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TennCare warns hospital directed payments, assessments will shrink under CMS rule changes
Summary
TennCare officials told lawmakers a pending CMS rule will require phased reductions to state directed payments beginning 2028, likely reducing hospital assessment funding (currently nearly $3 billion). Officials said the mathematical methodology remains unclear and will determine local hospital assessment impacts.
Lawmakers pressed TennCare on federal changes that require states to reduce state‑directed payments toward Medicare parity limits; TennCare staff said hospitals currently receive nearly $3 billion in directed payments and that the federal law will force a 10% annual reduction beginning in 2028 until payments align with 110% of Medicare.
"It's almost $3,000,000,000," TennCare Director Steven Smith said while describing current hospital directed payments, adding that the state will "have to start reducing that by 10% a year" once the CMS methodology is finalized. TennCare CFO Zane Seals told the committee CMS is expected to publish the calculation methodology later in 2026, and TennCare cannot yet predict how assessment revenue or local hospital finances will change.
Committee members asked how reductions would flow through to providers and to assessments that fund local hospital payments; TennCare answered that CMS will examine total payment amounts (MCO capitation plus directed payments) and that individual hospital decisions about assessments will determine local impacts.
Provenance: topicintro SEG 216, topfinish SEG 318.
