The December 2025 column warned of the coming reduction in funding for federal health care programs. It outlined the likely impact on county indigent health care programs and rural health care availability. Unfortunately, that funding reduction has arrived.
Under Chapter 61, Health and Safety Code, a county without a public hospital is the “payor of last resort” for indigent medical care. Also, hospitals with an emergency room must serve patients regardless of ability to pay under federal law. When funding for federal programs is reduced, patients are removed from the program and payment rates to hospitals are lowered. Local taxpayers are then required to fund the services for these citizens. Last year, counties expended over $515 million for indigent health care services. Based upon recent assessments, that total is about to escalate tremendously.
Hospitals lose money on Medicaid services because the payment rates do not cover the costs. For the past 10 years, Texas hospitals have received additional federal funding to help cover this difference. On Sept. 1, the federal administration suspended these payments. Despite an Aug. 7 letter from Gov. Greg Abbott to Health and Human Services (HHS) Secretary Robert F. Kennedy asserting that Texas continues to qualify for this funding under federal law, the U.S. Centers for Medicare & Medicaid Services (CMS) halted these payments. This suspension will cost Texas hospitals $27 million a day (about $1 billion per year).
HB 1, the One Big Beautiful Bill Act, requires a $900 billion reduction in Medicaid funding by 2034. Gov. Abbott estimated that present HHS policies will cost Texas more than $12 billion in 2027. Texas has the largest uninsured population in the United States. The reduction in the federal share of Medicaid funding will be redistributed to state and local taxpayers.
The effect of the reduced Medicaid funding is being amplified in Texas by a severe backlog of Medicaid applications. The Texas backlog of Medicaid applications grew from about 1,600 in January 2026 to more than 210,000 in August 2026. After a Medicaid applicant (mostly children) has submitted the required 30-page application, it sits on a state computer for 70 days before the state begins processing it. During this delay, any payment for medical services depends upon county or hospital district taxpayers.
With these impending issues, counties should carefully monitor their indigent health care programs for increases in applications and requests for payments. Close coordination with the community hospital and other providers will also be important to sustain these vital assets, especially in rural areas with large percentages of Medicaid- and Medicare-eligible residents.
