Information Alert: CMS Approves 10-Year Extension Of Texas’ Medicaid 1115 Waiver

Jan. 21, 2021

The Centers for Medicare & Medicaid Services on Jan. 15 approved a 10-year extension of Texas’ Medicaid 1115 Waiver. The extension is worth approximately $11.4 billion a year through Sept. 30, 2030. The current waiver was set to expire Sept. 30, 2022. In addition to helping stabilize the health care safety net through the rest of the pandemic, the extension:

• Continues the state’s managed care authority.
• Continues funding the existing uncompensated care pool and creates a new one.
• Preserves about $10 billion in budget neutrality room to allow for new directed and supplemental payment programs, including initiatives to transition the Delivery System Reform Incentive Payment program. 
• Adds new special terms and conditions related to monitoring and reporting, which make the state responsible for overseeing providers’ financing of “non-federal share” dollars. 

Uncompensated Care 

The extension continues the existing hospital UC pool and creates a new $500 million a year UC pool for public health providers, including local health departments and local mental/behavioral health authorities. The new Public Health Provider-Charity Care Program begins Oct. 1, 2021.

The existing UC pool will continue for two years at the current $3.9 billion level and will then be resized twice over the life of the waiver to allow for adjustments based on utilization. The first resizing will occur in federal fiscal year 2021 and takes effect in FFY 2023. HHSC negotiated for CMS to use hospitals’ 2019 cost report data and 2017 Disproportionate Share Hospital payment data for the first resizing in 2021 rather than using 2020 data impacted by COVID-19. The second UC resizing will occur in FFY 2027 and takes effect in FFY 2028. It will be based on FFY 2025 cost report and FFY 2023 DSH payment data. 

Budget Neutrality 

The extension preserves about $10 billion in budget neutrality room that would have otherwise been lost if HHSC pursued a “waiver renewal” (new waiver with new special terms and conditions) in lieu of an extension. 

Since Medicaid 1115 waivers are required to be “budget neutral” to the federal government, the state cannot spend more federal Medicaid dollars with the waiver than it would without the waiver. CMS previously indicated it would change the way budget neutrality is calculated for waiver renewals going forward and would limit rollover savings. If the state pursued a renewal at the end of the current five-year waiver, Texas would lose the $10 billion in budget neutrality room that is tied to the current waiver. The dollars under the negotiated extension give the state flexibility to create new directed payment programs and transition DSRIP while continuing to fund existing supplemental payment programs. 

Directed Payment Programs 

HHSC has proposed five new directed payment programs for FFY 2022, subject to CMS approval. The programs would help improve care quality and access and are critical to transition programs that are winding down. DSRIP funding is scheduled to end in September. Approval of these new programs by FFY 2022 (Oct. 1, 2021) is critical to transition DSRIP as well as the Network Access Improvement Program. While these DPPs are not yet final, the extension creates a framework for HHSC and CMS to approve the DPPs for 2022. The new DPPs (and an existing one) and associated program values are estimated as follows. 

1. Comprehensive Hospital Increased Reimbursement Program, including UHRIP and ACIA ($5.02 billion)
2. Quality Incentive Payment Program ($1.1 billion)
3. Texas Incentives for Physicians and Professional Services ($600 million)
4. Rural Access to Primary and Preventive Services ($18.7 million)
5. Ambulance Average Commercial Reimbursement Program ($150 million)
6. Behavioral Health Services ($43.5 million)

Transparency/Reporting 

The extension adds new special terms and conditions that require the state to monitor the funds providers use to finance the payments. The source of non-federal share for most directed and supplemental payment programs will continue to come from local entities through a variety of mechanisms, including intergovernmental transfers, certification of public expenditures, etc. Additional reporting of fund sources will be required, and the state will have to affirm existing certifications related to funds and payments. 

THA applauds the governor’s and HHSC’s quick work to secure a “fast track” waiver of this magnitude. The UC pool and opportunity for new directed payment programs are critical to maintain care quality and access as well as stabilize the safety net through the pandemic and beyond. THA is working closely with HHSC to understand the ongoing impact of the extension on Texas hospitals as well as implementation requirements and will work closely with our state and federal partners on the implementation of the new payment programs. THA also will continue educating lawmakers about the need to address the state’s existing coverage gap and rising rate of uninsured. 

See HHSC’s presentation from yesterday’s waiver extension webinar with hospital leaders. Additional information is available from THA’s Waiver Web page

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, Ste. 700, Austin, Texas 78701-2180.