Texas Medicaid Section 1115 Waiver Drama Trilogy: Part II

Texas Expects to Get, But Not Give, Notice

The Biden Administration came to town with clear intentions to review some of the waiver agreements that the Trump Administration had authorized – most notably on work requirements. We and others had urged the Trump Administration to reconsider the January 15th demonstration approval in Texas in light of the clear violation of the public comment and transparency rules (and the unlawful 10 year approval) described in Part I of the trilogy. After coming into office, President Biden quickly issued an Executive Order directing agencies to broadly review harmful Medicaid policies, including demonstration and waiver policies that reduce coverage.

And on April 16, 2021, CMS rescinded the January 15th approval – citing the violation of the process. More specifically, CMS’s action rescinded the January 15th renewal and reinstated the prior Section 1115 demonstration which was already approved through September 2022. CMS’s letter stated that “the state’s exemption request [from the notice and comment period] did not articulate a sufficient basis for us to conclude that approving the state’s emergency request for an exemption from the normal public notice process” was needed.

Importantly, CMS also noted that the state’s demonstration was operating “without material change” since the January approval and that Texas was authorized to continue the previous demonstration for nearly a year and a half (i.e., through September 2022), allowing more than enough time for the state to conduct the required notice and comment period. CMS’s decision appeared to open a path forward by which the public notice and comment failure could be corrected and Texas could achieve its objectives with no harm.

Nonetheless, a month later, Texas Attorney General Paxon filed a lawsuit in Federal District Court, Eastern District of Texas, alleging that the Biden Administration lacked the authority to rescind an approved waiver and had not followed proper process in doing so – including (yes really) by not providing the state with proper notice. Sometimes real life is stranger than satire: after skipping the required notice and comment period in its application, Texas sued CMS for rescinding the approval without proper notice.

Texas Lawsuit Preliminary Injunction 

In conjunction with its lawsuit challenging the Biden Administration’s rescission of the January demonstration approval, Texas requested a preliminary injunction from the District Court. On August 20, 2021, District Court Judge J. Campbell Barker granted the preliminary injunction, which, technically speaking, enjoins the rescission of the approval. In practice, this means that the January approval is reinstated pending the final outcome of the case.

This is significant in that it requires the judge to have found that Texas is at risk of irreparable harm and is likely to succeed on the merits of its claim. This ruling was surprising, to say the least, considering that the January approval by CMS clearly did not follow the required notice and comment process and the demonstration in effect was largely unchanged.

The decision raises several concerns; most shockingly, in a case that is about Texas’s undisputed failure to follow the legally required notice and comment process, the judge concludes that Texas is likely to succeed in the case because “CMS did not provide Texas notice of its intent to reconsider its approval of Texas’s demonstration program.” In Judge Barker’s courtroom, justice appears to be a one-way street.

In any event, temporarily reinstating the approval is not the end of the story. The final outcome of the legal case is yet to be determined. And more importantly, the temporary approval itself does not address the question of whether Texas will get the billions of dollars that are at the heart of this drama. Stay tuned as we will follow the money in Part III of the Texas waiver drama trilogy!