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1115 Waiver

In 2011, Texas Health & Human Services Commission (HHSC) received legislative approval to apply for and accept a five-year project as allowed under Section 1115 of the Social Security Act. The "Transformation & Quality Improvement Program" (aka 1115 Waiver) allows Texas to expand the existing Medicaid managed care programs, and to establish two funding pools that will assist providers with uncompensated care costs, and promote health system transformation. The 1115 Waiver redirects the supplemental payments that historically existed under the Upper Payment Limit (UPL) program in order to improve care delivery systems and capacity, while emphasizing accountability and transparency, and requiring demonstrated improvements as the provider level for the receipt of funding. These two pools of funding are Uncompensated Care (UC) and Delivery System Reform Incentive Payment Program (DSRIP). In 2016, the waiver was extended for a sixth year at level funding.  Negotiations are ongoing for continuation beyond Demonstration Year 6.

The 1115 Waiver's benefits include:

  • Protects current Texas UPL funds, and the waiver as submitted makes available additional funding for system investment over five years. Final additional funds are contingent upon negotiation. 
  • Allows for legislatively directed managed care expansion while protecting vital hospital UPL funds.
  • Local and state funds would continue to provide the state match for the program.
  • Places decisions regarding healthcare delivery system improvements in the hands of local hospitals and hospital districts, rather than a top-down, one-size-fits-all approach.
  • Plan development, system improvement metrics and reporting will serve as the basis for accountable, effective investments in healthcare and related waiver payments.
  • Helps to drive down healthcare inflation by ensuring hospitals are paid based on actual uncompensated care costs, not charges. The current payments for charges drive healthcare inflation as those hospitals paid UPL based on charges increase charges to all payors, including Medicaid, Medicare and commercial plans.
  • Achieves accountability and transparency for billions of dollars in Texas UPL funding. Under the waiver, payments must be based on services and contributions provided, either uncompensated care or contributions to regional healthcare improvements that will better manage indigent and Medicaid cost trends and improve the delivery system.