Federal funding may be clawed back if state fails to meet its goals.
Image Credit: Senator Bo Watson / Facebook
***Note from The Tennessee Conservative – this article posted here for informational purposes only.
By Cassandra Stephenson [Tennessee Lookout -CC BY-NC-ND 4.0] –
The Trump administration’s Rural Health Transformation Program is being met with skepticism from Tennessee lawmakers over difficult-to-achieve policy changes, potential clawbacks and uncertainty about future funding.
The state could receive up to $1 billion over a 5-year period, but the year-to-year grant amount to support Tennessee’s slate of rural health programs is unclear, making it hard for lawmakers to approve any programs that may not be funded next year. States receive $100 million in baseline funding each year, with the opportunity to compete against other states for additional annual funds based on how well each state performs on their promises.
Tennessee received roughly $207 million in federal grant dollars for the first year — slightly more than the state’s $200 million request — but could see part of that funding clawed back if the legislature does not pass several policy changes. That includes the elimination of the state’s Certificate of Need law, something that lawmakers have debated for years amid resistance from the Tennessee Hospital Association.
“There are a number of these pieces of legislation that probably are not going to pass, so we don’t want to commit dollars to projects … on something that is going to get clawed back,” Sen. Bo Watson, a Hixson Republican, said.
Several members of the Senate’s finance committee echoed Watson’s concerns over the course of two meetings discussing the program.
Michael Hendrix, policy director for Gov. Bill Lee, said the legislation promised in Tennessee’s application for the federal grant funding is meant to “build on what this General Assembly has done over many years, whether it be on scope of practice or certificate of need or other items.”
If the legislature fails to pass the bills this session, The Centers for Medicare and Medicaid Services, which administers the program, estimated it would claw back about $8.4 million of Tennessee’s first-year funding, Hendrix said, in addition to $10 million in future years.
That clawback would put Tennessee’s award below the national median and the first-year awards that peer states received.
“That is the floor, not the ceiling,” Hendrix said. “Substantially more could be at impact, depending on our policy results,” including competitiveness for future funds.
How much funding Tennessee might receive over the next five years is also dependent on how other states perform. If they fail to meet their goals, more money could be up for grabs for states that make more progress.
“(CMS does) acknowledge that this is a budgeting challenge for every state, and especially so in the first year or two years, given policy measures being debated across the country in almost every state that affects their ability to compete for those funds,” Hendrix said.
The Rural Health Transformation grant program is a result of $50 billion earmarked in the One Big Beautiful Bill Act for rural healthcare over the next five years. The budget act is also expected to reduce federal Medicaid spending by more than $900 billion over the next decade.
The federal dollars also come with restrictions: Program funds cannot be used for brick-and-mortar medical center construction (other than minor renovations), clinician salaries, loan repayment, hospital operating deficits, historical debt or raising reimbursement rates.
Lee’s administration included a separate $125 million request in the state’s fiscal year 2027 budget proposal that would earmark one-time TennCare Shared Savings dollars for Rural Health Transformation Resiliency projects.
That may include new buildings or support for standing up new practices in rural areas, Hendrix said.
TennCare Shared Savings is a Tennessee-specific Medicaid waiver allowing the state to tap into about half of the money it saves from its federal allocation to pay for medical insurance for Tennessee’s poorest residents. These “saved” dollars result from removing people from TennCare or reducing services.
Over the last three years, these funds have been used to bolster rural health programs, help cover disaster costs, and support food banks while the Supplemental Nutrition Assistance Program went unfunded in November amid the federal government shutdown.
