Texas Judge Blocks CMS Medicaid Funding Rule Overreach

The U.S. Supreme Court upheld the Department of Health and Human Services' (HHS) methodology for determining hospital payments for treating low-income patients, specifically affirming how the Medicare fraction is calculated for Disproportionate Share Hospital (DSH) payments. Meanwhile, a Trump-appointed federal judge in Texas permanently blocked a 2024 Centers for Medicare & Medicaid Services (CMS) regulation that sought to tighten oversight on state Medicaid funding, particularly disputing CMS's reinterpretation of provider tax arrangements as illegal "hold harmless" agreements. The state of Texas, led by Attorney General Ken Paxton, argued that CMS's rule threatened the state's ability to fund Medicaid adequately and could jeopardize access to healthcare for vulnerable Texans. This ruling concluded that CMS had exceeded its statutory authority by unilaterally changing the interpretation of permissible tax arrangements, a move that could have led to the loss of billions in federal funding for Texas. These legal decisions highlight ongoing tensions around Medicaid funding formulas and the federal government's role in regulating state contributions and hospital reimbursement amid budgetary pressures. The rulings collectively underscore the complex interplay between state healthcare funding mechanisms and federal regulatory authority.