The Biden administration has backed off its plans to prevent a decade-long uncompensated care waiver extension from going into effect.
The Centers for Medicare and Medicaid Services said in a Friday notice to Texas that it is withdrawing an April letter that revoked the waiver extension, effectively ending a lawsuit on the issue after nearly a year. The Trump administration approved Texas' extension request in the last days of its tenure.
"CMS has concluded that it is not the best use of the federal government's limited resources to continue to litigate this matter," the notice said.
Texas first received approval for its waiver—which expanded Medicaid managed care, created an uncompensated care program for providers and set up incentive payments to hospitals for care transformation efforts—in 2011.
The waiver authorizes the state to give out more than $3.8 billion to providers to account for uncompensated care alone. The Texas Tribune reported in 2019 that the waiver was worth $25 billion overall.
The state applied for its third extension early, in November 2020, through a "fast track" process. The waiver wasn't set to expire until September 2022.
The Trump CMS set aside the federal notice-and-comment period for the waiver, citing the COVID-19 pandemic. The agency extended the waiver for 10 years, just five days before leaving office. Medicaid waivers are typically renewed for three or five years, and Texas had applied for a five-year extension.
Texas sued the Biden CMS last May after the agency pulled the Trump administration's extension approval.
CMS said Texas hadn't gone through the proper notice-and-comment period in the extension process and invited it to reapply. The state claimed CMS revoked the extension to force Texas into expanding Medicaid coverage.
In August, a federal judge granted Texas' request for a preliminary injunction, which temporarily paused CMS' rescission of the extension.
Now, CMS voluntarily pulled back its rescission. But the agency remains committed to working with states to conduct robust notice and comment periods on all Medicaid waivers, in accordance with federal requirements, Friday's letter said.
The announcement came as a relief for Texas hospitals.
"Today's decision creates certainty following months of ambiguity during an ongoing pandemic. While funding, staffing and COVID-19 continue to challenge hospitals, we look forward to having a solid foundation to work from and rebuild," Texas Hospital Association President and CEO John Hawkins said in a statement.
The Trump administration also extended Medicaid waivers in Tennessee and Florida for 10 years at the end of its tenure. The Biden administration did not revoke either states' approval, though beneficiary advocates have sued Tennessee over the waiver.
