Texas hospitals expect to lose $27 million each day in additional Medicaid funding, beginning September 1 with the start of the state's new fiscal year. This anticipated shortfall totals about $9.8 billion for the next year, stemming from a Trump administration decision to withhold approval for three programs, with the Comprehensive Hospital Increase Reimbursement Program (CHIRP) being the most affected. The federal government is questioning how local jurisdictions in Texas calculate the taxes collected from hospitals.
CHIRP provides hospitals with crucial additional funding to cover the gap between state-set Medicaid payment rates and the actual costs of providing care to Medicaid patients. Local governmental entities collect approximately $4 billion annually in taxes from hospitals, which the federal government matches under CHIRP. Hospitals assert these funds are critical and that losing them will likely necessitate cuts to patient services. Four million low-income Texans, predominantly children, are enrolled in Medicaid.
Sara González, a vice president of advocacy for the Texas Hospital Association (THA), stated that significant Medicaid losses would impact services across the board, regardless of a patient's insurance. The Houston public healthcare system, Harris Health, could see at least $258 million less, with the broader region facing a reduction of up to $1.4 billion next year. Dr. Esmaeil Porsa, president and CEO of Harris Health, warned that the impacts "would be catastrophic for Texas' safety-net healthcare system." Robert Fries, chief financial officer for Children's Health in Dallas, noted that such funding is vital for pediatric hospitals, stating delays threaten access to critical care and the workforce needed.
The impasse began quietly last December. On August 7, Governor Greg Abbott sent a pointed letter to U.S. Health Secretary Robert F. Kennedy Jr., asserting that Texas's method of collecting local hospital taxes fully complies with federal law. Abbott referred to the funding holdup as an economic "gun to the head," adding that what the Centers for Medicare and Medicaid Services (CMS) is requesting does not comply. The Governor indicated that if Texas were to restructure its tax methods, the federal government must guarantee no future penalties. The state estimates the potential loss could reach $12 billion in 2027.
As of Monday, the Centers for Medicare and Medicaid Services, the Texas Health and Human Services Commission (HHSC) which administers Medicaid, and the governor's office had not offered comment on the nearly $10 billion loss or the resolution status. Even if a new agreement is reached soon, THA officials, including Anna Stelter, vice president of policy, confirmed that funding would be delayed for months due with a claims backlog taking at least 90 days to clear.
Congress passed H.R. 1, the One Big Beautiful Bill Act, a year ago, which included nationwide Medicaid funding cuts by 2034. This legislation also included a provision that effectively froze Texas's taxing structure for hospitals, allowing non-expansion states to maintain their existing status quo. Texas has historically declined to expand Medicaid coverage, a provision of the Affordable Care Act. Florida, another non-expansion state facing similar federal questions on hospital taxes, resolved its funding delay after 11 months. Texas's HHSC website shows 11 rounds of questions and answers between CMS and HHSC. In the latest exchange, Texas provided assurances that funds would not pay for non-citizen healthcare. Carrie Kroll, THA's senior vice president of advocacy, noted that hospitals do not expect state general revenue to offset this federal funding loss. The impasse continues, leaving hospitals to make difficult decisions about maintaining critical services.
