Earlier this week, the federal Centers for Medicare and Medicaid Services (CMS) sent a letter to the state of Texas extending the state’s Section 1115 Medicaid waiver for 15 months with level funding through the end of 2017. The state of Texas promptly labelled the agreement a “big win” for Texas – but was it?
Texas has a very substantial Section 1115 waiver, negotiated originally in 2011 prior to the Affordable Care Act being implemented and the Supreme Court decision that made Medicaid expansion optional. Funding flowing through the waiver includes both a substantial uncompensated care pool and a “DSRIP” pool for Delivery System Reform Incentive Payments totaling about $6 billion each year, of which about $4 billion is federal.
As regular readers of SayAhhh! will remember, a serious battle emerged in Florida over the future of its Low Income Pool (LIP) – that state’s uncompensated care pool that also predates the ACA. Florida is currently in the final year of its LIP agreement which has been reduced to $608 million from last year’s total of $1 billion.
One of the stages that Florida state officials passed through on the way to these cuts was denial. Texas officials appear to be in that stage too but hopefully they will move through the denial phase soon and start preparing for the impending cuts. Both Texas and Florida requested considerably large increases in their uncompensated care pools despite the clear signals from CMS that they weren’t going to go there.
And as CMS made clear in its letter to Florida on April 14, 2015, CMS is unwilling to provide federal funds to cover the cost of uncompensated care for individuals who are uninsured because the state has chosen not to expand Medicaid.
This principle was reiterated in the letter sent to Texas earlier this week. Texas and Florida have roughly similar demographics, so if I were a Texas policymaker, I would start expecting cuts along the magnitude of what Florida is experiencing. Given the new direction of federal health policy, Texas is likely going to lose a big slice of UC funding regardless of what state leaders decide about Medicaid expansion. The state’s public response so far has been to declare victory and ignore the talk of cuts down the road.
The Texas waiver is more complicated than the Florida waiver, and there is even more money at stake. The second big pot of money in the waiver flows through the DSRIP pool, and here, CMS was very explicit. While stating that they were confident that CMS and the state could reach an agreement in the next 15 months, CMS put the state on notice that if an agreement was not reached the DSRIP funding would be cut by 25% in 2018 and phased out entirely over a four-year period.
Texas could choose to accept federal Medicaid funding of approximately $6 billion per year and more than compensate for these cuts while providing coverage to 1.3 million uninsured Texans. Or, Texas could pretend they missed the end of the movie in Florida and watch their federal funds diminish and put their safety net system in peril.
