Dive Brief:

• The Biden administration has dropped its challenge to a Trump-era Medicaid extension in Texas after deciding it's no longer a good use of federal resources, according a letter the CMS Administrator Chiquita Brooks-LaSure sent to Texas' Medicaid director Friday.
• The decision ends a lawsuit that had stretched on for almost a year over a waiver extension approved in the last days of the Trump administration. Texas' main hospital lobby called the waiver's survival a relief, and the state's Republicans agreed late last week.
• The waiver, which expands Medicaid managed care, provides funds for uncompensated care and allows for the creation of nontraditional care delivery programs, is worth billions of dollars annually. It's currently slated to run through 2030.

Dive Insight:

The Trump administration in last January approved a decadelong extension of Texas' Medicaid waiver, just days before President Joe Biden was sworn into office. The state applied for ane tension early, as the waiver was scheduled to expire in fall of 2022.

Prior to approval, Trump's HHS didn't hold a public notice and comment period, citing the pandemic.

The Biden administration revoked the federal green light in April, arguing the CMS had "materially erred" in granting Texas' request by not undergoing the proper public comment period, the agency explained in a letter rescinding approval.

Texas sued in May, arguing the CMS didn't give the state notice of its intent to reconsider the waiver's approval. Its attorney general said the Biden administration was using the reversal as a smokescreen to pressure the state into a full Medicaid expansion under the Affordable Care Act. Texas is one of 12 states that have yet to do so.

In August, a federal judge allowed the waiver to temporarily stand, while the state and federal government negotiated its details.

In Friday's letter, Brooks-LaSure said the CMS is committed to public notice and comment periods on Medicaid demonstrations, but is allowing Texas' demonstration to stand, "as CMS has concluded that it is not the best use of the federal government's limited resources to continue to litigate this matter."

"This should resolve the issue without the need for further litigation and will create no disruption to the people who rely on Texas' Medicaid program, since the demonstration has been in effect" since January, Brooks-LaSure said.

Texas' uninsured rate is the highest in the nation and twice the national average, at 17.3%. Critics of its Medicaid waiver argue the state could expand coverage to more residents if it fully expanded Medicaid under the ACA.

Texas hospitals cheered the CMS' decision, while noting the importance of further coverage expansion.

"This is a step forward for the health of Texas and brings some relief for hospitals and the patients they serve. Today's decision creates certainty following months of ambiguity during an ongoing pandemic," John Hawkins, president and CEO of the Texas Hospital Association, said on Friday. "We will continue to underscore the need for coverage expansion, rates that more closely match the cost of care, and a stable uncompensated care pool."

Texas Gov. Greg Abbott, a Republican, said he applauded the CMS in a statement on the reversal, saying it would allow the state to maintain an "efficient and effective Medicaid" program.