From AIS Health: Texas Weighs Medicaid Expansion After CMS Revokes Waiver

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Reprinted with AIS Health permission from the April 23, 2021 issue of Health Plan Weekly

CMS on Apr. 16 revoked an eleventh-hour Section 1115 waiver the Trump administration had granted to Texas, which makes the shape of the second-most populous state’s Medicaid program after 2022 an open question. Experts say that CMS’s action is an attempt by the Biden administration to push Texas to expand Medicaid — although the state’s legislature recently voted down one such proposal.

CMS had approved Texas’ waiver request on Jan. 15, less than a week before the end of the Trump administration. The waiver would have sent about $11.4 billion to Texas annually in order for the state to compensate providers for unreimbursed care. The Trump administration approved the waiver for 10 years, a term that experts say is unusually long and likely motivated by politics.

Texas is the largest state that has not expanded Medicaid under the Affordable Care Act (ACA), which also means it has the highest number of uninsured residents: In 2019, about 5.2 million, or 18.4% of the state population, lacked coverage, according to the Kaiser Family Foundation (KFF). Families USA estimated in July 2020 that an additional 659,000 Texans lost coverage during the pandemic. If the state chose to expand Medicaid eligibility, KFF estimates as many as 1.4 million people could become eligible to enroll.

At present, 3,958,489 people are enrolled in Medicaid managed care in Texas, according to the AIS’s

Directory of Health Plans. Centene Corp. (978,008 lives), Anthem, Inc. (764,820), Texas Children’s Health Plan (409,412), UnitedHealthcare (302,180) and Community Health Choice, Inc. (294,116) are the five largest Medicaid carriers in the state. Eleven more payers have MCO contracts, including CVS Health Corp.’s Aetna, Blue Cross Blue Shield of Texas and Molina Healthcare, Inc., which plans to acquire Cigna’s Medicaid lives in Texas (see brief, p. 8).

The notice issued by CMS Acting Administrator Elizabeth Richter indicated that contrary to the Trump administration’s move, Texas’ 1115 waiver will expire at the end of its original term, Sept. 30, 2022. (A care quality improvement program will expire on Sept. 30, 2021.) In the letter, Richter said the program was terminated because the Trump administration did not subject the waiver to the full public comment period mandated by the Administrative Procedures Act (APA) — the same reason several other notable last-minute executive actions issued by Trump’s HHS, including some Medicaid work requirements waivers, were canceled.

“I think CMS is on strong legal ground,” David Kaufman tells AIS Health. Kaufman is a partner at Laurus Law Group LLC and former general counsel of Blue Cross Blue Shield of Illinois. The original waiver approval cited the COVID-19 pandemic public health emergency as the reason for bypassing APA requirements, which Kaufman finds dubious.

“It seems like a very political decision,” Kaufman says. “The extension was until Sept. 30, 2030. They [Texas] waited until after the election to request the notice and comment period and the extension — their [original] extension request was to 2027, not 2030. Then, very quickly, two weeks later, CMS said their application was complete, and they were exempt from the notice and comment period. Then one month later, on Jan.15, just five days before the inauguration, it was approved. And they approved it for even longer than Texas asked — until 2030. I thought that’s interesting, because that takes you beyond eight years of a Democratic presidential term.”

Madeline Guth, a policy analyst at KFF, also observes that the duration of the initial approval is unusual.

“Towards the end of 2020, Texas requested a five-year extension of this waiver, which is kind of the standard time for extensions. CMS usually approves them in three-to-five-year increments,” Guth tells AIS Health. “CMS not only approved this request for Texas, they actually approved it for a 10-year extension.”

What’s more, Guth says, the Trump administration “added this new pool [of funds] that was not originally part of Texas’s request.” That funding was earmarked for mitigating uncompensated care costs.

Waiver Was a Boon for Providers

Gary Rosenfield, a senior vice president at ConsejoSano and a former Kaiser Permanente Medicaid executive, tells AIS Health that providers would have done well under the 1115 wavier.

“This would have been $100 billion fund that the state would have had to just give handouts to providers, in my opinion,” Rosenfield says. “If the federal government is going to give money for uncompensated care, where’s the incentive for providers to drive value?”

Indeed, the Texas Hospital Association (THA) criticized CMS’s decision to revoke the waiver extension. In an April 16 statement, THA CEO Ted Shaw argued that the move “puts the state’s health at serious risk and creates unprecedented levels of uncertainty for an industry that is charged with saving lives.”

Kaufman says that the rescinded waiver is best understood as part of the Biden administration’s strategy to push holdout states toward expanding Medicaid eligibility. If the more generous funds included in the American Rescue Plan are a carrot (HPW 4/9/21, p. 1), then a stricter approach with 1115 waivers is the stick.

“The recent legislation sweetens the pot for the states to expand Medicaid,” Kaufman says. “So how good a deal do they have to offer before these holdout states decide it’s in their interest to get people covered?”

Texas Lawmakers Consider Expansion

Medicaid expansion has been a hot topic in the Texas Legislature’s current session. According to the Texas Tribune, an expansion bill in the state House of Representatives has support from both parties — all of the lower chamber’s 67 Democrats and nine Republicans. The House bill and an identical bill in the Senate are modeled after Medicaid expansion programs in Ohio and Indiana. However, the chamber on April 23 voted down a separate budget amendment that would have expanded Medicaid.

Republican Gov. Greg Abbott has historically opposed expansion, although he had not taken a position on the bill as of April 21. Abbott denounced the termination of the waiver, according to the Tribune, which also reported that Republican Attorney General Ken Paxton said he would “use every legal tool available to regain the assistance Texans need.”

The THA supports Medicaid expansion “very much,” spokesperson Carrie Williams tells AIS Health. According to an April 21 letter signed by Shaw, “Texas hospitals support the smart, budget-neutral solution offered by a bipartisan group of state lawmakers to shrink Texas’ coverage gap and use federal funding to cover most of the cost.”

But the provider group also wants the $100 billion uncompensated care fund to remain in place regardless of whether Texas expands. In arguing for the fund, Shaw wrote that “nearly 4 million Texans who still would not qualify [for Medicaid coverage] even with expanded Medicaid eligibility.”

Rosenfield points out that “in reality, if they can expand Medicaid, given the size of the Medicaid expansion, the amount of money that’s going to be flowing into Texas government is going to be so much more than $100 billion over 10 years. And it actually will end up benefiting all the providers.”

Find the waiver and CMS letter at https://wapo.st/32S2Yh7, the expansion bill at https://bit.ly/3sINgiz, and Texas Tribune coverage of the legislature at https://bit.ly/3xfKzIX. Contact Guth at madelineg@kff.org, Kaufman at dkaufman@laurusllc.net and Rosenfield via Joe Reblando at joe@joereblando.com.

by Peter Johnson