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Testimony: Senate Health & Human Services - Health Care Costs: 1115 Demonstration Waiver

Texas Conservative Coalition Research Institute

Testimony to the Senate Committee on Health & Human Services

December 3, 2019

Regarding the Committee’s Charge: Examine the current status and future direction of the following programs: The Texas Healthcare Transformation and Quality Improvement Program Section 1115 Demonstration Waiver, including the DSRIP Transition Plan, and the Healthy Texas Women Section 1115 Demonstration Waiver.

Executive Summary

In December 2011, Texas received approval for a new Section 1115 Healthcare Transformation and Quality Improvement Waiver. The state’s largest Medicaid waiver to date, and one of, if not the largest of its kind in the nation, this new waiver encompassed all of Texas’ Medicaid managed care program, as well as billions of dollars in supplemental funding to hospitals and other “safety net” system providers.

The waiver was renewed after its initial five-year period and is currently operating under an extension that is set to expire on September 30, 2022. While HHSC is continually looking towards waiver renewal for federal fiscal year (FFY) 2023, the most critical waiver-related issue currently facing the state is the end of Delivery System Reform Incentive Payment (DSRIP) funding in September 2021. Since its inception, the DSRIP pool has provided approximately $16.3 billion in supplemental payments to about 300 participating providers, with hospitals accounting for almost 70 percent of the total payments.

In addition to the presumed waiver renewal and expiration of DSRIP funding, there are other challenges on the horizon that will most likely impact funding available to safety net providers and how Texas provides the matching funds to draw down the federal share of its supplemental provider payments.

SB 750 (86R, 2019 - Kolkhorst/ SP: Button) also directed HHSC to examine the feasibility and cost- effectiveness of serving the Healthy Texas Women (HTW) population through a managed care program, if the state’s outstanding request to implement a Healthy Texas Women 1115 Waiver is approved.

The 87th Legislative Session will be the final session before many of the aforementioned changes and/or negotiations take place. Therefore, it is imperative that lawmakers use this interim process to focus on establishing guiding principles to provide the framework for waiver renewal negotiations and how the state will address the end of DSRIP funding, as well as identifying any additional issues that deserve further exploration.

TCCRI offers the following recommendations and considerations as lawmakers prepare for these coming changes:

  • Develop or finalize an objective process for determining which DSRIP projects are not meeting established goals and should be ended without consideration of additional funding.

  • Require that any DSRIP programs, or future iterations of such programs, adhere to strict quality metrics and transparency reporting requirements so that federal and state leaders, as well as taxpayers, can clearly see how funds are being utilized.

  • Examine the use of LPPFs as a mechanism for non-federal match and the state’s approach should the use of provider fees be disallowed under federal rules.

  • In the presumed extension of the existing 1115 waiver in FY 2023, consider the impact of the perpetual maximization of federal funds and how the state will be affected in the future if this funding is decreased.

  • Ensure that, if the Healthy Texas Women Program is approved as an 1115 waiver, there is a clause that terminates participation in the waiver and reverts the program back to the state- funded program in place today if, at some point in the future, the federal government does not allow the program’s prohibition of participation by abortion providers and their affiliates.

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