Texas hospitals could incur $8.2 billion annually in unreimbursed Medicaid and uninsured care costs even after a Medicaid expansion.
“While the implementation of a Medicaid expansion would blunt the impact to a certain degree, it would not come close to eliminating the uncompensated care burden in the state,” said the authors of a Health Management Associates report submitted to the CMS late last month.
Since 2012, hospitals in the state have received between $3 billion to $4 billion annually in state and federal funds to cover costs when patients couldn't pay. The money is part of an uncompensated pool created by an 1115 waiver.
The CMS has increasingly questioned the need for such pools since coverage has expanded under the Affordable Care Act.
In May, the CMS awarded Texas a 15-month extension to its 1115 waiver, which would have expired at the end of September. It will now continue through Dec. 31, 2017.
Texas engaged an independent party to evaluate the need for such funding and to ensure the federal government wasn't covering costs that could be met by expanding Medicaid.
HMA's estimate is partly based on the fact that Texas's population is growing at a staggering rate.
The state currently has the highest rate of uninsured residents at 19.1%, compared to a national average of 11.1%, HMA said. Texas' annual population growth rate was more than twice the national rate in both 2013 and 2014 at 1.71% and 1.77% respectively.
The firm's findings are in line with similar third-party reports conducted for both California and Tennessee, which also found that the uncompensated care pools will remain necessary to keep safety net hospitals afloat even under expansions.
In fiscal 2015, uncompensated care pool payments accounted for 54.9% of aggregate net income of all revenue for Texas hospitals, indicating that these hospitals would face losses without the funding, HMA said.
Hospitals in the state hope the HMA report will boost their agenda. They want to see the CMS not only renew the uncompensated care pool, but increase it. They'd also like to see the state Legislature pass Medicaid expansion and raise the base Medicaid rate to hospitals. Currently, only 62% of costs are covered, according to John Hawkins, senior vice president for advocacy and public policy for the Texas Hospital Association.
These steps are especially crucial given the cuts Medicaid disproportionate-share hospital payments will face in 2018. The cuts were called for by the Affordable Care Act to account for the decrease in uncompensated care anticipated under health insurance coverage expansion.