THA members are encouraged to contact their member of Congress to discuss ongoing negotiations between the state and CMS on the future of the Medicaid 1115 Waiver. THA encourages hospital leaders to ask their U.S. representative to engage CMS to immediately resolve negotiations over the new Waiver agreement and move forward with terms and conditions that include:

  1. A full two-year transition period to use the S-10 Worksheet for uncompensated care payment calculation.
  2. No limits on the definition of charity care.
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(Jan. 26, 2017) The Texas Health and Human Services Commission has submitted a request to CMS for a 21-month extension of the 1115 waiver that would take funding through Sept. 30, 2019. The request is to continue level funding for both the DSRIP and UC pools consistent with the current 15-month extension that expires Dec. 31, 2017. This additional extension allows time for transition to the new presidential administration and an additional Texas legislative session from January to May 2019.

Texas’ Medicaid 1115 Waiver is transforming how health care is delivered and paid for in Texas. Approved in Dec. 2011, the Waiver will expire Dec. 31. 2017.

The Waiver has two primary purposes:

  • Expands Medicaid managed care to the entire state.
  • Replaces the upper payment limit program with two new pools of funding. One, the uncompensated care pool, valued at $17.582 billion between 2011 and 2016, reimburses hospitals for the cost of care for Medicaid and uninsured patients for which the hospital does not receive payment. The second, the delivery system reform incentive payment pool, provides up to $11.418 billion in earned incentive payments to hospitals and other providers upon their achieving certain goals that are intended to improve the quality and lower the cost of care.
1115 Waiver Funding Distribution (All Funds)
Type of Pool Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
(Oct-Dec 2017)
UC $3.7B $3.9B $3.534B $3.348B $3.1B $3.1B $775M $21.457B
DSRIP $500M $2.3B $2.666B $2.852B $3.1B $3.1B $775M $15.293B
$4.2B $6.2B $6.2B $6.2B $6.2B $6.2B $1.55B $36.75B
% UC 88% 63% 57% 54% 50% 50% 50% 59%
% DSRIP 12% 37% 43% 46% 50% 50% 50% 41%

Note: Demonstration years align with the federal fiscal year, which begins on Oct. 1 and ends on Sept. 30. For example, Year 1 began on Oct. 1, 2011 and ended on Sept. 30, 2012.

Texas’ Medicaid 1115 Transformation Waiver represents a major resource in reshaping the delivery of health care in communities across the state. Hospitals are collaborating with providers of all types to implement ways to make health care more effective and efficient. To demonstrate the local impact of the waiver for members of Congress and highlight the innovative work hospitals and their partners are pursuing, THA produced a series of one-pagers highlighting the unique needs and challenges of each region, and the projects developed to meet those needs ... Read more

In September 2014, CMS notified THHSC that it was deferring $74 million in federal Medicaid funds tied to private hospital uncompensated care payments from 2013 under the Waiver. While it did not accept the financial arrangement, CMS ultimately released the deferral in January 2015 and stated its willingness to work with THHSC before making a final determination.

In May 2015, THHSC and CMS revisited the issue, and shortly thereafter, CMS agreed that if changes to private hospital funding were required following the discussions, Texas would have until Sept. 1, 2017 to transition to other funding mechanisms without risk of disallowance on the same grounds as the 2014 deferral. Discussions concluded in September 2015 without CMS’ authorization of the private hospital funding arrangement in question.

In September 2016, CMS issued another disallowance notice to THHSC stating that$27 million in federal uncompensated care payments were being disallowed because they constituted “impermissible provider donations.” THHSC is appealing that decision.

CMS Disallowance Response from CMS Administrator Seema Verma (Sept. 28, 2017)
Letter from Charles Smith to Seema Verma re: Disallowance (Sept. 22, 2017)
THHSC Appellate Brief on UC Disallowance (June 2017)
Disallowance of Federal Uncompensated Care Payments for Texas Hospitals (April 17, 2017)
Joint Hospital Association Letter to Texas Congressional Delegation (March 13, 2017)
THHSC Letter to US HHS Secretary Tom Price (March 7, 2017)
CMS Affirms Disallowance (Dec. 21, 2016)
Final Reconsideration Letter (Oct. 28, 2016)
CMS Disallowance Response (Oct. 27, 2016)
CMS Letter Lifting UC Deferral (Jan. 2015)
CMS Notice of Deferral (Oct. 2014)
THHSC Notice of Deferral (Oct. 2014)
THA Letter to THHSC Executive Commissioner (Oct. 2014)
CMS is questioning the financing mechanisms being used based on guidance issued in a State Medicaid Director Letter #14-004 on May 9, 2014.
THHSC Letter to Cindy Mann – CMS (Nov. 2014)
Congressmen Green, Doggett and Castro Letter 1115 Waiver Letter
Texas Congressional Delegation 1115 Waiver and Disallowance Letter
DY 7-8 DSRIP Webinar Presentation
Draft DY 7-8 DSRIP Protocol (Feb. 5, 2017)
DY 7-8 Measure Bundle Overview for Providers (Feb. 5, 2017)
THHSC 1115 Waiver Update Presentation (Feb. 5, 2017)
THHSC 21-month Waiver Renewal Request (Jan. 26, 2017)
THA Takeaways, THHSC Uncompensated Care Study: Implications for 1115 Waiver Renewal (Sept. 2, 2016)
THHSC Study of Hospital UC Costs (September 2016)
Letter from HHSC to CMS on Waiver Extension (Aug. 19, 2016)
Medicaid Draft Report on Hospital UC Cost (July 19, 2016)
THA Takeaways, Medicaid 1115 Waiver Extension: What Does It Mean for Texas Hospitals and Patients? (May 4, 2016)
Texas Medicare Transformation 1115 Waiver Extension CMS Special Terms and Conditions (May 2, 2016)
CMS - Request for 15-Month Extension of the 1115 Demonstration Waiver (April 7, 2016)
Medicaid 1115 Waiver CMS Response to Johnson
Performance Bonus Pool
Transformational Extension Protocol Models, Jan. 26, 2016
Transition Year Plan
Delegation Waiver Letter of Support Signed (November 2015)
1115 waiver extension: Comment letter to CMS (November 2015)
Congressional Letter of Support (November 2015)
Waiver Extension FAQs (October 2015)
Final 1115 Waiver Extension Application (Submitted September 2015)
Infographic: Uncompensated Care (Aug. 7, 2015)
THA Comments on THHSC's Draft Waiver Extension Request(Aug. 3, 2015)
THA Takeaways: Hospitals Support Waiver Continuation (July 8, 2015)
1115 Extension Application Draft (July 2, 2015)
Attachment A - Texas DSRIP Projects (July 2, 2015)
Attachment B - Quality Monitoring Reports and Deliverables (July 2, 2015)
Attachment C - Performance Indicator Dashboards and Pay-for-Quality Measures (July 2, 2015)
Attachment D - 1115 Waiver Extension Budget Neutrality Calculations (July 2, 2015)
Attachment E - STC Compliance (July 2, 2015)
Public Notice (July 2, 2015)
THA Takeaways: Waiver Renewal Discussion (April 2015)
Special Terms and Conditions (STC) 48 Requirement (March 23, 2015)
Special Terms and Conditions (STC) 48 Requirement Attachment A (March 23, 2015)
THA Comments on THHSC’s Draft Waiver Transition Plan (Feb. 13, 2015)

According to Texas Government Code 305.027, portions of this material may be considered “legislative advertising.” Authorization for its publication is made by John Hawkins, Texas Hospital Association, 1108 Lavaca, Suite 700, Austin, TX 78701-2180.