HB 3505 proposes to allow certain rural counties and hospital districts in Texas to continue operating multi-jurisdictional health care provider participation districts (HCPPDs) under a new section of the Health and Safety Code—Chapter 300C. These districts are authorized to assess mandatory payments from nonpublic hospitals to finance the nonfederal share of Medicaid supplemental payment programs. While the bill aims to sustain rural healthcare financing in underserved areas, it raises several critical policy and constitutional concerns.
First and foremost, the bill fundamentally undermines the principle of Free Enterprise by imposing mandatory financial assessments on private hospitals. These institutions have little to no discretion in avoiding these payments if they are located within a designated district. Although the bill emphasizes that these assessments are not taxes, their compulsory nature, tied to hospital revenue, makes them functionally equivalent to a targeted levy. This contradicts the market-based approach that supports voluntary participation and transparent contractual relationships in public-private funding initiatives.
Second, HB 3505 presents a challenge to Private Property Rights. The bill allows a quasi-governmental entity to extract a portion of a private hospital’s net patient revenue for public financing purposes without direct compensation or elective participation. Hospitals are effectively conscripted into a public funding role by virtue of their geographic location, irrespective of their business model or willingness to contribute. This infringes upon their ability to control how their revenue is allocated and used, which is a key component of property and economic liberty.
From a Limited Government standpoint, the bill expands the authority of local governments to create, operate, and fund health districts without requiring taxpayer approval, competitive checks, or sunset provisions for future legislative oversight. The continued operation of these districts is contingent only upon mutual agreement among local government boards, not public referenda or periodic legislative review. The result is a self-perpetuating administrative body with the power to impose financial obligations on private entities while operating with limited accountability.
Additionally, despite provisions barring cost pass-throughs to patients, the real-world effect of mandatory assessments may result in increased healthcare prices, as hospitals look for other ways to offset the financial burden. Over time, this could lead to higher private insurance premiums or reduced service availability, especially in rural areas where margins are already thin. These concerns reinforce the unintended fiscal impacts that extend well beyond the bill’s neutral score in the state’s official fiscal note.
Finally, although HB 3505 contains language prohibiting the use of these funds for Medicaid expansion under the Affordable Care Act, some lawmakers may reasonably view this structure as a stepping stone toward further entrenching federally supported healthcare models. Creating permanent local mechanisms to fund the nonfederal share of Medicaid payments increases political pressure to expand eligibility and services in future sessions.
In sum, while HB 3505 addresses an administrative expiration issue for an existing district, it does so through a statutory framework that infringes on private property rights, disrupts free enterprise, and delegates ongoing fiscal authority to unelected administrative boards. These structural problems outweigh the bill’s intended benefits, and as such, Texas Policy Research recommends that lawmakers vote NO on HB 3505 as a principled defense of constitutional limits, market freedom, and property autonomy.
- Individual Liberty: While the bill does not directly restrict the freedoms of individuals, it indirectly affects individual liberty by altering the landscape of healthcare access and pricing in rural communities. By imposing mandatory financial assessments on nonpublic hospitals, the bill risks contributing to higher operational costs, which could be passed along to consumers in less direct ways (e.g., reduced services, higher private insurance rates). This may limit the healthcare choices or affordability available to individuals in affected areas, especially if smaller hospitals respond by cutting services or avoiding expansion.
- Personal Responsibility: The bill neither encourages nor undermines personal responsibility in any direct way. However, by entrenching a public financing mechanism that does not involve direct taxation or voluntary contribution, it may marginalize the principle that public services should be funded transparently and with voter accountability. That said, it doesn’t absolve individuals of any particular duty, nor does it impose new obligations on citizens directly.
- Free Enterprise: This is the principle most directly affected by the bill. The bill forces nonpublic (private) hospitals to make mandatory payments based on their net patient revenue, regardless of their willingness to participate or ability to negotiate terms. This compulsion bypasses market mechanisms and effectively injects a form of government-set pricing or revenue diversion into private hospital operations. The free market is distorted when private enterprises are conscripted into financing public programs under threat of legal obligation. Additionally, these financial assessments could disincentivize investment or expansion by hospitals wary of future liability or governmental entanglement.
- Private Property Rights: Property rights include not only physical ownership but also the right to control one’s income and financial resources. The bill undermines this principle by compelling hospitals to divert private revenue into a public fund, one they do not control, and that is administered by a government-created entity. Although framed as “mandatory payments” rather than taxes, the effect is the same: private entities are forced to fund a public system with no guaranteed return or representation. The hospitals cannot opt out unless they physically relocate or cease operations, effectively tying property use to an imposed financial burden.
- Limited Government: The bill expands local government authority to create and operate multi-jurisdictional funding districts with ongoing revenue collection powers, outside the reach of standard democratic checks. These districts are governed by appointed boards, not elected officials, and their funding authority continues indefinitely so long as the participating governments agree, not the public. There is no requirement for voter approval of the program, its continuance, or its assessments. This undermines the principle that government should be limited in scope, transparent in funding, and accountable to the people.
