(Reuters) - Texas has sued President Joe Biden's administration over its decision to rescind the previous administration's approval of changes to its Medicaid program, saying the move was meant to pressure the state into expanding Medicaid under the Affordable Care Act.
In a complaint filed Friday in federal court in Tyler, Texas, the state said that the loss of the approval could cost the state more than $30 billion and would have an "almost incalculable effect on Texas' most vulnerable citizens."
"The Biden administration cannot simply breach a contract and topple Texas' Medicaid system without warning," Texas Attorney General Ken Paxton said in a statement. "This disgusting and unlawful abuse of power aimed at sovereign states must end."
The U.S. Centers for Medicare and Medicaid Services (CMS), the agency within the Department of Health and Human Services that administers Medicaid, had no immediate comment.
The dispute centers on a so-called Medicaid waiver first granted to Texas in 2011. CMS can provide waivers to states wishing to depart from usual federal rules for administering Medicaid, a joint federal and state program meant to cover low-income and disabled people.
Texas' waiver, which has been modified several times, allows the state to require Medicaid recipients to enroll in managed care organizations (MCOs), which are intended to reduce costs. Under a managed care model, Medicaid pays MCOs a fixed premium for each beneficiary, rather than paying for services directly.
Texas also receives federal funding for a related incentive program through which bonuses are distributed to Medicaid providers or regions based on improvement metrics. About $20 billion has been distributed through that program, according to the lawsuit, but federal support for the program is set to expire this September.
In 2020, the state sought an extension of the waiver, set to expire in 2022, through 2030. It was allowed to bypass the normal notice and comment period in light of the COVID-19 emergency.
The newly extended program included new federal funding to replace the expiring incentive program, according to the lawsuit. In April, however, CMS informed Texas that the extension had been improperly granted because there had been no notice and comment period.
The state said in the lawsuit that the sudden rescission violated federal law.
"Federal authorities may not topple a state's Medicaid system as a child might a sandcastle," it said.
The state also said that the decision had an "ulterior motive," noting that CMS had cited a letter from three advocacy groups - Children's Defense Fund-Texas, Every Texan and Texans Care for Children - that criticized the state for relying on its waiver program rather than expanding Medicaid under the ACA.
The organizations said in their letter that despite "valuable contributions" of the waiver, "Texans need and deserve more."
The state is seeking a court order that the April rescission is invalid.
Texas is one several Republican-led states that have not taken advantage of expanded Medicaid funds through the ACA, the signature achievement of Democratic former president Barack Obama.
The case is State of Texas et al v. Richter et al, U.S. District Court, Eastern District of Texas, No. 21-cv-00191.
For Texas: Solicitor General Judd Stone
For the federal government: Not immediately available
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