New Trump administration rules designed to cut waste in the nation’s food stamp program means Texas taxpayers will have to pay the federal government $700 million more each year to participate, state officials told lawmakers on Wednesday.
Texas Health and Human Services officials disclosed the cost in a presentation to the Senate Health and Human Services Committee, which met to discuss how Texas curbs fraud in welfare programs.
Recommended Videos
Federal officials announced the new rules last year during the passage of the One Big Beautiful Bill Act. The rules force each state to improve the number of times officials overpay or underpay recipients in the Supplemental Nutrition Assistance, or SNAP, program. States, including Texas, have until 2027 to improve their SNAP error rate or face financial penalties.
Almost 9% of Texas’ SNAP payments had an error, better than the national rate of 11%, putting it in the middle of the pack compared to other states. But under the new rules, the state would be penalized more, unless it can bring down that error rate to below 6%. Texas has until October 2027 to bring its error rate down or it can face $709 million in penalties. An error rate is based on unintentional mistakes by the agency or the client receiving the benefits that results in an overpayment or underpayment. Monthly changes in a SNAP recipient’s financial situation can result in an overpayment or underpayment.
Currently, SNAP assistance is 100% funded by federal tax dollars but each state agrees to pick up a percentage of the administrative costs. Under the new federal rules, Texas will also have to pay 75% of SNAP’s administrative cost — about $117 million more starting next year, according to HHS’ numbers — instead of the 50% share the state pays now. Add in the penalties from the error rate, taxpayers will have to pay a total of $826 million more in 2027.
Because the October 2027 deadline will occur after the Legislature forms a budget, budget writers will likely have to set aside money ahead of time.
SNAP, also known as food stamps, feeds about 3.1 million low-income residents, including about 1.5 million children in Texas, as of March. Texas households receive an average payment of nearly $400 per month that is loaded onto a debit-like Lone Star card that they can use to purchase groceries. Unused benefits from one month can be rolled over to the next month. Starting this month, SNAP recipients can no longer purchase candy or sugary drinks. Also, undocumented immigrants are not eligible for SNAP assistance.
With 24% of the state’s population receiving some type of assistance from Texas Health and Human Services, lawmakers are focusing hard on what to do to improve the state’s record on fraud control, especially now they are facing a hefty financial penalty if they do not reduce the SNAP error rate.
Wednesday’s hearing was scheduled after Lt. Gov. Dan Patrick listed fraud as an interim charge or priority. Welfare fraud has resurfaced as a conservative priority following reports from Minnesota of child care fraud in that state earlier this year. By comparison, Texas sees little fraud in its own child care assistance programs. Still, Gov. Greg Abbott earlier this year has directed agencies to make fraud detection a top priority.
“We are dealing today with a health care epidemic, but not from a disease or virus,” said Sen Lois Kolkhorst, R-Brenham, the committee chair. “With scandals in place like Minnesota and California drawing national attention, we, as Texans, must examine our own system and see how we measure up to other states.”
State record on fraud and surfacing problem areas
Texas spends more money than many states to shore up its enforcement apparatus, according to health plan representatives and state agencies charged with investigating health care fraud, namely the Office of the Attorney General’s Medicaid Fraud Control Unit (MFCU) and state Health and Human Services Inspector General Raymond Winter. Both agencies relayed big wins and recoupment of millions of dollars in fraudulent billing from providers.
In fiscal year 2025, HHS OIG recouped $465 million in overpayments. The MFCU recouped another $125 million and secured 123 arrests and 180 indictments related to health care fraud. Since 2020, the attorney general’s office has brought back more than $1 billion to Texas coffers.
“I think long before we had this federal focus on fraud, waste, and abuse, Texas has been a national leader in the proactive steps that we’ve taken,” said HHS Executive Commissioner Stephanie Muth. “And that is largely due to the leadership from the governor, as well as the leadership from the legislative body, and creating extra protections for our taxpayer dollars.”
Even with the millions spent over several legislative sessions to better detect health care fraud, it is like tackling an elephant one bite at a time, Sen. Charles Perry, R-Lubbock said.
The National Health Care Anti-Fraud Association estimates that up to 10% of total health care expenditures are lost to fraud, waste and abuse each year, Winter said.
New problems are emerging, experts told the committee. Texas has seen a dramatic spike in the number of hospice providers coming to Texas since 2020, said Lisa McNair, the CEO and president of Hospice Brazos Valley, a nonprofit hospice company offering end of life care in 17 counties. She suggested not all of those companies are coming here because of increased patient demand. Some of them are coming because of the state’s looser regulations.
“We basically doubled the number of hospices since 2020,” McNair said. “We haven’t doubled our population.”
Fraud in personal attendant billing — where the state pays for personal attendants for disabled Texans — is another growing problem, MFCU Chief William Marlowe said.
His unit caught one Texas jail correctional officer scamming the state by falsely recording she was making visits as a personal attendant even though she was on duty at the jail. In another case, a Texas family kept the corpse of an elderly relative in the house for three years to keep payments for personal attendant services going.
“Never underestimate the depravity of humanity,” Perry said.