CMS renews Texas uncompensated-care waiver that Obama opposed

The CMS has renewed a Texas Medicaid waiver that was opposed by the Obama administration.

Texas will receive nearly $25 billion in funds over five years for the Texas Healthcare Transformation and Quality Improvement Program, which covers providers' uncompensated-care bills. It also includes a Delivery System Reform Incentive Payment, or DSRIP, which encourages providers to adopt innovative programs to improve care quality and cost efficiency.

"With this agreement, we will continue our innovative approach to providing healthcare to millions of Texas Medicaid clients," Texas HHS Executive Commissioner Charles Smith said in a statement. "We're committed to delivering a sustainable healthcare system over the long-term while being good stewards of taxpayer dollars."

Texas' waiver, which began in 2011, was set to expire Dec. 31, after the CMS granted a short-term extension last spring. President Barack Obama's administration had been against continued funding of states' uncompensated-care pools because Medicaid expansion would have made them obsolete.

But conservative lawmakers in states like Texas have rejected Medicaid expansion, placing the waiver's future in doubt.

In its renewal decision, the CMS makes clear that it views the next few years as a transition period. After that, much of the waiver funding will stop.

Under terms of the demonstration agreement, the CMS will give the state four years of additional federal matching funding for its DSRIP program. This will include two years of level funding, followed by two years of funding that will decrease each year. The fifth year of the extension, from Oct. 1, 2021, through Sept. 30, 2022, will not include any DSRIP funding.

This "is to reflect the time-limited nature of DSRIP payments to support demonstrable delivery," CMS Administrator Seema Verma said in a Dec. 21 letter to state officials.

Texas hospitals and other Medicaid providers will receive $3.1 billion each year for the first and second years of the five-year agreement. After that, there will be a new methodology that will provide a more accurate calculation of Texas' uncompensated-care costs.

The renewal represents the key contrast between the Obama and Trump administrations when it comes to supplemental Medicaid funding, according to Billy Millwee, a health policy consultant at Sellers Dorsey and former Medicaid director for Texas.

The Obama administration contended that coverage rather than uncompensated-care pools is the best way to secure affordable access to healthcare for low-income individuals.

"The Trump-era CMS has clearly departed from that philosophy," Millwee said. The CMS now seems to be adhering to the provision that "payments to healthcare providers must be sufficient to promote provider participation and access and should support plans in managing and coordinating care," Millwee said.

Although DSRIP and uncompensated-care funds will eventually wind down, Texas hospitals are thrilled to be getting anything after the previous uncertainty surrounding the waiver's future.

"The supplemental payments are key to the safety net, both to hospitals and behavioral healthcare providers," said John Hawkins, senior vice president of government relations for the Texas Hospital Association. "Renewal was needed to continue services."