Federal judge rules for Texas, temporarily restores federal health care funding extension

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A federal district judge on Friday temporarily reinstated a 10-year extension of a federal health care program that Texas uses to help pay for health care for uninsured Texans and is worth billions of dollars annually.

The agreement was set to expire next year after federal health officials in April rescinded the Trump-era extension to the 1115 waiver agreement — which Texas has had with the U.S. Centers for Medicare and Medicaid Services since 2011 and is up for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 original October 2022 expiration date.

The decision did not stop the funding for the current waiver, which provides $3.87 billion in annual funding 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.

In his order Friday, U.S. District Judge J. Campbell Parker granted a preliminary injunction sought by Texas to block the federal government from rescinding the original Trump-era agreement. The decision removes the requirement, at least for now, for Texas to negotiate its deal with CMS if it wants 1115 funding beyond October 2022.

The decision by CMS was “likely unlawful” and resulted in “turmoil in the state’s Medicaid program,” in part because the state had already begun “reassigning staff, making plans, appropriating money, passing regulations, and engaging stakeholders to work towards implementing the necessary changes” allowed by the original deal, which was confirmed in January before it was rescinded by the Biden administration in April, Barker said in the order.

On Friday, Texas Attorney General Ken Paxton, who had sued to reinstate the 10-year deal, applauded Barker’s decision, calling the April action of the CMS “capricious” and a political ploy by President Joe Biden to pressure the state into expanding Medicaid.

“The Biden Administration continues to believe they can violate federal law again and again. Here, their disgusting power grab would have ripped a $30 billion hole in Texas’s budget, as well as sacrificed the well-being of many vulnerable Texans, on top of this move being a flagrant violation of the fundamentals of a constitutional republic,” Paxton said in a written statement.

A majority of Texans support expanding Medicaid to include millions more mostly working poor people, according to recent surveys.

The 10-year extension, originally 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.

The 1115 waiver was meant to be temporary while Texas transitioned to an expanded Medicaid program under the Affordable Care Act of 2010, but that never happened because the U.S. Supreme Court ruled in 2012 that states couldn’t be forced to expand Medicaid.

Since then, the state has relied on the waiver for various programs to care for Texas’ uninsured, with Republican state leaders frequently leaning on it in their arguments against Medicaid expansion.

In early May, Paxton filed a lawsuit against the Biden administration over the decision to rescind the extension, alleging that Biden was using it as a political weapon to push Texas toward expanding its Medicaid program to include more working adults.

Proponents of Medicaid expansion counter that Texas did not meet public notice requirements and that the 1115 waiver and extension have been used to bat away increasing pressure on conservative state leaders to allow Texans who can’t afford private insurance to become eligible for the government program.

Two public hearings and a public advisory meeting were held in June.

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.

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