New Texas lawsuit accuses Biden administration of threatening state’s health care funding to force Medicaid expansion

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Texas Attorney General Ken Paxton sued the Biden administration Friday to reinstate an eight-year extension to a federal health care funding agreement, worth billions of dollars annually and set to expire next year, that the state uses to help pay for health care for uninsured Texans.

Last month, federal health officials rescinded the Trump-era extension to the 1115 waiver agreement — which Texas has had with the U.S. Centers for Medicare and Medicaid Services since 2011 and is up for review every few years — and ordered Texas to collect public input, as the agreement requires, while it renegotiates a new extension beyond its current October 2022 expiration date.

The decision did not stop the funding in the current waiver, which will continue to provide $3.87 billion in annual funding for 2021 and 2022 to partly offset free care provided by Texas hospitals to the uninsured, and to pay for innovative health care projects that serve low-income Texans, often for mental health services.

The extension, granted in the waning days of Donald Trump’s presidency, would have continued hospital reimbursements until September 2030 but allowed the innovation fund to expire.

In his lawsuit filed Friday, Paxton said the decision was a political move by President Joe Biden that was meant to force Texas to expand its Medicaid program under the Affordable Care Act of 2010.

Forcing Texas back to the drawing board on negotiations over the extension, which Paxton said would have amounted to $30 billion in federal funding through 2030, threatens to “destabilize” the programs the state funds through the waiver, he said.

“This would be a disaster for our state, and yet President Biden seems intent on thrusting his bloated model of government on everyone — including Texas,” he said in a statement Friday.

Biden tried unsuccessfully to incentivize Texas and other states to expand Medicaid eligibility by dangling billions of dollars in additional Medicaid funding for the government health care program for low-income people.

Texas lawmakers declined to move forward on the issue during this year’s legislative session, which ends later this month.

“This disgusting and unlawful abuse of power aimed at sovereign states must end,” Paxton said.

The 1115 waiver was originally granted to Texas as a temporary funding bridge while the state developed its plan to expand its Medicaid program, but the U.S. Supreme Court ruled in 2012 that the ACA could not require states to do so — and Texas has since leaned on the 1115 waiver to help pay for care for the uninsured.

Supporters of Medicaid expansion have said that the state should utilize both 1115 waiver funding and expanded Medicaid eligibility, and have expressed confidence that the state would be able to negotiate the extension — with the required public input — before it expires.

“We have an attorney general and other state leaders who have made crystal clear the last few months and last few years that they have little interest in health care for working Texans — although they do have an obsession with filing lawsuits against the White House,” said Patrick Bresette, executive director of Children’s Defense Fund-Texas. “This misguided lawsuit is the cherry on top of a legislative session in which state leaders shot down all attempts to give an affordable health insurance option to janitors, cooks, grocery store clerks, and other Texans.”

Texas, which has the nation’s highest rate of residents without health insurance, is one of only 12 states that have refused to expand Medicaid eligibility to those earning up to 138% of the federal poverty level, as allowed by the ACA.

That’s about $1,500 per month for an individual, or $3,000 a month for a family of four. Currently the threshold in states that have not expanded Medicaid is about $200 per month for a family of two, or about $300 per month for a family of four.

Some 4.2 million people are on Medicaid in Texas — including more than 3 million children. The rest of the recipients are people with disabilities, pregnant women and parents living below 14% of the federal poverty level.

Adults with no disabilities or dependent children don’t qualify for Medicaid, and the vast majority of children on Medicaid have parents who do not qualify. An estimated 1.4 million more Texans who earn too much to qualify for Medicaid but not enough to pay for private insurance would be eligible if Texas were to expand its program.