Securing Funding for Increased Medicaid Reimbursement Rates

Since 2011, legislators have balanced the state budget by sacrificing funding from the Medicaid program. The result has been continued declines in reimbursement to hospitals for the care provided to Medicaid patients. Hospital funding cuts by the 82nd and 83rd Texas Legislatures reduced Medicaid inpatient and outpatient payment rates by 10 percent across the board, which by itself reduced Medicaid payments to hospitals by more than $400 million a year. 

Today, most Texas hospitals are reimbursed about 50 percent of costs for inpatient services and 72 percent of costs for outpatient services.

The state’s chronic underfunding of Medicaid rates has forced increased reliance on supplemental payments.

A targeted reimbursement rate increase will:

  • Direct funding to follow the care where it is provided. About 163 Texas hospitals would benefit from enhanced rates. 
  • Leverage federal funding.
  • Decrease reliance on supplemental payments.
  • Restore some of the funds lost to hospitals as a result of the cuts made by previous legislatures.

Lawmakers included approximately $220 million in new state funds over the biennium in the state budget to increase Medicaid rates for rural hospital outpatient services, trauma care and safety net hospitals. By far Texas hospitals’ most significant legislative victory, the rate increase will leverage additional federal funds to provide well over $500 million in all funds for Texas hospitals over the biennium.


THA will work with the Texas Health and Human Services Commission as the agency develops a methodology for allocating the trauma and safety net hospital add-ons. THA will engage its membership to promote a methodology that is fair and equitable and reimburses those hospitals that provide trauma care and those that serve a disproportionate number of Medicaid and uninsured patients.


Contact John Hawkins at 512/465-1505.