The federal government Monday granted Texas a waiver that could mean billions more in Medicaid dollars to hospitals over the next few years, in return for having them work together to provide better care for the poor.

In Bexar County, that could mean new money to help keep the mentally ill from overusing crowded hospital emergency rooms, among other new services, one local official said.

At the same time, federal officials slapped down a request from Texas to deny Medicaid patients access to family planning centers such as Planned Parenthood that also provide abortions — a plan that had drawn the anger of family planning advocates.

“This waiver will allow us to replace an archaic federal Medicaid funding system with one built around local solutions that reward hospitals for patient care and innovation,” Tom Suehs, executive commissioner of Texas Health and Human Services, said in a statement.

In a conference call with reporters, Cindy Mann, director of the federal Center for Medicaid and CHIP Services, said the waiver “will expand the use of Medicaid managed care, and it will give doctors and hospitals funding to offset the cost for caring for the uninsured, and also to help health care providers take steps to improve the care that they provide.”

CHIP stands for Children's Health Insurance Program.

State lawmakers cut deeply into the Medicaid budget this year, in part by requiring all Texas Medicaid patients to be enrolled in private health maintenance organizations for their doctor care. In recent years, patients in most urban areas such as Bexar and surrounding counties were covered by HMOs, while patients in many rural counties and the Rio Grande Valley had their doctor bills paid directly by Medicaid.

The problem was that enrolling everyone in managed care plans threatened to violate the terms of an existing waiver that paid hospitals separately and at much higher rates — equal to what Medicare pays.

“That's why this waiver is so important,” Dr. Dan Stultz, president of the Texas Hospital Association, said in Austin last month at a program organized by the Kaiser Family Foundation. “We do want as a state to expand Medicaid managed care, but we don't want to lose the billions and billions of dollars in Medicaid, because it helps subsidize this shortfall the hospitals are facing.”

To get that extra money for hospitals, local tax funds are put into a state pool to draw down more federal funds. In Bexar County, the University Health System pays into the pool to benefit itself as well as most private local hospitals. That's meant about $500 million in extra local hospital payments since 2007. In return, those private local hospitals agreed to help pay for the doctors that see uninsured patients at University Hospital.

So Texas had to apply for a new waiver. And the new plan could lead to even more money for hospitals: as much as $6.2 billion in the fifth and final year of the five-year waiver, up from about $2.8 billion this year. But it would require all the hospitals in each region work together on a local plan to better care for the poor.

“That's the part that excites me,” said George B. Hernández Jr., president of the University Health System, who said local hospital leaders will soon be putting their heads together to come up local solutions.

One pressing need is finding a way to divert mentally ill patients who often end up in emergency rooms because of a lack of alternatives.

As for the state's request to ban clinics that perform abortions from getting money through the Women's Health Program under a separate Medicaid waiver, Mann said it violated federal law.

“Medicaid does not pay for abortions and will not pay for abortions,” Mann said. “The issue here is not whether Medicaid funding is involved, but whether a state can restrict access to a qualified health provider simply because they provide other services that Medicaid doesn't pay for. The law does not permit this.”

“We are disappointed in the decision, which is inconsistent with federal law that gives states the authority to establish qualifications for Medicaid providers,” said Stephanie Goodman, a spokeswoman for Texas Health and Human Services.

The federal government will extend the current family planning grant to Texas through March while the state revises its proposal, Mann said.