Vice President for
Federal Fiscal Policy
A year after Hurricane Maria took an extraordinary human and economic toll on Puerto Rico, the island faces immediate recovery tasks as well as longer-term challenges that predated the storm, including a decade-long recession and an overwhelming debt burden. Inadequate federal Medicaid funding — far less than what Puerto Rico would have received if it were a state — has contributed significantly to the island’s financial problems. Temporary funding increases that federal policymakers enacted in recent years to alleviate the problem will expire a year from now, so federal policymakers will need to give Puerto Rico adequate, secure funding to provide health care to its residents over the long run.
Puerto Rico relies heavily on Medicaid, which served almost half of the island’s population and nearly 60 percent of its children in 2017. If Puerto Rico were a state, the federal government would cover more than 80 percent of its Medicaid spending, due to its low per capita income relative to the United States as a whole. But as a territory, Puerto Rico receives a fixed Medicaid block grant; once that’s exhausted, Puerto Rico must cover all remaining costs itself.
That block grant effectively covered only 15 to 20 percent of the island’s Medicaid costs. The 2010 Affordable Care Act (ACA), however, temporarily boosted Puerto Rico’s Medicaid funding and, after Hurricane Maria, the 2018 Bipartisan Budget Act (BBA) provided additional funding and allowed those funds to cover 100 percent of the island’s Medicaid costs through September 2019.
This additional funding has been essential to averting cuts in needed health care benefits and services. In Puerto Rico, access to care has often been problematic, particularly for those in poor health. Even before the hurricane, the departure of doctors, deteriorating health care infrastructure, and long wait times for care were serious concerns. Since the storm, about a third of residents say they’ve had trouble getting needed medical care, and about a quarter report a new or worsened health condition, a recent survey found. Households with an individual who has a debilitating chronic condition or disability face even greater problems.
Both the ACA and the BBA temporary funding increases will end in September 2019, and federal Medicaid funding will plummet more than 80 percent to the austere annual block grant amount of about $350 million. Governor Ricardo Rosselló and the federally appointed Financial Oversight and Management Board have been wrestling over the details of the island’s fiscal plan in the aftermath of the hurricane. But both seem to agree that, with the range of budget pressures it’s confronting, Puerto Rico simply can’t afford to increase its own funding enough to maintain the current Medicaid program and compensate for the dramatic reduction in federal support. The most recent fiscal plan calls for sharply reducing total Medicaid expenditures starting in 2020 as federal assistance dwindles, with the reductions exceeding $800 million a year by 2023. Moreover, the plan also rests on the shaky assumption that Puerto Rico can significantly raise its contribution to the program.
Puerto Rico’s Medicaid program is currently examining health care delivery reforms to achieve these savings but hasn’t worked out the details. The island can and should implement cost-saving improvements to make the program more efficient. But to produce savings on the huge scale being contemplated would very likely require significantly cutting care to a vulnerable population.
Squeezing savings out of a health care system isn’t easy and doesn’t happen quickly. Moreover, delivery system reforms often require upfront investments in provider capacity and technology. Reforming a health system that’s under severe stress due to a hurricane and has uncertain future funding is even more daunting. Recognizing these challenges, the fiscal plan suggests that if desired savings can’t be achieved through delivery system reform, Puerto Rico’s government could raise cost sharing for beneficiaries and cut health benefits. Cutting benefits would be especially harmful; Puerto Rico’s Medicaid program already covers fewer benefits than state Medicaid programs.
Federal policymakers should address Puerto Rico’s Medicaid funding issue well before September 2019 to prevent funding shortfalls and avoid the loss of needed health care. Instead of adopting another temporary fix, they should eliminate the block grant and fund Puerto Rico’s Medicaid program adequately. Ultimately, they should apply the same financing, eligibility, and benefit rules to Puerto Rico’s Medicaid program (and that of other U.S. territories) as the federal government provides for the states. Only with adequate, secure funding on an ongoing basis can Puerto Rico repair and reform its health system to provide the health care that its residents need and deserve.