DALLAS – The federal government's decision to extend a Texas Medicaid waiver by 15 months gives hospitals in the state some breathing room, ratings analysts said.
"The extension removes uncertainty regarding the funding in the near term, and allows hospitals to budget with greater clarity and precision," Moody's analyst Lisa Goldstein wrote after the Centers for Medicare and Medicaid approved the extension May 1.
"The extension is credit positive for not-for-profit hospitals in Texas, particularly those treating a high percentage of Medicaid and uninsured patients," Goldstein said.
Previously set to expire on Sept. 30, the waiver now expires on December 31, 2017.
The waiver was a result of a standoff between Texas Republican leaders and the federal government over expansion of Medicaid under the 2010 Affordable Care Act, known familiarly as Obamacare.
Texas Republican leaders refused to expand the program to cover the working poor. In lieu of that expansion, an 1115 waiver program was approved that would allow Texas hospitals to continue receiving reimbursement under the program.
Failure to extend the waiver "would have resulted in near catastrophic consequences for the state's most vulnerable populations," according to Ted Shaw, president of the Texas Hospital Association.
The waiver extension will continue the annual funding level, where federal and local funds are split between the Delivery System Reform Incentive Payment (DSRIP) program and the Uncompensated Care (UC) program.
According to the Texas Health and Human Services Commission, both programs contribute $3.1 billion a year, each.
Moody's said that Harris County Hospital District, rated A2-stable, and Tarrant County Hospital District, Aa3-stable, benefit the most from the extension because they treat a high percentage of low-income patients.
"Additionally, many of the small rural hospitals in areas hit hard by the downturn in the oil industry will benefit from the certainty of the extension," Goldstein wrote.
According to Gallup, Texas had the highest uninsured rate in the U.S. at 20.8% in mid-2015, compared to 11.7% nationally. Under the ACA, Texas' uninsured rate has fallen from 27% in 2013.
Texas is one of 19 states whose Republican governors or legislatures refused to participate in Medicaid expansion under the Affordable Care Act. In addition to not participating in the program, Texas sued the federal government to overturn Obamacare. The state won a partial victory when the U.S. Supreme Court allowed states to opt out of the Medicaid expansion.
