Texas Governor Greg Abbott is intensifying efforts to reclaim nearly $10 billion in Medicaid funding that the Trump administration is currently withholding from Texas hospitals. This funding is vital for maintaining the state’s health care infrastructure, particularly for low-income residents reliant on Medicaid services.
“Texas is working with the Centers for Medicare and Medicaid Services to protect funding that helps hospitals serve Medicaid patients and keeps critical emergency care available,” stated Abbott’s spokesman, Andrew Mahaleris.
This announcement follows reports from The Texas Tribune indicating that the governor’s office has intervened in a protracted dispute between the Texas Health and Human Services Commission (HHSC) and federal authorities regarding the funding. This financial support is essential for hospitals to cover the discrepancies between Medicaid reimbursements and the actual costs incurred while treating low-income Texans.
The delayed funding was scheduled to begin on the first day of the state fiscal year, which is Tuesday. Each day this funding is delayed costs Texas hospitals approximately $27 million, according to estimates from the Texas Hospital Association.
Texas hospitals contribute around $4.2 billion annually to local taxing districts, which are subsequently matched by federal funding to provide supplemental Medicaid resources. However, since December, federal officials have raised concerns regarding how these taxes are generated and calculated, leading to the withholding of funds until satisfactory answers are provided.
Despite the federal scrutiny, Texas health officials argue that the state’s financing strategies fully comply with federal law, emphasizing that there have been no changes in the calculations or collection methods.
“Texas’ financing fully complies with federal law, and Texas health care providers should receive the funding they are due,” Mahaleris reiterated.
Abbott’s actions, including a recent letter to Health Secretary Robert F. Kennedy Jr., characterize the withholding of funds as an economic “gun to the head,” marking a notable public stance from the governor in favor of Medicaid funding for Texas. This position is particularly significant given that Texas is one of the few states that has not expanded Medicaid, resulting in the highest uninsured rate in the United States.
Last year, Texas faced a significant measles outbreak while also managing a $700 million clawback of unspent COVID funding, compounded by cuts to public health funding. While some lawmakers acknowledged that the Trump administration replaced a portion of healthcare cuts with smaller grants, the overall funding landscape remains precarious.
The federal government’s scrutiny followed the passage of the One Big Beautiful Bill Act, which cut $900 million from Medicaid, disproportionately affecting states that expanded their Medicaid programs. A provision in this legislation effectively froze Texas’ hospital taxing structure, triggering the suspension of supplemental funding.
As of late Tuesday, a spokesperson for CMS reiterated the agency’s commitment to ensuring appropriate use of Medicaid funds, but did not provide additional details regarding the ongoing dispute. “The agency is working with all states to ensure compliance with both longstanding and recent statutory requirements and remains engaged with the state on these issues,” the statement read. “CMS will continue to monitor the implementation of these changes and their potential impact on access to care for Medicaid beneficiaries.”
Disclosure: The Texas Hospital Association has been a significant financial supporter of The Texas Tribune, a nonprofit and nonpartisan news organization funded by donations from members, foundations, and corporate sponsors. Financial supporters do not influence the organization’s journalism, and more details about their policies can be found on their website.
