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Biden administration rescinds billions in Medicaid funding for Texas



TX – A federal waiver granting Texas billions of dollars over the next decade to help cover emergency care for the uninsured was abruptly rescinded Friday, a move that could upend the state’s health care safety net and adds pressure on Republican leaders hesitant to expand Medicaid.

The Centers for Medicare and Medicaid Services said in a letter that it had incorrectly allowed Texas to forgo the normal comment period when applying for an extension of its 1115 waiver, which reimburses hospitals in the state for uncompensated care.

The extension had been approved in the waning days of the Trump administration, after the state asked for urgency because of the coronavirus pandemic. But the agency asserted Friday that Texas never presented an issue in its application that “related to the public health emergency for COVID-19.”

“CMS erred in exempting the state from the normal public notice process — a critical priority for soliciting stakeholder feedback and ensuring public awareness,” it said in a subsequent statement.

While the state’s current 1115 waiver won’t expire until September of next year, the reversal has immediate political impacts because the state Legislature has only weeks left in its session and won’t meet again until 2023. Without certainty over how much the federal government will contribute going forward, lawmakers risk leaving huge funding gaps for counties and hospitals.

Texas Republicans, who control the state government, have long campaigned against the Affordable Care Act and have declined to expand Medicaid under the act’s provisions as they seek to overturn the law in court. The state has depended on the waiver system as a cheaper alternative that nonetheless leaves millions of Texans uncovered.

Today, Texas has the highest uninsured rate in the country, with nearly 1 in 5 people lacking coverage. That results in staggering amounts of uncompensated emergency room visits each year, some of which is reimbursed by the 1115 waivers.

Health care advocates and some moderate Republicans have joined Democrats in calling for Medicaid expansion this session, citing the pandemic’s toll. Congress also offered Texas an extra $3 billion over the coming biennium if it expands the safety net coverage. So far, none of the expansion bills has made any serious progress in the Legislature.

Gov. Greg Abbott, a Republican who has opposed Medicaid expansion, said the federal government’s decision on Friday is “obstructing health care access for vulnerable Texans and taking away crucial resources for rural hospitals in Texas.”

“With this action, the Biden administration is deliberately betraying Texans who depend on the resources made possible through this waiver,” Abbott said.

Earlier this year, a group of national health associations including the American Cancer Society, the American Heart Association and the American Lung Association called out the Trump administration’s expedited approval, saying there was plenty of time to hold a public comment period before the existing waiver expires next year.

“The waiver application was hundreds of pages, I don’t think it even mentioned COVID,” said Joan Alker, a Medicaid expert at Georgetown University who had signed on to the letter. “So it was a blatant disregard of what the exemption was supposed to be for.”

The Texas Hospital Association said it was disappointed with the decision.

“This action undermines the safety net and hospitals’ ability to protect people,” president Ted Shaw said in a statement. “It puts the state’s health at serious risk and creates unprecedented levels of uncertainty for an industry that is charged with saving lives.”

Others noted that the waiver was never meant to be a permanent solution.

“The waiver was always intended to serve as a temporary bridge until the state implemented an insurance option — with federal Medicaid expansion funds — for low-wage workers whose jobs don’t provide health coverage,” said Patrick Bressette, who directs the Children’s Defense Fund Texas. “Now would be a good time to have a real conversation about Medicaid expansion.”

Texas Sen. Nathan Johnson, a Democrat from Dallas who authored an expansion bill that has some Republican support, said the state should immediately reapply for the waiver while also taking up the expansion question.

“The story being told on the Republican side is Biden’s taking away resources from vulnerable people. False,” he said. “There’s still time left under the old waiver protections to do this the right way.”

Even if the state were to expand Medicaid, it would need federal support under the 1115 waiver to cover higher income Texans who are uninsured.

“There will still be uncompensated care burdens for hospitals,” said Anne Dunkelberg, a health care expert at the left-leaning group Every Texan.