House TennCare Subcommittee Holds Summer Study on Controversial Medicaid Block Grant Proposal


The House TennCare Subcommittee took on the controversial topic of the block grant proposal, hearing from key stakeholders in a two-hour summer study conducted last Thursday.

Subcommittee Chairman David Hawk (R-Greeneville), a new appointee to the leadership position since Cameron Sexton took over as Speaker of the House, led the proceedings. House TennCare Subcommittee members in attendance included Representatives Scott Cepicky (R-Culleoka), Ron Grant (R-Rossville), Larry Miller (D-Memphis) and Bryan Terry (R-Murfreesboro).

Subcommittee members Representatives Robin Smith (R-Hixson) and Jason Zachary (R-Knoxville), Chairman Hawk advised, were unable to attend due to work and life commitments.

Other House members recognized by Chairman Hawk during various points during the proceedings were Representatives Sam Whitson (R-Franklin), G. A. Hardaway (D-Memphis) and John Ray Clemmons (D-Nashville), in addition to the House sponsor of the block grant legislation, Timothy Hill (R-Blountville).

The legislation sponsored by Representative Hill under HB 1280 directed the Governor, through the Commissioner of Finance and Administration, to submit a waiver amendment within 180 days of the effective date of the act to the Centers for Medicare and Medicaid Service (CMS) to provide TennCare II funding by means of a block grant, indexed for inflation and population growth.

The legislation initially passed the House on April 11 with a very partisan vote of 68 Ayes, 21 Noes and 1 Present and not voting. No Republicans voted against the measure and no Democrats voted for it.

The House non-concurred with a Senate amendment to the bill, which wasn’t adopted by the upper chamber until April 30.

The refusal by both chambers to move off their positions resulted in a joint Conference Committee to resolve the differences, the report from which was adopted by the House and Senate on May 2, 2019 – the last day of the legislative session as The Tennessee Star reported.

During the process, House Democrats repeatedly objected to the lack of an appointment of one of their caucus members to the Conference Committee and staged a walk out from the House floor session, resulting in the loss of a Constitutionally-required quorum of two-thirds of its members.

The legislation went on to be signed by Governor Bill Lee and became Public Chapter No. 481.

As The Star reported, the 34-page Amendment 42 draft demonstration waiver, released on September 17 began the 30-day public comment period in compliance with CFR 431.408, which ended on October 18.

In addition to making the amendment available for public review and comment on a specific webpage on the TennCare website, three public hearings across the state were scheduled and later two more were added.

In accordance with Public Chapter No. 481, the block grant waiver amendment must be submitted to CMS by November 20, 2019.

Chairman Hawk opened the meeting saying that he began paying attention to the Tennessee state government 25 years ago, when TennCare came to be.

As it began, Chairman Hawk relayed, the population of Tennessee was about six million people and was set up to provide insurance coverage for roughly one million of those citizens. The one in six ratio has been pretty consistent historically, but it is now greater than one in six, said Chairman Hawk.

The first decade of TennCare, according to Chairman Hawk was “very interesting,” and the second decade was “very good.”

Chairman Hawk acknowledged Representative Miller as he alluded to some tough decisions [that] were made during the Bredesen administration” when approximately 350,000 Tennesseans were cut from TennCare, as The Star reported.

“We continually have to balance the number one priority – that the health of our citizens is taken care of – balanced with the fiscal resources that taxpayers allow us to utilize,” which has been a very interesting process, summarized Chairman Hawk.

Chairman Hawk concluded that TennCare has done a good job and he looks forward to working with them in this capacity.

Representative Hill, House sponsor of the legislation, was recognized by Chairman Hawk for opening remarks.

Expressing appreciation to the chairman and the committee, Representative Hill said as the bill sponsor, “I am grateful for the chance we have here today to cut through the politics through various media accounts and, candidly, straight up fear tactics about this particular proposal.”

He went on to say that the legislation he carried and was supported by the body, requires the Administration to make a request of CMS for a block grant and that – importantly, “whatever is agreed upon by CMS and the Administration must come back to the legislature for final approval.”

“The public comment period has concluded, and the Commissioner and TennCare are going through those in preparation for submission of the plan by November 20, 2019,” updated Representative Hill about the status of the process.

“Concerns raised about the submitted plan are very real, they’re very valid and must be addressed to win legislative approval,” said Representative Hill.

“Sustainability with an unpredictable number of people in the program, medication costs and access to care all must be addressed.”

“It must also be noted,” continued Representative Hill, “that this body approved the Katie Beckett waiver, serving our children and families in the absolute most need in our state.”

Representative Hill said that he, as did many on the committee and the body, supported the Katie Beckett waiver and that it must also be noted that, “the two proposals – the block grant and the Katie Beckett waiver – are moving forward without interference between the two.”

The Katie Beckett Program would serve children under age 18 who have disabilities or complex medical needs and do not qualify for Medicaid because of their parent’s income or assets under two parts – Part A and Part B.

Part A will serve children who qualify for care in an institution, but choose home care instead. Their income and assets will be excluded in determining their Medicaid eligibility and, if they otherwise qualify, would receive full Medicaid benefits to help pay for care their private insurance doesn’t cover.

Part B will serve children who will not be enrolled in Medicaid but would receive up to $10,000 per year in services to help cover costs of private insurance premiums or things their private insurance doesn’t cover.

In the 2019 legislative session, legislators approved a set amount of funding of $27.3 million which, when matched with federal Medicaid funds, will total $72 million to spend on services for 300 children in Part A and up to 2,700 children in Part B of the Program.

The Katie Beckett waiver amendment had to be submitted to CMS by September 21, and it is unknown how long it will take to receive a decision.

TennCare has said that he earliest the Katie Becket Program would start is 2020.

Representative Hill continued about the Amendment 42 block grant waiver, “There’s a tremendous amount of disinformation by a few groups and individuals who want traditional Medicaid expansion, causing great fear in a lot of very good people. And, today, my hope is that this particular issue will be addressed through testimony and a plan presented by TennCare itself.”

Further explaining the importance of the Katie Becker waiver to the legislature, “To my families that are worried today about the Katie Beckett waiver – because all across the state there were – it’s not my intent to harm what we passed for you and for your children. Candidly, if the proposal comes back to the legislature without a protection of what this body has passed for our most vulnerable, I believe it will be met with tremendous opposition.”

“The ultimate goal of the legislation, as it was brought, is to serve as many people as we possibly can with existing resources. TennCare is run extremely well, and the proposal, I believe, addresses the concerns that have been raised.”

“And, Mr. Chairman, it’s an innovative approach,” said Representative Hill.

Representative Hill said he has heard that there are no other states that do it this way and that during his presentation of the legislation to that very subcommittee, he said, “This is exactly why Tennessee is the perfect place to innovate, to stand up for our most vulnerable, to find a way to serve our people with compassion and fiscal responsibility.”

Following along on the same themes, Representative Hill also told The Star shortly after filing the bill, “Medicaid block grants is the conservative way to expand TennCare coverage.”

It was noted by Representative Hill that “there is still a tremendous road ahead for the block grant proposal.”

Representative Hill shared, “This hearing is a fantastic opportunity to cut through all of the noise about what it might do or what it may do or what people are saying about it, which I assure you, I’ve heard quite a bit of it but probably only bits and parts of what’s out there.”

“I’m looking forward to working toward the best policy, removing the cost of federal compliance and returning Tennessee tax dollars home, because I believe Tennesseans are better equipped to serve our people than Washington, D.C., and ultimately provide greater access to healthcare that is patient centered and greatly needed.”

In closing, Representative Hill reiterated his original purpose in bringing the legislation. “I firmly believe that we in Tennessee know best how to care for our own people, and I believe that the plan that has been put forth, which is bound we hope to go through the negotiation process with CMS, addresses many of the concerns.”

Chairman Hawk said that “transparency is key,” being important to the committee, the legislature and “I think it’s important to the folks at TennCare and the administrative branch as well.  I feel very confident that we are going to achieve that in this process.”

Offering a reminder that the discussions are to be on the block grant proposal, Chairman Hawk recognized Gabe Roberts, Deputy Commissioner/Director and Aaron Butler, Director of Policy with TennCare.

Director Roberts had a brief slide presentation that included the guiding principles set forth in the legislation:

  • Index for growth but no decrease in federal share in cases of population reductions
  • Adjust for inflation
  • Exclude expenditures that are carved out of the existing TennCare waiver (e.g. services provided by DIDD)
  • Exclude administrative costs
  • Provide the state with “maximum flexibility” with regard to federal mandates and regulations
  • Provide the state with “maximum flexibility” regarding pharmacy benefits
  • Provide the state with flexibility to serve other needy populations
  • Remain at the set level according to the block grant without any decrease in federal share based on deflation or population reductions

With the eight bullet points, Director Roberts said there was an expectation of thoughtfulness in the understanding of the pros and cons of traditional block grants as well as traditional funding of Medicaid to try to craft a solution that would give the best of both worlds, so that there would be a good approach and good deal for the state of Tennessee.

It’s a goal Director Roberts thinks they have met.

Director Roberts went on to review a slide addressing how TennCare funding works today with both state and federal dollars.  In fiscal year 2020, of the $12.2 billion in TennCare funding, $8.5 billion is federal and “just north of $3 billion” of state dollars, which is essentially a two to one match of federal to state dollars, explained Director Roberts.

He went on that under Tennessee’s current 1155 demonstration waiver authority from CMS and using a managed care tool approach versus a standard fee-for-service model, robust Medicaid services are delivered to more people than otherwise covered in a status quo environment and is done so at least as cost effectively if the waiver was not in place.

Director Roberts presented a slide that reviewed the net neutrality cap, a critical element to the block grant waiver.  It represents the amount of money CMS projects to spend in the absence of the waiver.

The slide showed that TennCare’s actual expenses since 2008 tracked much lower than the CMS projection with the gap widening through 2018.

Director Roberts explained that there have been a series of changes at the federal level that don’t give Tennessee credit for all of the savings realized against the CMS projection.

One of the core tenets that has been in place for a while, according to Director Roberts, is there a way for us as a model state in a unique situation to be rewarded for an efficient program but, more importantly, an effective program in terms of the outcomes of the people that are covered from a health standpoint.

If so, said Director Roberts, is there a way to access some of those federal dollars to continue to drive better results for the people served in our very rural state.

Director Roberts showed that the block grant framework consists of a “base” amount of applicable TennCare experience over the past three state fiscal years trending forward each year for inflation, plus per capita member growth, plus shared savings from the difference between TennCare actual spending and CMS projections.

Because the block grant amount would increase whenever TennCare enrollment increases, there is no incentive to limit TennCare eligibility, clarified Director Roberts about one of the major concerns for how savings would be realized.

The key piece is sharing in one half of the savings represented in the gap between CMS projected costs and TennCare’s actual spending.  Currently, Tennessee gets credit for only 25 percent of the two-thirds of the funding that is federal dollars.

The entirety of the shared savings will be spent on the TennCare program along with an ongoing similar percent of state allocations to the TennCare program, so the result is net new additive dollars to the program, said Director Roberts.

The purpose of the flexibilities is to be additive, not to limit a benefit or service, reiterated Director Roberts.

He said that he realizes that they are asking for trust and joked, “That’s a totally fair criticism. I wouldn’t trust me either if I wasn’t me.”

To address those concerns, Director Roberts added that the length of the flexibility would be clearly articulated in the waiver and that he would anticipate, because of his understanding and previous work with CMS, that there would be guardrails put around those issues.

The prescription drug benefit, which Director Roberts said is one of the most expensive parts of the program, has been specifically carved out of the legislation as there seems to be opportunities to drive better outcomes and potentially better adherence to certain medications, if there is flexibility in how TennCare covers drugs.

In light of some of the comments, which he appreciates, Director Roberts wanted to make it very clear, “that this is more a cost containment issue than a coverage issue.”

Director Roberts explained that waivers, by their very nature, only contain information about what is to be changed. As such, appeals and benefits to children aren’t going to be changed and are, therefore, not included.

In conclusion, Director Roberts said this model will bring more – and not fewer – dollars into the state to spend and invest in the Medicaid population.

“That’s why we were so confident and so bold to say in writing in the waiver, which we are held to, that there will be no limitation on eligibility and there will be no limitation on services provided through TennCare. In fact, we went further and said we would use the additional dollars for both/and targeted enhancements of services to people who are already covered and potentially covering additional people in different populations.”

The projected timeline was then reviewed by TennCare Policy Director Aaron Butler:

  • Per legislation, the block grant amendment must be submitted to CMS by November 20, 2019
  • Prior to submission, TennCare must provide a 30-day public comment period, which ended on October 18, 2019 and included 5 public hearings across the state.
  • Date of final decision by CMS is unknown.
  • If an agreement on the block grant waiver amendment is reached between CMS and the Administration, the General Assembly must approve the agreement prior to implementation.

Between the public hearings as well as letters, postcards, emails and other methods of communication, Director Butler reported there were a total of about 1,700 comments that are being reviewed by a team of people with a human being laying eyes on every single piece of input received.

Chairman Hawk advised that representatives from four organizations asked to speak at the summer study, and they were called forward one by one to deliver their comments, hard copies of which were also provided to the Subcommittee members.

Ben Simpson, Assistant General Counsel Assistant Director of Government Affairs for the Tennessee Medical Association (TMA) spoke on behalf of their organization and its 9,000 members, first commending the leadership of the legislature and the governor for taking on “a wholly, uniquely [sic] task.”

He remembered former Lieutenant Governor Ron Ramsey always saying, “It matters who leads,” and expressed appreciation for the sponsors of the legislation and the governor’s representatives seated behind him “who are leading not only Tennessee in the nation in something that could change the way we do healthcare in the state of Tennessee.”

Diving in to the large and unique waiver, Simpson said there are things they really like.  Specifically, Simpson mentioned the investment in public health measures, saying they are very big into preventative care and spending $1 on the front end versus spending $100 on the back end.

Simpson said that with big change such as this, come big questions.  TMA has submitted their comments and questions to Director Roberts.

While the waiver being centered around net neutrality and shared savings is a “great way to go,” Simpson said it is based on episodes of care which “we haven’t quite gotten right.”  He added that the problem comes with expanding a system that is not perfected yet,  “We don’t want a small bad system to become a large bad system.”

Simpson went on to detail issues with the episodes of care model, how new “eligibles” for TennCare as a secondary payor will be treated and cancer drugs that didn’t make it into the 100 percent category of the TennCare formulary.

In closing, Simpson said that they appreciate the opportunity and “stand ready to work with TennCare, the Administration and our legislative partners to get the best waiver that we can so that Tennessee can be that leader in the nation when it comes to providing health and healthcare for its citizens.”

Dr. Wendy Long, President and CEO of Tennessee Hospital Association, said the staff has reviewed the proposal in detail and their position is “We are cautiously optimistic.”

Dr. Long went on to say they are optimistic because TennCare has designed a model that will bring substantial new financial resources into the state with the proposed shared savings that will finally reward Tennessee for the efficiencies that have reduced the federal cost of Medicaid in Tennessee for years now.

She pointed out that there are other design elements that will help to “shield the state from some of the risk that would typically be associated with a block grant model,” specifically, increased funding for increased enrollment, maintaining eligibility and benefit levels “which are essential in not increasing provider charity costs.”

Especially as it relates to hospitals that provide high volumes of charity care, Dr. Long said, “We believe this structure will allow them to provide care for all who come through their doors.”

Dr. Long expressed excitement about the potential to invest these shared savings to improve the healthcare delivery system and the health of Tennessee residents.

She made the point that hospitals could make the same argument as TennCare in reducing costs that, in many cases to similar effect, with the benefit going to someone else.

The “caution” comes mostly from what isn’t as opposed to what is in the draft waiver, said Dr. Long.

Of the three things that drive cost – eligibility, benefits and provider rates – the waiver speaks clearly about not changing the first two.  Verbal assurances have been received on the provider rates, but Dr. Long said they would like to see that included “side by side” in the waiver.

Dr. Long also expressed concern about the lack of detail regarding prescription drugs.

Agreeing with the notion that the state knows best, Dr. Long said they would like visibility on what “the new world” would like if CMS grants the requested flexibilities.

Finally, Dr. Long said that is pretty much understood that this is just the starting point, and when and if the proposal “takes a different shape,” THA would like the opportunity to engage.

Executive Director of Tennessee Disability Coalition, Carol Westlake talked about the importance of Medicaid as “an amazingly vital safety net program for adults and children with disabilities,” saying, “TennCare is not simply health insurance, it’s a lifeline.”

While Westlake said of the amendment waiver, “many of the goals are ones we can support,” she reminded that “lots of disabilities are not public health problems.”

Westlake expressed her understanding of the slide presented by Director Roberts showing that a lot of the savings are in the gap, but said of her population, “Whenever we talk about savings, people with disabilities get nervous because they are the most expensive and most vulnerable enrollees.”

Backing that up, Westlake said, “According to the Kaiser Family Foundation, seniors and people with disabilities make up a national average of one in four Medicaid enrollees, while accounting for almost two-thirds of Medicaid spending.”

Westlake went on to say that while TennCare says in the Amendment 42 draft they don’t intend to change eligibility, “they ask for permission change amount, duration and scope without any oversight from the federal government” and that makes that population very nervous.

That concern is heightened, continued Westlake, because for so many elements of the program in Amendment 42, “there is a lack of detail and clarity that leaves us with a lot of unanswered questions about the potential impact those changes will have on our daily lives.”

Westlake went on to recognize that the waiver amendment is not written to be fully detailed about how a program is going to run.

Speaking about the importance of the program, Westlake said she would like to see assurances relative to the protection of full funding for the Katie Beckett program.

TennCare’s adoption of a commercial-style closed formulary by is “worrisome,” and something that others also addressed, said Westlake.

Westlake asked that those with disabilities and their families be listened to, that any proposed changes be thoroughly vetted and detailed “so that people really understand what the impacts are going to be.”

Jack Fosbinder, State Counsel of Pharmaceutical Research and Manufacturers of America (PHRMA) said he met with TennCare representatives the day prior to review concerns and that the meeting was productive.

Fosbinder, saying he wasn’t a subject matter expert on grants or CMS regulations, read a summary of comments to TennCare and said he would take any questions back to those who could responsd.

The proposed waiver, Fosbinder said, could have unintended consequences of upending decades of statutorily set Medicaid partnership and program functions that could possibly endanger access to healthcare and the necessary lifesaving medications for TennCare recipients.

Fosbinder detailed PHRMA’s concerns with the flexibility the state is seeking, including adoption of a commercial-style closed formulary.

Director Roberts, who had been sitting behind the speakers and taking notes throughout the comment period, came back up with Director Butler to address the issues.

After expressing appreciation for the hearing and the comments, Director Roberts said waiver amendments that are substantial like Amendment 42 are complex with complex negotiations.  They will be clearly articulated and the entire process will come back before the legislature with ample time for public comment.

While he said he wouldn’t go through point-by-point the concerns expressed, it seemed Director Roberts took a significant amount of time essentially doing just that.

Of the Katie Beckett population, Director Roberts reassured, “My team and I worked tirelessly with the Disability Coalition, with this committee and with legislators, Representative Whitson (House sponsor of the Katie Beckett waiver legislation) and others to be able to get to a place where the state could not only really step in and help these families, but do it the Tennessee way and I’m proud of that.”

Roberts went on the record saying, “There will no negative impact on the Katie Beckett population. In fact, there will be no negative impact on any of our population with respect to this block grant.”

He went on to say that there will be no negative impact on members, providers, MCOs, and no operational changes required.

“It is a financial calculation of how dollars come into the state. There could be operational benefits in terms of providing more services to the people who are covered or covering additional folks,” explained Director Roberts.

Roberts committed, in light of the comments received and out of an abundance of caution, “One of the clarifications we will put into the waiver amendment is that we will not be seeking to change the EPSDT (Early and Periodic Screening, Diagnosis and Treatment) benefit for children and around the pharmacy piece we’re also going to talk about not wanting to limit the off-label use of drugs for the pediatric population.”

It is our collective impact with our healthcare community that have been able to deliver services in the right time and the right place and the right setting in Tennessee. So we’ve all had a part in that and so when we get these savings we’re looking at providing more services to our people, we’re looking at additional folks but we’re also looking at trying to make sure it continues to be a value-add proposition for our providers to be able to continue to serve our population.

At the end of the day, what we’re asking CMS to do, in fact, with this proposal is to hold us to a similar standard that we now are holding our providers and our MCOs: Put us at risk and let us be able to run our program. We have demonstrated for more than a decade that we can do this in a way that drives a lot of value for all the reasons that I said earlier and then let us share in those rewards.

Create this funding mechanism as a value-based approach.  We think it’s fair for them to hold us to a similar standard that we hold our providers and MCOs.

Director Roberts reiterated that they had a great meeting with PHRMA the day prior and with a “whole host of folks,” and look forward to a good relationship moving forward.

Director Roberts said that a three-page document the Subcommittee members had that clarifies myths versus facts about the Amendment 42 waiver would be available on TennCare’s website.

To Ms. Westlake’s point, Director Roberts also clarified the context of the word savings as a shared approach of trying to get access to additional federal dollars that Tennessee does not have access to now and has nothing to do with trying to drive “savings” in our actual expenditures year over year.

Stating in a hopefully more straightforward way, that that calculation, those amounts of savings are not dependent upon cutting services or even cutting individuals. 

In fact, due to some Medicaid math wizardry, the more folks we have on our program, we have the potential for a larger shared savings arrangement with the federal government.  

So there is no requirement that we cut services to actually result in savings for the state, because, again, the savings relate to our project costs versus what we actually spend.  

I wanted to make that really clear, I perhaps wasn’t as clear as I could have been earlier.

The meeting was opened for questions by the Subcommittee members

To Representative Miller’s query about “per capita member growth,” Director Roberts confirmed that if there is an increase in membership, Tennessee would get more federal dollars in the calculation.

Representative Miller recognized that he needed to stay focused on the block grant, but asked how many Tennessean’s are uninsured and if covering more Tennesseans is part of the goal of the block grant.

Director Roberts responded that he thought recent census data he saw showed 600,000 uninsured Tennesseans and confirmed that expanded coverage is part of the goal.

Representative Miller, who voted against the block grant legislation under HB 1280, said “I’m not quite there now, but I look forward to when you sit down and negotiate what some would consider a sweetheart deal.”

He continued, “From the surface, it would like this may not be a bad thing, but the question is do you think that the federal government would really seriously consider what’s in this proposal at this point?”

Director Roberts said he thinks they will.

“They’ve been actively asking states to bring them innovative ideas around block grants specifically and I believe we are a great state to go do this for all the reasons we’ve talked about, the metrics that we have. I believe that what you’ll find is that, in my opinion, if we were able to reach an agreement like this that CMS would find others states start raising their hands. There are a couple of states that are not exactly but pretty close to Tennessee. I’ve heard the governor say if we can get CMS to reimagine and reward states, that would be a win for the country.”

During an exchange with Representative Cepicky, Director Roberts said they are prepared for a downturn in the economy and a potential increase in enrollment.  He also added that the TennCare covers more than 200,000 Tennesseans than during the recession.

Representative Terry, who is also a physician, worked through with Director Roberts several of the slides to come to a bottom line that with the shared savings Tennessee could get back $550 million on the $4.4 billion the state saved the federal government.

Representative Gant clarified with Directors Roberts and Butler that the proposal would not affect the private insurance market.

Responding to Chairman Hawk’s inquiry, Director Roberts said that Tennessee has five amendments before CMS right now, not including the Amendment 42 block grant waiver.

Expressing excitement about the Amendment 42 waiver, Director Roberts concluded, “We think this really has the opportunity to be a game-changer positively for Tennessee and the people that we cover, their families and for the taxpayers of the state.”

Chairman Hawk summarized that while a tremendous amount of work has been done, the process is just beginning.  As such, “It’s difficult for many of us to be patient, but that’s what I would encourage.”

A strong critic of House leadership during the 2019 legislative session, Chairman Hawk said, “I’ve seen more conversation and better dialogue in this two-hour meeting than I’ve seen for quite some time,” and commended and thanked the presenters, the committee members and staff.

Chairman Hawk concluded, “As we began this meeting, we talked about transparency, and that’s why we’re here.  For all those listening, all those in the audience, we want to hear from you.  This is how we learn, how we grow, how we create progress.  So, we want to hear from everyone who has an interest in this and we will come up with a good product.”

The video of the House TennCare Subcommittee summer study can be viewed here.

Laura Baigert is a senior reporter at The Tennessee Star.








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One Thought to “House TennCare Subcommittee Holds Summer Study on Controversial Medicaid Block Grant Proposal”

  1. CCW

    This is what happens when the Block Grant “strings attached” begin to influence the proponents. The first string I identified was the sudden interest in Billy Lee trying to decide whether or not to extend Medicaid (TennCare) to IA’s in the state. Tough call when $1.7 Bn is at stake.