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Texas Gets Extension of Crucial Hospital Payments Until 2018, But Feds Demand Permanent Fix

Feds say Texas must use the 15-month extension to address critical gaps in insurance coverage.


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The federal government has agreed to continue sending billions annually to Texas, to support hospitals that treat large numbers of uninsured patients. In return, the feds expect Texas health officials to work towards a more permanent solution for the uninsured.

The payments were set to expire in September, ending a five-year deal between Texas and the Obama administration known as an "1115 waiver." Hospitals feared an abrupt cut-off of the funding would disrupt hundreds of community-based health programs and hurt their bottom lines.

The waiver began in 2011, and gave Texas officials more flexibility in distributing supplementary Medicaid funds across the state. The original intent was to help Texas hospitals continue caring for the state's five million uninsured residents, while also developing innovative programs such as drop-in mental health clinics and ambulances with laptops on board, providing live video links with ER doctors.

On Monday, the Centers for Medicare & Medicaid informed Texas that the payments will continue through the end of 2017, a 15-month extension.

Without the extension, many hospitals would have been in big financial trouble, said John Hawkins, vice president for governmental affairs for the Texas Hospital Association.

"The reality is it's about $6 billion a year in supplemental payments," Hawkins said. "Hospitals are using those to offset the cost of the uninsured, and deal with the Medicaid shortfall, since the state is reimbursing hospitals at about 51 percent of cost."

The original funding deal was negotiated years ago, before the U.S. Supreme Court reviewed the Affordable Care Act and ruled that one major facet of the law could be optional: states did not have to expand Medicaid to low-income adults. Thirty-one states have chosen to do so, but Texas and 18 other have not.

Without the force of law, federal officials must rely on other incentives to encourage Medicaid expansion, according to Anne Dunkelberg, a health policy analyst with the Center for Public Policy Priorities, a left-leaning Austin think tank.

One powerful incentive in Texas would be if federal officials withheld some of the supplementary Medicaid payments that were set to expire in September. Although Texas won an temporary extension, CMS officials explained in a letter that future funding agreements must meet certain conditions.

"A 15-month stopgap means the story is far from over," Dunkelberg said.

Some of the current funds help reimburse Texas hospitals for money spent treating uninsured Texans in emergency rooms, Dunkelberg said. In the future, the Obama administration wants Texas to spend federal healthcare dollars on providing Medicaid coverage to more Texans, so there are fewer uninsured patients showing up in emergency rooms in the first place.

"They have basically said ‘We're not going to pay uncompensated care payments for people you could have covered by Medicaid,'" Dunkelberg said. "That's just the new rule."

While the 15-month extension is in place, the Texas legislature will re-convene in Austin. In the past two sessions, Republicans have blocked any efforts to expand Medicaid, calling the program a costly and inefficient entitlement. But Democrats now hope that with more pressure from hospitals over these payments, and a new deadline, some sort of permanent compromise can be found for the uninsured in Texas.


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