Texas hospitals, clinics spared the worst of GOP Medicaid cuts. An expected rise in the uninsured rate could change that.

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Texas’ already-strained health care system is bracing for deeper challenges when federal Affordable Care Act and Medicaid cuts go into effect as soon as next year, bringing fears of hospital closures, longer wait times and negative health outcomes.

But in the short-term, Texas hospital advocates and CEOs say they averted disaster by keeping the most damaging Medicaid-related provisions out of Republicans’ mega-bill.

Over 4 million Texans are enrolled in the narrowly structured Medicaid program, where eligibility is limited to children, pregnant women, seniors, disabled people and parents with a monthly income of under $300, for a family of four. At various points during negotiations, Republicans had discussed decreasing the federal match rate for Medicaid spending and eliminating provider taxes, a key source of revenue that jurisdictions in the state use to tax private hospitals to fund the state’s portion of Medicaid.

Those provisions could have been catastrophic for Texas hospitals, particularly rural ones that overwhelmingly rely on Medicaid for reimbursement. But ultimately they were not included. And given that Texas never expanded Medicaid to people above the federal poverty limit, the state will not have to impose work requirements or slash its provider tax rate.

Texas is projected to lose out on $1.2 billion in Medicaid funding owing to changes in the bill, but it stands to gain $1.6 billion from the last-minute addition of a rural hospital fund over the next five years, according to estimates from the National Rural Hospital Association.

While Texas Hospital Association CEO John Hawkins said there were unsatisfactory parts of the bill, hospitals and Texas Medicaid, for now, “have not suffered the hit that was initially feared.”

“From THA’s standpoint, there’s simply a sense of deep relief on the other side of this finish line,” Hawkins wrote in an op-ed. “Our concerns were heard, and our Lone Star safety net will remain intact.”

Uncertain future

But the long-term implications of the bill are more concerning for hospitals.

Jurisdictions in Texas, such as cities, counties or hospital districts, can charge a tax of up to 6% on private hospitals, a provision that was grandfathered in to remain intact. Hawkins noted this as a significant win for hospitals in the state. But those rates are now frozen, eliminating the ability for jurisdictions who have not implemented a provider tax or whose rate is lower than the 6% to raise new revenue in the future.

A THA spokesperson said most local government entities are already assessing a tax at the 6% maximum, and the majority of those who were not took steps to do so in anticipation of the mega-bill's passage.

To offset the potential for lost revenue in rural hospitals in particular, the Senate created a five-year, $50 billion fund for rural hospitals. For the first two and a half years, the money will be distributed equally between states — which disadvantages Texas because it has a significantly larger population than nearly every state. During the second half of the program, Texas should receive more funding because spending will be proportional based on rural hospital expenditures.

Such funding will be critical in Texas, where 15 rural hospitals are currently at risk of closure.

While the fund will theoretically more than compensate rural hospitals for their Medicaid losses, experts cautioned that outcomes could be different by region, town and individual hospital.

John Henderson, the CEO of the Texas Organization of Rural and Community Hospitals, said it is difficult to predict how rural hospitals will fare without a deeper understanding of the rural hospital fund’s effectiveness. But he’s concerned about what happens when the fund expires.

“Coverage matters, whether it be Medicaid or commercial,” he said. “When fewer patients show up with coverage, it just puts more burden on the hospital. So I'm more worried about 2031 than 2026.”

Rise of the uninsured

Close to 5 million Texans are uninsured, a figure projected to rise by 1.7 million once ACA marketplace changes from the Republican mega-bill take effect, according to health policy nonprofit KFF. The high uninsured rate poses a number of negative downstream effects for health care in the state.

Nearly 4 million Texans are currently enrolled in insurance through the ACA. Uptake rates are particularly high in West Texas, South Texas and the Houston area — in border counties like Hidalgo, Starr and Zapata, for example, over 20% of residents have insurance through the ACA.

When people drop their level of coverage or abandon it altogether, their health outcomes worsen. They typically do not seek medical care, especially preventive care, and are more likely to incur medical debt.

Hospitals have to perform emergency care on patients regardless of their ability to pay. When an increased number of people lack insurance, instances of uncompensated care rise. These compounding issues could be devastating for both the state’s health infrastructure and for individuals.

Health clinics, which play a critical role in managing patients’ health so they can avoid winding up in the hospital, are also worried about how a rise in the uninsured rate could create financial and operational difficulties.

Brian Sasser, the chief communications officer at the Episcopal Health Foundation, said some clinics that the foundation funds derive over 50% of their revenue from Medicaid. Between expected coverage loss from Medicaid and the ACA, new policies preventing many undocumented immigrants and some immigrants with legal status from accessing health care services and insurance and cuts to federal food assistance programs, he said clinics are worried about having to scale down services or shut their doors.

“It's the perfect storm of hitting the people who face the most barriers to good health already,” Sasser said. “They’re just getting hit from all sides.”

Paula Walker, the executive director of the Texas Association of Charitable Clinics, has similar fears. TXACC works with 75 member clinics to provide free primary care for over 220,000 Texans annually who lack insurance. These free clinics are the very bottom of the health care safety net; any closure or rollback of services could have severe health consequences in the communities they serve, particularly because they disproportionately treat chronic illnesses and provide dental and mental care for people who cannot afford it.

For the first time in its over 100-year history, TXACC asked for a legislative appropriation from the state this year because patient volume is already rising so significantly. When ACA cuts hit, free clinics could end up completely overwhelmed.

“We manage chronic disease for the uninsured,” Walker said. “We're finding more people at our door, and it's hard for us to financially keep up…the concern is that, as we face maybe up to a million and a half more uninsured, where are they going to turn for their health care?”

Walker said the top two diseases that TXACC-affiliated clinics treat are hypertension and diabetes, both of which become expensive if left untreated but can be managed relatively cost-effectively if patients seek regular treatment.

But if wait lists at free clinics become exorbitantly long, people may either go untreated or only seek care once it becomes life-threatening — meaning hospitals will need to shoulder the expense.

“The burden goes to emergency departments, which bleeds into hospitals,” Walker said. “It's just an economic disaster.”

And health care advocates agreed that the effects on individual and public health will be devastating. When people drop their insurance coverage because it’s too expensive, they rarely seek preventative care.

When they do get treatment for serious illnesses or emergencies, they are more likely to accumulate medical debt. And when they don’t, the consequences can be fatal.

“People will not go to the emergency room when they have a minor stroke or a minor heart attack,” said Lynn Cowles, the health and food justice director at left-leaning think tank Every Texan. “And then they'll have another one, and that one could be the lethal one.”

Disclosure: Episcopal Health Foundation, Every Texan and Texas Hospital Association have been financial supporters of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune's journalism. Find a complete list of them here.

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