DALLAS –Texas hospitals are in danger of losing up to $4 billion per year if the federal government rejects a five-year extension of a Medicaid waiver, according to health experts.
Loss or reduction of funding received under the waiver could impact the credits of not-for-profit hospitals that serve as safety nets in areas with large uninsured populations, according to Moody's Investors Service.
"Expiration of the Texas Medicaid waiver program in September 2016 is a material risk if not extended, given hospital dependence on this supplemental funding source," according to a Moody's Investors Service report on Texas hospitals authored by Lisa Martin.
Texas has the largest medically uninsured population in the nation at 21%, far exceeding the national average of 12%, Moody's said.
Under the waiver granted in 2011, the state receives $4 billion in federal funds per year. That amount, combined with state matching funds, is split into two pools: One for uncompensated care and another known as the Delivery System Reform Incentive Payment, an incentive to improve the quality and cost effectiveness of care by creating innovative programs.
Texas' refusal to expand Medicaid coverage to the working poor in the state could be a factor in whether the Centers for Medicaid and Medicare Services (CMS) modifies or rejects the waiver, according to indications from the agency.
In April, the CMS alerted some states, including Texas, that the agency intends to evaluate waiver renewal requests according to stated principles. One of the principles is that coverage, rather than uncompensated care pools, is the best way to secure affordable access to health care for low-income individuals. Uncompensated care pool funding should not pay for costs that would be covered in a Medicaid expansion, according to the CMS.
"On the surface, it appears that Texas lawmakers' decision not to expand Medicaid will cast a shadow over waiver extension negotiations," the Texas Hospital Association said on its web site. "However, the agency also has said that it recognizes that each state has different circumstances and will be evaluated accordingly."
While Texas is applying for renewal of the waiver, Gov. Greg Abbott has maintained a defiant attitude toward any provisions of the so-called Obamacare, particularly expansion of Medicaid. Earlier this year, Abbott joined with Florida Gov. Rick Scott, both Republicans, in threatening to sue the federal government if the waiver funding is tied to Medicaid expansion.
"The Supreme Court made it very clear that the Constitution does not allow the federal government to use these coercive tactics against the states," Abbott said in a statement. "Medicaid expansion is wrong for Texas. Florida's approach should be determined by Floridians, not coerced by federal bureaucrats."
Regardless of the politics, "the potential expiration of the Texas Medicaid waiver in 2016 puts material supplemental funding at risk," Martin noted.
Texas' decision not to expand Medicaid leaves a coverage gap of more than 1 million Texans who make too much money to qualify for Medicaid and too little to receive subsidies in the federal private health insurance exchange, according to the Texas Medical Association.
The 2015 Texas Legislature also failed to pass a $400 million House plan to continue paying select primary care physicians at rates that match Medicare. The ACA increased Medicaid primary care payments to Medicare rates for 2013 and 2014 using federal funds. That raised physician Medicaid participation by 5% in Texas, but the pay raise expired Dec. 31, 2014.
Population growth in Texas is double the national rate, with significant projected increases in all age categories.
"This trend will drive higher-than-average annual revenue growth for Texas hospitals for several years, continuing a historical trend of Texas hospital revenue growth exceeding the U.S. by approximately one percentage point in most years," Martin wrote.
"This favorable demographic trend and the absence of state certificate of need regulations attract heavy competition to the state," she added. "Texas hospitals are likely to be more leveraged than hospitals in other states given capital needs to compete for growth and comparatively modest cash resources."
Texas health care providers and Texas hospitals waged an aggressive, high-profile campaign to convince Texas lawmakers to accept federal funds to develop a private alternative to Medicaid expansion, following the example of Indiana, Arkansas, Iowa and several other states.
"The political climate in Texas, however, is simply not conducive to promotion of anything related to the Affordable Care Act," the THA said.
"A hard line from CMS on coverage expansion would be counterproductive," THA says. "It is unlikely to convince any Texas lawmakers to change their position on the issue and could in fact further entrench opposition."
Timing of the CMS decision could be critical, given the fact that the Texas Legislature is not in session in 2016.
"It is important to remember that the state legislature is finished for 2015 and will not return to lawmaking until January 2017," the THA said. "There is simply not an opportunity for the legislature to do anything related to Medicaid expansion in time to influence the waiver extension negotiations."
