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Rocks in the Water: The Unseen Cost of Losing Federal Support for Uncompensated Care

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Under current law and considering current trends in federal policy, changes in federal health care funding could result in the loss of up to $3.6 billion over the next two years in federal support for Texas hospitals and other safety net providers. Of this, about $2 billion would represent losses to local jurisdictions that levy property taxes to support hospitals. To make up the difference with local funds, city, county, and hospital district officials would have to increase property taxes an average of $0.05 (five cents) per $100 valuation—an additional $81 per year for the average Texas homeowner.i

In many cases, local jurisdictions would be constrained from implementing such an increase. Under Texas’ current tax rollback provisions, 91 of the state’s 107 hospital districts, 25 of the state’s 54 counties that support hospitals with local tax revenues, and 3 out of the 4 Texas cities that support hospitals with local tax revenues would hit their rollback rates if they raised taxes high enough to make up for lost federal funds to their hospitals. And in a few cases, local jurisdictions would bump up against constitutional or statutory tax caps—meaning they could not raise taxes high enough to cover their lost federal funds even if taxpayers wanted to do so.

When Congress convenes in January 2017 under a new Administration, they will consider sweeping changes to the American health care finance system. Many of these changes are related to health insurance and access to affordable health care for specific groups of people...but individual coverage is only part of the picture.

Texas taxpayers should be concerned that changes to federal health care funding could impact funding for hospitals. Such changes—some of which are already embedded in current law—would create new pressure on local property taxes, and jeopardize access to health care services for Texans in communities across the state, regardless of whether they have health insurance.

Texas leaders should safeguard the state’s economy and health care infrastructure by ensuring, at a minimum, that Texas does not lose any federal funding currently going to support the state’s safety net hospital system. Even better, lawmakers should work with the new administration to find ways to repurpose existing funding through the state’s soon-to-expire Medicaid demonstration waiver to increase coverage and improve care for low and moderate-income health care consumers across the state.

This report explains the role federal funds play in supporting Texas’ hospital infrastructure, and the positive impact those federal funds have in our state and local economies. The report examines the negative impacts that could result from reductions in federal hospital funding, both for reductions that are predictable under current law and reductions that have been proposed by the current Administration and could be made worse—or better—depending on choices the incoming Administration makes.

iBased on a statewide average home value of $161,000. Retrieved December 9, 2016.