Court Sides with Texas Over Rescinded Medicaid Deal

U.S. District Judge J. Campbell Barker granted an injunction for Texas Attorney General Ken Paxton in a lawsuit filed against the Biden administration for rescinding previously approved Medicaid funding.

In May, Paxton sued the Centers for Medicare & Medicaid Services (CMS), the U.S. Department of Health and Human Services, their respective secretaries, and the federal government after they rescinded federal Medicaid funds already approved by the prior administration.

The extension, which was scheduled to run through 2030, would have provided $11 billion per year in health care funding to Texas, including for uncompensated care. The Biden administration rescinded the waiver because of a procedural issue with the paperwork.

Liz Richter, the then-acting administrator for CMS, wrote in an April 15 letter to Texas officials that the approval was rescinded because “it did not go through the full federal rulemaking process.”

Waiver Was Approved

Texas submitted an application to extend its 1115 demonstration project waiver, which was accepted on December 15, 2020 and approved on January 15, 2021. Under Section 1902 of the Social Security Act, states can modify Medicaid program requirements with a Section 1115 waiver. Within three months, the Biden administration rescinded the waiver extension, which would primarily fund care for children, people with disabilities, and the elderly.

“The Biden administration cannot simply breach a contract and topple Texas’s Medicaid system without warning,” Paxton said when he filed the lawsuit. “This disgusting and unlawful abuse of power aimed at sovereign states must end.”

If the administration’s decision had stood, Paxton says “it would have ripped a $30 billion hole in Texas’s budget, as well as sacrificed the well-being of many vulnerable Texans.”

Judge Sides with Texas

In his 26-page ruling, Barker said CMS’s decision “is likely unlawful and causes prospective harm to plaintiffs that can be avoided by an injunction but not compensated later in damages. Accordingly, the court will enjoin defendants from implementing the rescission and withdrawal stated in that letter and from enforcing the new deadlines and requirements stated in the letter as a result of the rescission.”

The waiver funds “are vital to the very existence of many hospitals in Texas,” said Texas Essential Healthcare Partnerships President Donald Lee.

The move was seen as an attempt to push states toward participating in the federal government’s oversight of the Affordable Care Act’s Medicaid expansion, which Texas continues to reject. The Washington Post reported earlier this year that the administration had already forced a dozen holdout states to accept Medicaid expansion by rescinding funding or through other measures.

Federal Funding Gap

If Texas were to return to government oversight of Medicaid, it would receive $3.9 billion in funding over two years and more than two million uninsured individuals would be eligible to receive Medicaid coverage, the Post reported.

Paxton described Biden’s “attempt to force our state into expanding Medicaid – the Biden Administration’s ultimate goal” – as “deplorable” and “illegal.”

The Biden administration has not yet stated whether it will appeal the case.