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Tennessee transgender bill threatens to upend Medicaid contracts

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A novel bill making its way through the Tennessee General Assembly could have reverberating effects on Medicaid managed care procurement throughout the U.S.

Tennessee Speaker of the House of Representatives Cameron Sexton (R) and Speaker of the Senate Randy McNally (R),who also is lieutenant governor, sponsored the Tennessee MCO Reform Act, which would prohibit the state Medicaid agency from contracting with insurers that cover gender-affirming treatment for anyone, anywhere in the country.

Bills targeting transgender people have snowballed across Republican-led states. What started as restrictions on where transgender people can use the bathroom and what athletic teams they can join has escalated to legal restrictions on their medical treatment.

The Tennessee Legislature and Gov. Bill Lee (R) began the year by passing the nation’s first ban on drag performances in the presence of minors. More than 400 anti-LGBTQ bills are advancing through state legislatures this year, and 25 states have or are considering banning gender-affirming care for minors, according to the American Civil Liberties Union.

“We’re not particularly trying to fix a problem,” Tennessee state Rep. Tim Rudd (R),a cosponsor of the bill involving the Medicaid agency, said during a legislative hearing last month. “The way [gender-affirming care] is starting to be implemented is not within the values of most Tennesseans.”

The Medicaid proposal is a first-of-its-kind attempt to politicize the typically nonpartisan Medicaid bidding process, said Heather Howard, director of state health and value strategies at the Princeton School of Public and International Affairs. The legislation has massive market and legal implications and could revert TennCare, the first Medicaid managed care program, back to a fee-for-service model, she said.

The measure presents a litany of legal questions, many of which are already being considered in lower courts. For example, the bill invites challenges under the equal protection and interstate commerce clauses of the U.S. Constitution, the nondiscrimination provisions from the Affordable Care Act and Tennessee’s contractual obligations to the health insurance companies that provide TennCare benefits, policy experts said.

According to a nonpartisan Tennessee Legislature budget analysis, the bill would also limit the Medicaid agency’s ability to attract insurers to administer the program, which could simultaneously reduce quality and raise costs. In addition, any amendment to managed care contracts requires approval from the federal Centers for Medicare and Medicaid Services. If the terms are not approved and the state has no Medicaid managed care contractors, TennCare would have to shift to a fee-for-service model, according to the analysis.

“This would threaten to upend the entire notion of managed care, which relies on commercial insurers to come in. The theory has been—and Tennessee pioneered this—that these commercial insurance companies can provide greater value and slow the growth of costs,” said Howard, who previously served as New Jersey’s commissioner of health and senior services under Gov. Jon Corzine (D).

The Tennessee bill’s sponsors did not respond to requests for comment. Lee has not taken a position. “This bill is still moving through the legislative process, and as always, the governor will review final legislation when it reaches his desk,” a spokesperson wrote in an email.

A previous version of the Tennessee bill would have forbidden the Medicaid agency from contracting with insurers that offer surgery, hormone therapy and other gender-affirming treatments to anyone, including adults, through private and government-sponsored health plans. After revisions, the measure has a narrower scope and only seeks to exclude insurers that cover gender-affirming surgery.

Tennessee’s Medicaid program already bans coverage of gender-affirming care. This legislation seeks to influence insurers to extend that mandate to other product lines and states, said Lindsey Dawson, associate director of HIV policy and director of LGBTQ health policy at the Kaiser Family Foundation.

“This actually isn’t going to really impact access to care in TennCare because the services that we’re talking about are already not covered in the state, but it could impact contracts and services in other states,” she said.

If enacted, TennCare would have to revise its contracts within 30 days of the effective date to ensure compliance. Insurers would need to update care delivery protocols, claims processing systems and provider contracts to eliminate gender-affirming services or risk significant penalties, including lost contracts, Avalere Health consultant Michael Lutz wrote in an email.

If an insurer were deemed in violation, it would have 90 days to comply. Tennessee procured its multibillion-dollar managed care contracts last year, and terminating them to meet these requirements could affect continuity of care for all TennCare enrollees, Dawson said.

The money at stake for insurers may induce them to stop paying for gender-affirming surgeries instead, according to Lutz. “While the plans may disagree with the intent and impacts of the rule, the size of the revenue opportunity to serve the state would likely mean that the state would still be attractive to carriers,” he wrote.

The legislation also conflicts with other states’ rules. Insurers with contracts in states that require transition surgery coverage could be ineligible to participate in TennCare, according to the legislature’s budget analysis. For example, UnitedHealthcare, one of Tennessee’s three managed care contractors, also administers the Garden State’s Medicaid program, New Jersey FamilyCare, which requires coverage of gender-affirming treatments.

“Plans could exit, or plans could change their offering,” Dawson said. “If a plan exits the state of Tennessee, that impacts not just people who are seeking gender-affirming care, but all enrollees, and could certainly cause a disruption in services and problems with continuity of coverage and care.”

The insurers contracted to provide managed care for TennCare—Amerigroup, UnitedHealthcare and BlueCare Tennessee—did not respond to requests for comment.

On its own, the Tennessee legislation could hamper the state’s ability to attract competitive Medicaid bids, which may increase costs and harm quality, Howard said. If this policy were to spread to other states, it could fragment the market based on political affiliation.

“It just creates a crazy patchwork, that I think would be unworkable, where you have some managed care companies operating in blue states and some in red states,” she said.

The bill is adapted from laws enacted in Arkansas, Florida and Georgia that aim to limit gender-affirming care by arguing it is not medically necessary. The Tennessee measure would go further by stopping insurers from covering such care in any state.

The Arkansas, Florida and Georgia statutes are enmired in legal challenges. But Rudd said during the committee hearing that the Tennessee bill is crafted to avoid similar obstacles. “The way it’s structured has not been challenged before in a court. All the other bills were different,” he said.

Courts are still considering constitutional questions about excluding people based on sexual orientation and gender identity, Dawson said.

“Litigation is certainly possible,” she said. “We’ve seen plaintiffs succeed with discrimination claims in court in the past when state Medicaid programs have banned gender-affirming care. We saw a settlement in Georgia quite recently. And in Wisconsin, we saw a federal judge find that these categorical exclusions violated several federal protections.”

Source : Modern Healthcare

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