Texas is locked in Medicaid ‘game of chicken’
Nearly a year after the Biden administration revoked approval of billions in future Medicaid dollars for Texas, state and federal officials are at an impasse over the safety net funding, with a deadline looming Friday.
The money, funneled through what’s known as an 1115 waiver, has brought more than $30 billion to Texas since its start in 2012 and now accounts for nearly a third of the state’s Medicaid budget. Those dollars primarily prop up hospitals for emergency care to patients without government or private insurance.
Last April, the new Democratic administration withdrew a surprise, 10-year waiver renewal made in the final days of the Trump presidency. Republican state leaders sued to reinstate it and a federal judge ordered both sides to negotiate. They remain locked in disagreement over how the state funds its portion of the waiver.
The judge, J. Campbell Barker in East Texas, has ordered the Centers for Medicare and Medicaid Services to make a final decision on the payments by the end of this week.
John Hawkins, president and chief executive of the Texas Hospital Association, said the stalemate is costing hospitals about $7 million a day and could force some to roll back medical services or increase charges if the waiver expires this fall, as originally scheduled. Under the initial plan, new payments to hospitals would have already begun.
“Our concern is why all of a sudden has CMS chosen to make this a bigger deal than it’s been in the past, and particularly given that we’re in the middle of a pan
demic?” Hawkins said last month.
The Biden administration’s reversal last year set off a firestorm among hospital and patient advocates, many of whom are divided over the state’s increasing reliance on waiver dollars to compensate for the state’s bare-bones Medicaid program.
Patient advocates had assumed the waiver would shrink over time as Texas expanded Medicaid under the Affordable Care Act. But Republicans have refused to expand, leaving about a million low-income Texans without Medicaid or other coverage that could pay for routine checkups and other preventative care. Many of them later end up in hospitals for untreated medical conditions.
Texas has both the biggest uninsured population and the highest uninsured rate of any state.
Under pressure to close the coverage gap, Republicans leaders in the Legislature often point to the waiver as a backstop, making up for whatever funding gaps hospitals incur. But they have little control over that money, and it’s unclear whether they can force the Biden administration into carrying out a Trump-era decision, especially when many of the details of the waiver’s renewal had yet to be worked out.
“They’re now in a game of chicken with the administration,” Sara Rosenbaum, a health law and policy professor at George Washington University, said of the state’s position.
State-created ‘problem’
In revoking the Trump renewal, Rosenbaum said it’s possible that federal officials are trying to pressure Texas into contributing more toward indigent care. Aside from Medicaid expansion, the state also has historically low reimbursement rates for providers, including hospitals.
“I don’t think the Biden administration will let the entire health care system collapse,” she said. “But I don’t think it has any particular interest in solving a problem of the state’s own making.”
Medicaid experts widely agree that Texas will need federal help even if it expands the program. The state has about 5 million uninsured people, many of them undocumented or who would otherwise be ineligible for expanded Medicaid.
But Judy Solomon, who studies health policy at the progressive Center on Budget and Policy Priorities, said CMS has raised valid questions about the state’s funding mechanism. Typically, states access waiver dollars with matching funds from their general revenue or through statewide provider taxes.
Texas devised a workaround in which the state is one-step removed. Under the model, called a Local Provider Participation Fund, private hospitals tax themselves and send the money up through their local governments and the state to CMS. Those hospitals are then eligible for enhanced Medicaid payments on treatment they provide.
Not all providers that pay the tax come out on top, however, and in 2019, a hospital consultant inadvertently tipped off CMS that the hospitals that profit from payments were privately covering the cost of the tax for others. Medicaid rules prohibit such arrangements if the government is directly or indirectly involved.
“This dispute really comes down to whether these payments conform to the rules that CMS administers,” Solomon said.
The state has repeatedly declined to provide CMS with details about the arrangements, and proponents say the setup is legal, since the deals are done privately. The federal inspector general’s office has opened an investigation into the provider funds, which are also taking off in Florida, another state where lawmakers have rebuffed Medicaid expansion.
Originally, the funds were only intended for counties without a public hospital district, like those in South Texas, because they couldn’t raise matching funds through property taxes or sales taxes. They have since spread to 28 jurisdictions, many of them with sprawling metros and large public hospitals, including Harris, Bexar and Dallas.
‘A disaster for our state’
The Centers for Medicare and Medicaid Services declined to comment, citing the ongoing Texas litigation. In remarks earlier this month to state health officials, it said the agency is “committed to ensuring a strong and vibrant social safety net across the nation, including in Texas.”
“This includes making sure that providers in Texas receive all Medicaid payments for providing services to Medicaid beneficiaries to which they are entitled,” it wrote.
Christine Mann, a spokeswoman for the Texas Health and Human Services Commission, said the state plays a limited role in helping Texas hospitals draw down the waiver funding.
Federal officials are asking Texas to “regulate private agreements between non-governmental actors, which neither CMS nor HHSC has the legal authority to do,” she wrote. “HHSC has offered attestations that it is complying with applicable federal law, which CMS rejected.”
Neither the governor’s nor the attorney general’s offices responded to requests for comment. Attorney General Ken Paxton has said previously that the impasse is meant to force the state into expanding Medicaid, which he opposes.
“This would be a disaster for our state,” Paxton said last year, “and yet President Biden seems intent on thrusting his bloated model of government on everyone — including Texas.”