Texas Attorney General Ken Paxton filed a lawsuit against the Centers for Medicare and Medicaid Services (“CMS”) and the U.S. Department of Health and Human Services (“HHS”) challenging a federal bulletin that threatens the integrity of Texas’s Medicaid program and the nearly five million citizens that it serves by imposing requirements that are neither authorized by statute nor required by existing regulations. 

Paxton also filed a motion for preliminary injunction to halt CMS’s efforts. 

“CMS’s actions imperil not only local governments’ ability to support Medicaid providers in their area, but the entire State of Texas’s ability to adequately fund its Medicaid program,” said Paxton. “This unlawful policy change will endanger vulnerable Texans’ access to health care and handicap local providers’ ability to serve our citizens in every community across the state.”

“The consequences of CMS’s actions are both staggering and devastating,” he noted. “It is yet another disastrous, illegal federal policy from the Biden Administration, but we are fighting back.”

“Despite the current Administration’s inconsistency on the topic, the courts have handed Texas decisive victories on this issue previously and the law is clear: Local Provider Participation Funds are not unlawful hold harmless arrangements.” 

Texas’s Medicaid program is funded jointly by both the state and the federal government. Local governments may also participate by providing funding to the State to enable their citizens’ access to health care, regardless of income level.

Additionally, since 2013 and with CMS’s authorization, Texas has allowed local governments to administer Local Provider Participation Funds (“LPPFs”). Biden’s CMS attempted to rescind authorization of Texas Medicaid’s use of LPPFs in 2021, but the court issued a preliminary injunction against this effort. 

LPPFs involve local governments collecting a mandatory assessment from healthcare providers and then transferring that money to the state to help finance Texas’s share of non-federal funding for Medicaid. Such arrangements are expressly permitted by federal law. 

Federal law, however, outlaws hold harmless arrangements, which are agreements between a government and a health care provider through which the government guarantees that the provider will receive its total tax payment back through Medicaid payments.

CMS recently issued an unlawful informational bulletin that would arbitrarily categorize purely private contracts involving entities that pay taxes into an LPPF as prohibited hold harmless arrangements. Nothing in federal law prohibits purely private contracts of this sort. 

Though the Texas Health and Human Services Commission (“HHSC”) lacks the power to do so, CMS announced in the bulletin that it intended to require HHSC to provide information regarding these private “hold harmless arrangements” as a condition for receiving federal funding, jeopardizing potentially billions of dollars to which Texas’s Medicaid program is entitled. The changes are a stark departure from CMS’s previous policy and represent an unprecedented expansion of the entity’s authority.  

 IN GOD WE TRUST

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