Proposed Medicaid Rule Would Severely Restrict Services, Medicine Argues
By David Doolittle


A proposed federal rule that would restrict how states fund their share of Medicaid would cause serious cuts in services, particularly for children, pregnant women, the elderly, and the disabled.

That is the message the Texas Medical Association and multiple state and specialty medical societies delivered to the Centers for Medicare & Medicaid Services (CMS) on Friday.

“The proposal represents a substantial shift in the state-federal Medicaid partnership and a reversal of more than two decades of policy that allowed states different options for financing our share of medical care in order to receive federal Medicaid matching dollars,” medicine wrote to CMS Administer Seema Verma. “We are concerned about the negative impact of the proposed rule on state budgets and states’ capacity to address funding gaps.”

States use general-revenue tax dollars plus supplemental funding – including hospital fees, provider taxes, and intergovernmental transfers – to pay their required “nonfederal” share of Medicaid services. Over the years, states such as Texas have had to increase supplemental funding because of lawmakers’ reluctance to increase the amount of general revenue that goes to Medicaid.

CMS in November proposed regulations that would require states to give CMS certain information on supplemental funding arrangements and that any new supplemental sources be “consistent with the proper and efficient operation of the state plan.”

CMS says the new reporting requirements would promote transparency within the system.

However, medicine argues that the rule would restrict states’ ability to use supplemental funds, that it establishes no clear standard for how states can raise funds, and that states would not have adequate time to plan for the changes.

“This rule would create significant funding gaps in state budgets and leave states without adequate resources or time to prepare for the future,” medicine’s letter says. “States could be forced to close budget gaps with either untenable cuts to providers and medical services or burdensome increases in state and local taxes.

“We strongly urge CMS to withdraw the proposed rule and work with states, physicians, and patients on alternatives that will ensure not only efficient use of taxpayer dollars, but also protect patient access to Medicaid services,” the letter says.

In Texas, which has the nation’s largest uninsured population, supplemental funding accounts for as much as 60% of hospitals’ Medicaid payments, finance experts report.

“These dollars serve as the lifeblood of safety net hospitals and health systems, including teaching facilities, children’s hospitals, and rural hospitals, which together serve the vast majority of Medicaid and low-income Texans while also providing critical community services, such as neonatal, maternity, and trauma care,” several Texas medical organizations, including TMA, wrote in a separate letter to Ms. Verma. “Without these dollars, many of these facilities would cease to exist or be forced to sharply limit their services.”

In addition, the state’s Medicaid 1115 Transformation Waiver, which will provide an additional $25 billion until 2022, relies almost exclusively on supplemental funding. That waiver has helped thousands of low-income Texans receive medical, behavioral, and dental services.

Without the ability to use supplemental funding, lawmakers would be unlikely to support any future Medicaid waiver, Texas’ letter says.

“Restricting Texas’ use of supplemental funds will ultimately jeopardize the health and well-being of Texans,” the letter says. “If Texas must make up the lost revenue, lawmakers may very well instead choose to cut benefits, services, and physician and provider payments to make up for the lost dollars.”

Last Updated On

February 03, 2020

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David Doolittle


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Dave Doolittle is editor of Texas Medicine and Texas Medicine Today. Dave grew up in Austin, where he attended culinary school as well as the University of Texas. He spent years covering Central Texas for the Austin American-Statesman newspaper. He is the father of two girls, a proud Longhorn, and an avid motorsports fan.

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