Governor’s Proposal Would Stabilize, Improve Puerto Rico’s Medicaid Program

Puerto Rico Governor Ricardo Rosselló has sent congressional leaders a proposal to address the Commonwealth’s Medicaid funding cliff (its impending shortfall that would threaten the health coverage of 1.5 million Puerto Rico residents this fall), stabilize its Medicaid program for the next five years, and improve the program.

Unlike the states, which receive open-ended federal funds for a specified share of their Medicaid spending, Puerto Rico receives a fixed block grant each year — totaling only $367 million in fiscal year 2019, compared to almost $2.8 billion in projected spending. Also, Puerto Rico’s federal matching rate is 55 percent (meaning that for every $1 it spends on Medicaid, the block grant contributes 55 cents), well below the 83 percent rate that Puerto Rico would receive under the formula that applies to states.

Due to these severe funding constraints, Puerto Rico’s Medicaid eligibility limits are lower than in the states, its benefits are less comprehensive, and its payments to health care providers are much lower —the latter of which is helping to drive an exodus of doctors and a shortage of such providers as emergency physicians and neurosurgeons.

The governor is requesting $15.1 billion over five years — a period aligning with the five-year fiscal plans certified by the Financial Oversight and Management Board, which the President and Congress created in 2016 to oversee Puerto Rico’s finances and debt restructuring. These funds would come with an 83 percent matching rate.

The governor’s proposal seeks core funding that it needs to maintain its current Medicaid for five years as well as additional funds to improve it by raising provider payments, expanding eligibility limits, and covering additional benefits.

Specifically, the proposal would:

• Raise provider payments through a “directed payments” mechanism that requires the managed care organizations that cover all of the island’s Medicaid beneficiaries to use the new funding for higher provider reimbursements.
• Raise payments to hospitals to reduce their losses due to Medicaid’s low reimbursement rates, which disproportionately affect Puerto Rico’s hospitals because Medicaid serves a large share of the population.
• Add coverage for drugs that cure Hepatitis-C, which, the governor estimates, could benefit about 14,000 Medicaid beneficiaries.
• Cover Medicare Part B premiums for close to 300,000 Puerto Rico residents eligible for both Medicaid and Medicare, who now pay the premiums themselves. (If they lived in the states, the Medicare Savings Program would cover their premiums.)
• Raise Medicaid income eligibility limits to maintain coverage for 120,000 people whose coverage Puerto Rico now solely finances itself, outside of Medicaid.