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Feds Rescind Funding Agreement That Would Have Covered Care For Uninsured, Poor Texans After 2022

A doctor walks through an open door into an exam room.
Michael Stravato for The Texas Tribune
The Biden Administration rescinded what's called a 1115 waiver that would have extended for 10 years Texas’ health care safety net for uninsured residents. The existing waiver expires next year.

The Washington Post, citing two federal health officials, said the decision was a bid to push Texas toward expanding Medicaid.

The Biden Administration on Friday rescinded approval of changes to a federal funding agreement, known as a 1115 waiver, that would have extended for 10 years Texas’ health care safety net for uninsured residents — potentially teeing up a new round of negotiations before the existing waiver expires in 2022.

The previous administration “materially erred” in granting the extension without a “normal public notice process," according to a Friday letter from the Centers for Medicare and Medicaid Services.

The Washington Post, citing two federal health officials, said the decision was a bid to push Texas toward expanding Medicaid to cover more low-income adults, a move the state and eleven others have resisted.

The 1115 waiver reimburses hospitals for the “uncompensated care” they provide to patients without health insurance, and pays for innovative health care projects that serve low-income Texans, often for mental health services.

The extension approved in the waning days of the Trump administration would have continued hospital reimbursements until September 2030, but allowed the innovation fund to expire this year.

The earlier waiver is still in effect and federal authorities “stand ready to work with the state” if it wishes to extend it beyond next year, according to Friday's letter.

The state’s rationale to get out of the normal public notice process was that health care providers needed financial stability to prepare for and respond to the coronavirus pandemic, the letter said. But the state’s request did not “meaningfully explain why the extension request addressed the COVID-19 public health emergency or any other sudden emergency threat to human lives,” it said, in part.

The state’s first 1115 waiver was approved in 2011. It was meant to be a “bridge” to Medicaid expansion under the newly passed Affordable Care Act, but a subsequent U.S. Supreme Court ruling gutted the Medicaid expansion part of the sweeping federal health law. Republican leadership in Texas — which has the nation’s highest rate of uninsured residents — has stood fast against expanding Medicaid, sometimes characterizing it as building on a broken system.

Republican state officials slammed Friday’s decision.

“The State of Texas spent months negotiating this agreement with the federal government to ensure vital funds for hospitals, nursing homes, and mental health resources for Texans who are uninsured,” Gov. Greg Abbott said in a statement.

Attorney General Ken Paxton said he would “use every legal tool available to regain the assistance Texans need.”

Texas Hospital Association president Ted Shaw said the group was "extremely disappointed."

"The waiver extension would have helped the state to seamlessly continue support for much-needed health care improvements and would have continued stable funding for hospitals that serve large numbers of uninsured patients," he said.

The announcement comes as some state lawmakers are pushing to broaden Medicaid coverage, though bills to do so have so far failed to pass either chamber.

State Sen. Nathan Johnson, D-Dallas, said the 10-year waiver extension approved in January had taken some pressure off lawmakers to expand Medicaid but Friday's decisions puts it back on.

The "decision is being portrayed as a strike against vulnerable Texans but it is not at all, it doesn't terminate funding for anything," he said. "It tells Texas to resubmit its application and this time, follow the rules. And while we're at it, why don't we do what we're supposed to do, which is expand Medicaid."

The Texas Tribune provided this story.

Shannon Najmabadi | Texas Tribune