Court sides with Texas in dispute with Biden administration over Medicaid funding

U.S. District Judge J. Campbell Barker handed Texas another win against the Biden administration Friday, this time over Medicaid funding, granting Attorney General Ken Paxton’s request for an injunction and denying the administration’s motion to dismiss.

In May, Paxton sued the Centers for Medicare & Medicaid Services and the U.S. Department of Health and Human Services and their respective secretaries, and the federal government, after they rescinded federal Medicaid funds already approved by the prior administration.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The Biden administration rescinded the waiver, not because of any material issues pertaining to the application but because of a procedural issue with the paperwork. Liz Richter, acting administrator for CMS, wrote in an April 15 letter to Texas officials that its approval was rescinded because “it did not go through the full federal rulemaking process.”

Texas submitted an application to extend its 1115 demonstration project waiver, which was accepted on Dec. 15, 2020, and approved on Jan. 15, 2021. Within three months, the Biden Administration rescinded the waiver extension, which would primarily fund care for children, people with disabilities, and the elderly.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.”

Barker agreed.

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.”

Paxton commended the judge’s ruling, adding that he would continue to fight against the Biden administration violating federal law “again and again.”

Texas has so far sued the Biden administration more than any other state, primarily over immigration, followed by oil and gas and public health issues. He says his office “will continue to fight against every political ploy this Administration throws at us.”

The waiver funds “are vital to the very existence of many hospitals in Texas,” Texas Essential Healthcare Partnerships President Donald Lee told The Center Square. If Texas had lost this funding, Lee says, “it would create a cascading disaster as hospitals failed and Texans would then have no, or limited access, to hospital services. The impact will be felt most acutely in the inner city of our major metro areas, in our rural areas, and especially along the Texas-Mexico border.”

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, a move 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. If Texas were to participate, 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.