⚖ Oral Arguments, with Context

The Fifth Circuit considers whether federal Medicaid funding rules reach private agreements among hospitals. Texas allows local governments to tax healthcare providers to help finance its share of Medicaid, a joint federal-state healthcare program. Federal matching funds are added, and hospitals receive Medicaid payments. CMS, the Centers for Medicare and Medicaid Services, is targeting private agreements that redistribute those payments so taxpaying hospitals recover their tax costs. This is the hold-harmless issue: whether providers are being protected from the cost of the tax. CMS says private redistribution can amount to an indirect government guarantee. Texas says the statute requires a guarantee from the state or local government itself, not merely a private agreement. A district judge set aside the challenged rule provisions and bulletins, and the federal government now appeals. Its lawyer will argue that private intermediaries do not remove these arrangements from Congress's prohibition. Texas's lawyer will defend the district court's reading and argue that CMS changed its position without adequately explaining the shift. You will also hear about the major-questions doctrine, which calls for clear congressional authorization for extraordinary claims of agency power. If the ruling stands, how broadly should it operate? Vacatur means setting an agency action aside; the government will argue for relief limited to Texas rather than across the board.

State of Texas v. Oz (No. 25-40766) — U.S. Court of Appeals for the Fifth Circuit, argued November 2, 2026.