The Implications for Texas of CMS Canceling Its Medicaid Waiver Extension – State of Reform

DJ Wilson | 19 Apr 2021

News from last week that the Biden administration canceled the extension of the derogation 1115 the Trump administration had granted that Texas was felt from California to Florida, and certainly throughout the Lone Star State.

Austin was in turmoil with the implications for the state, a reality that didn’t begin to set in until Monday as staff at the Texas Health and Human Services Commission (HHSC) were able to give a meaning to Transmission of 669 pages.

Here’s an excerpt from the Centers for Medicare and Medicaid Services (CMS) announcement on Friday:

“While the delivery system reform incentive payment program is being phased out in September 2021, extending the waiver would have allowed the state to develop and implement directed payment programs for services. of Medicaid-Managed Care to Improve Quality and Access, Stabilizing Health Care in Texas. safety net as providers continue to respond to the ongoing public health pandemic. Examples of new directed payment programs have reportedly included funding for hospitals, physicians, rural health clinics, and community behavioral health care providers.

Yes, the waiver will remain in effect until September 2022. But one of the main elements of the waiver that has caused the most concern among health care and health policy makers is the payout incentive program. reform of the delivery system (DSRIP).

With the action of CMS, this DSRIP program is expected to expire in less than six months at the end of September 2021.

When this program ends, the billions of dollars that Texas has relied on in recent years to fund Medicaid services will disappear.

DSRIP funds support hospital reimbursement rates, support community and population health activities that support hospital emergency diversion, and help fund services that would otherwise be unpaid care.

In other words, without these funds, hospital rates will drop, emergency room use will increase, and hospitals will receive less funds to support unpaid care.

The Abbott administration has attempted to expand the funding currently provided by DSRIP.

HHSC submitted a $ 2.49 billion request for a one-year DSRIP extension on October 16, 2020. However, the Trump administration was not willing at that time to grant an extension.

In fact, it was the Trump administration that specifically demanded a “sunset” provision for DSRIP funds with an expiration date one year before the full waiver expires.

CMS thought, as conveyed by former HHSC officials, was to give Texas a ‘lead’ to come up with a different option for funding unpaid care and hospital reimbursement before returning to CMS for a full waiver extension.

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However, after President Trump’s electoral loss, Texas requested a full extension of the waiver on November 30, 2020, just under two years before the waiver expired.

The extension request called for a five-year extension of the existing waiver. According to a brief provided by Every Texan, a nonprofit social justice organization and one of the organizations to write to CMS to request that the waiver extension be rescinded, the extension did not add much. new components to the Texas Medicaid system. Texas has called for an expansion of the “unpaid care” fund pool and a new “charitable care pool” for public health providers.

This time, however, the Trump administration was more willing to lend its support to Texas. It provided for a 10-year approval period instead of the 5 years requested by Texas. It also allowed Texas to use a “fast track” review process. While the “fast-track” process is a useful tool for many states in this predicament, according to Every Texan’s brief, the process rules specifically exclude consideration of “unpaid care pool extensions”.

The Biden administration first put states like Texas on 8 days’ notice in the new administration that their waiver would be reconsidered. In one Executive order on Jan. 28, President Biden ordered agencies to review “Medicaid and ACA demonstrations and waivers that could reduce coverage or undermine programs, including work requirements …”

For some hospitals in Texas, this might be too difficult to overcome.

According to the Texas Rural and Community Hospitals Organization (TORCH), 26 Texas rural hospitals have closed since 2010, 37% of the national total. John Henderson is the CEO of the organization. In comments first provided to State of Reform in February 2020, Henderson mentionned eliminating DSRIP would bankrupt most of Texas’ rural and community hospitals.

“Forty-six percent of rural Texas hospitals have negative operating margins and you can’t exist for long when you do that, so we’re just trying to bring them back to balance.”

On Monday, Henderson reiterated his point in a comment to State of Reform.

“Losing billions of dollars in unmatched health care funding in Texas would be a disaster, especially for small rural hospitals that have negative margins even with those funds.

Henderson noted that although DSRIP funds will expire on September 30, 2021, the remaining funding for the unpaid care program will remain until September 30, 2022.

Taken together, Texas policymakers now appear to have a politically difficult set of options to stabilize hospitals in the state.

Doing nothing is likely to gut the Texas health care system starting in September. It’s never good. It’s even worse in a never-ending pandemic.

Going back to CMS with the same extension model is less likely to be successful now than it would have been with a Republican president. Additionally, stakeholder feedback is not likely to be uniformly positive for the Abbott administration. Many stakeholders will simply call for the expansion of Medicaid.

It is uncertain whether Texas will get new money simply by resubmitting its current waiver. In fact, federal rules generally require a reset of budget neutrality in those considerations which specifically exclude new funds for existing service delivery models.

So without a clear path to maintaining the safety net of Texas hospitals, and with time passing, lawmakers will likely be forced to come up with short-term budget credit to do so until a new waiver can. be negotiated.

This means that the legislature will have to determine how to spend more public funds on Medicaid to keep providers afloat. This is where things get even more difficult.

As a general rule, the Federal Matching Contribution (FMAP) can only be allocated to actuarially valid costs. Also, once a benefit is added, it is often very difficult to remove it, depending on the added benefit (mandatory or optional).

This means that the easiest way to close a large deficit is for Texas to cover all the costs to maintain these new benefits. California often does something similar, paying for services with general funds without any positive contribution to FMAP.

However, this is the more expensive option. And, for a state like Texas that has historically relied on federal dollars to offset state investments, that’s an unlikely scenario.

That leaves another option – to make the federal government pay almost all of the shortfall in unpaid care as 38 other states do: expand the Medicaid program to cut more than 90% of the cost of the federal government.

It is also not politically acceptable among Republican lawmakers.

But these are the three main options on the table:

  1. Let the safety net come crashing down
  2. Insufficient funds with mainly state funds
  3. Insufficient funds with exclusively federal funds (ex: expanding Medicaid)

Texas Legislature has 47 days left. Get your popcorn.

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