, according to TennCare analysis, delayed higher‑cost institutional enrollment by an average of 13 months, producing an estimated $60 million in ongoing savings.

Smith also outlined trend items in the proposed budget: a medical inflation/utilization line typically the largest item, a pharmacy trend driven substantially by increased utilization of GLP‑1 obesity drugs such as Ozempic and Wegovy, and targeted 5% rate increases for certain non‑managed‑care services including dental services, home‑delivered meals and enhanced respiratory care. He said year‑over‑year increases in rates for direct service professionals in home‑and‑community‑based services remain a multi‑year priority.

Committee members pressed staff on implementation details. Smith said TennCare requests funding to bring roughly 2,500 people onto the Choices waiting list now and intends, through attrition and planned slots, to ensure those enrollments can be sustained through the waiver period into 2030. He said the waiver and its rebasing provisions were negotiated and that the state has protections in the waiver that make a sudden federal “clawback” unlikely, but acknowledged federal policy remains a variable.

Members also asked about procurement and payment issues. Smith said the state’s managed‑care organization (MCO) contracts remain subject to a chancery‑court protest by a losing bidder; in the interim TennCare has negotiated one‑year contract extensions. On hospital funding, officials said a hospital directed payment tied to a hospital assessment remains pending federal approval by CMS and, if approved, would draw substantial federal matching dollars into the system. Smith said two of three hospital assessment pieces have CMS approval and one remains pending.

On HEAL hurricane relief, Smith said TennCare provided $100 million to the Tennessee Infrastructure and Management Authority (TIMA) for zero‑interest loans to local governments for water, wastewater and debris removal; he described the loans as short‑term bridges that localities repay once federal funds are available. Leader Camper and others pressed whether those loans were an appropriate use of shared savings; Smith said the agency judged those investments tied directly to health and access to care for affected TennCare members.

Other operational notes included: TennCare has used shared savings to fund recurring items the state approved (for example, the Strong Families initiative to add children and pregnant women); year‑2 investments in rural and behavioral health were largely nonrecurring; the TennCare for Working Individuals with Disabilities waiver remains pending federal approval and will require federal match before enrollment begins. Smith said the waiver team is ready to implement the TWID program once CMS approves it.

The presentation closed with committee members pressing for continued monitoring of provider network adequacy — particularly nursing homes, ambulance providers and hospitals — and asking for further detail on program metrics and reporting mechanisms that will accompany proposed investments.

TennCare officials made multiple commitments to follow up with written materials requested by the committee, including status of MCO litigation, timelines for CMS reviews and more detail on the proposed Choices 3 expansion and workforce payment mechanics.

Questions and discussion on TennCare ran from the start of the committee’s budget hearing block through the committee’s scheduled transition to the next presenter.