EAST TEXAS (KLTV/KTRE) – Texas hospitals stand to lose millions of dollars a day in critical funding after the federal government began withholding Medicaid reimbursements on Sept. 1.
The funding cutoff, which totals an estimated $27 million daily across the state, targets three critical Medicaid reimbursement programs that act as financial lifelines for healthcare facilities, according to the Texas Hospital Association.
The decision by the Centers for Medicare and Medicaid Services (CMS) comes as the federal agency requires states to restructure how local tax funding is collected to match federal dollars.
The current dispute is heavily shaped by the federal budget reconciliation package passed in July 2025, known as the One Big Beautiful Bill Act. While the Texas Hospital Association (THA) successfully lobbied to protect $10 billion in Texas Medicaid funding from direct cuts in the final legislation, the act prompted stricter federal oversight of state-level provider taxes and matching funds.
John Hawkins, president and CEO of the THA, warned that the sudden cutoff will disproportionately impact rural hospitals operating on thin margins and serving larger Medicaid populations.
“I think these funds are very important, and they ensure access to care across the state, particularly for rural areas,” Hawkins said. “We’re especially concerned about rural hospitals, the thin margins that they’re operating with, the fact that they usually have a higher Medicaid population than a lot of the other hospitals in the state.”
While major East Texas medical hubs UT Health and Christus Health Systems are potential targets for service cuts, both declined to comment. Hawkins warned that forcing hubs to limit access points would require patients to travel farther for medical care.
“If it’s inconvenient, you’re either going to forgo care, or you’re going to delay it, and then the conditions worse, worse health outcomes, More costly to the system,” Hawkins said. “So that’s not an ideal situation.”
The Texas Health and Human Services Commission is currently negotiating a deal with CMS to secure the federal funding.
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