The Texas Health and Human Services Commission (“HHSC”) has been actively trying to reach an agreement with the Centers for Medicare and Medicaid Services (“CMS”) to extend or renew the Texas 1115 Transformation Waiver (the “Waiver”)since March 2015, when HHSC submitted its first iteration of a transition plan focused on a 5-year renewal. The result was released yesterday, May 2, through publication of CMS’ approval of a 15-month extension at current funding levels. CMS’ approval letter clearly states that if an agreement is not reached between HHSC and CMS, the Waiver will not be renewed beyond December 31, 2017. CMS’ letter further indicates that, absent an agreement, funding for uncompensated care in Texas and funding for Waiver-related projects will be drastically reduced beginning January 1, 2018.
The first Waiver term was officially approved by CMS in December of 2011 and is set to expire September 30, 2016. The Waiver was designed to increase the population enrolled in Managed Care, as well as institute two payment pools to replace the former Upper Payment Limit or “UPL” program. The two payment pools were the Uncompensated Care Pool (“UC Pool”) and the Delivery System Reform Incentive Payment pool (“DSRIP”). At the start of the Waiver, the UC Pool comprised a greater percentage of payment opportunity, as it was developed to reimburse providers for the uncompensated care provided to the Medicaid and uninsured population. Over each year of the Waiver, the DSRIP program became a larger and larger source of payment opportunity, as it was designed to pay providers for developing innovative projects aimed at primary care, care management, behavioral health services, and other services that would eventually reduce the burden of uncompensated care. Currently (the fifth year of the initial Waiver term), the two pools share the Waiver amount allocated by CMS 50/50 ($3.1 billion in available funding for the UC Pool and $3.1 billion available for DSRIP).
Unfortunately, over the last five years of the Waiver, uncompensated cost has not been reduced in Texas and, in fact, providers are facing increased unreimbursed costs for treating Medicaid and uninsured patients. This burden on providers has been exacerbated by the dwindling funding allocated to the UC Pool, and HHSC has advocated for increased UC Pool funding as part of Waiver renewal, as well as continuing to allow funding for the DSRIP program. However, CMS has resisted such proposals, reiterating that, “coverage is the best way to assure beneficiary access to health care for low income individuals and uncompensated care funding should not pay for costs that would otherwise be covered in a Medicaid expansion.” Simply stated, CMS does not seem willing to continue to negotiate without an expansion of Medicaid in Texas.
If an agreement is not reached between HHSC and CMS, CMS’ temporary extension letter specifies that DSRIP funding will be cut by 25% in 2018, 50% in 2019, 75% in 2020 and eliminated thereafter. The UC Pool reduction is potentially even more drastic, as CMS’ letter states that the UC Pool will be limited to “costs of uncompensated and charity care for low-income individuals who are uninsured and cannot be covered through Medicaid or other insurance programs, using Texas hospital Medicare cost reports and projections of the potential impact of Medicaid expansion in Texas.” Therefore, even if Texas does not expand Medicaid, CMS is indicating it plans to limit payments to providers using projections that assume expansion was adopted (and successful in reducing costs). Although the 15-month extension is a small victory (when measured against the Waiver screeching to a halt this fall), there are still many hurdles for Texas providers and HHSC to overcome before the end of 2017. HHSC has 30 days to acknowledge CMS’ “award” and accept associated Waiver conditions.