In its final weeks, the Trump administration approved 10-year Section 1115 Medicaid waivers for Florida, Tennessee, and Texas — three states that have not expanded Medicaid under the Affordable Care Act (ACA). These waivers, which allow states to use Medicaid funds in ways not otherwise permitted, could shape the Medicaid programs in these three states for the next decade. Many of the uninsured in these states — some 1.3 million people — could be insured if these states expanded Medicaid.
Uncompensated Care Pools in Florida, Tennessee, and Texas
When people seek care from hospitals, it is not unreasonable for those hospitals to expect payment for services. But paying for an emergency room visit or inpatient care is no substitute for coverage that provides access to primary and preventive care, diagnostic tests, services to treat and manage acute and chronic illnesses, as well as access to other services including prescription drugs. Indeed, coverage can help avoid costly emergency room visits and inpatient admissions. For this reason, hospitals themselves have continued to press for Medicaid expansion.
Section 1115 waivers have been used in the past to allow states to draw down Medicaid funds to pay hospitals for care provided to the uninsured. These “uncompensated care pools” can play an important role in defraying costs associated with treating people who lack access to affordable coverage, even in states that have expanded Medicaid. The new approvals, however, lock in significantly more federal funding for uncompensated care than has been approved in the past and thus alleviates pressure to expand coverage.
After enactment of the ACA, the Centers for Medicare and Medicaid Services (CMS) approved uncompensated care pools, but sought to phase out Medicaid’s subsidization of the costs attributable to the expansion population to encourage coverage. The Trump administration, which did not support Medicaid expansion, reversed course and allowed uncompensated care pool funding to substitute for coverage, resulting in substantially larger pools.
The new waivers were approved for an unprecedented 10 years, as opposed to five, which is more typical. Although the Trump administration issued policy that permitted 10-year waivers for “routine, successful, non-complex” demonstrations, these approvals do not conform to this guidance and appear designed to “lock in” funding that the Biden administration might not approve. Indeed, the Trump administration even skipped public notice requirements to approve the Texas waiver extension on January 15, 2021.