Medicaid Funding Cliff Approaching for U.S. Territories

Tomorrow’s House Energy and Commerce Committee hearing will put the focus back on the crisis that U.S. territories face due to the looming expiration of federal funds to supplement their inadequate Medicaid block grants — and their need for ongoing, stable, and adequate funding to fund the full range of Medicaid benefits to all who qualify.

A short-term extension of supplemental funding won’t enable the territories — American Samoa, the Commonwealth of the Northern Mariana Islands (CNMI), Guam, Puerto Rico, and the Virgin Islands — to meet the health care needs of their low-income residents.

Unlike the states, whose federal funding covers a specified share of their Medicaid spending, the territories receive a fixed amount of federal funds as a capped block grant. And while each state’s matching rate is tied to its relative per capita income and can go as high as 83 percent, the territories’ matching rate is fixed at 55 percent, irrespective of need. As a result, their federal Medicaid funding doesn’t cover their needs.

The territories have avoided deep Medicaid cuts because they’ve received added federal funds through the Affordable Care Act (ACA) since 2011 and, for Puerto Rico and the Virgin Islands, through disaster legislation after Hurricanes Maria and Irma. But that funding mostly expires on September 30 (with a small amount expiring on December 31), after which the territories will only have their inadequate capped allotments. For example, Puerto Rico’s allotment in 2018 was $359.5 million but it spent $2.49 billion; Guam’s allotment was $17.6 million but it spent $85.8 million.

With inadequate ongoing funding and only temporary added funds, the territories’ Medicaid programs can’t meet all Medicaid standards for coverage and benefits. American Samoa and the Mariana Islands have federal waivers allowing them to waive some Medicaid standards; the other territories don’t have these waivers, but the Centers for Medicare & Medicaid Services has let them fall short of federal standards, given their federal funding status. Puerto Rico, for example, provides only ten of Medicaid’s 17 mandatory benefits.

Access to care is also inadequate for some services, largely due to the territories’ low provider reimbursements. American Samoa and CNMI, for example, each rely mainly on one hospital to provide services, sending residents off-island for services that the hospital doesn’t provide. And the territories haven’t made needed Medicaid improvements due to uncertainty about additional federal funding. For example, Puerto Rico hasn’t added coverage for Hepatitis C drugs — which could benefit about 14,000 beneficiaries, according to Governor Ricardo Rosselló — because its supplemental funds will soon expire.

Medicaid officials from all five territories recently told Congress how they would likely respond to the looming loss of the additional funding:

• American Samoa would eliminate off-island referrals to New Zealand for services that its hospital can’t provide. It also would eliminate funding for community health centers, durable medical equipment, and other optional services.
• CNMI would have trouble maintaining mandatory services, would likely lose some providers, and would likely limit off-island services.
• Guam would end coverage for at least half of its 23,000 Medicaid enrollees and cut dental services, some prescription drugs, clinic services, and eyeglasses.
• Puerto Rico would cut dental services and some prescription drugs and strictly limit some mandatory services. It also would cut Medicaid eligibility altogether for 125,000 beneficiaries who receive coverage under a solely Puerto Rico-funded program; these individuals have income below $800 a month.
• The Virgin Islands would end coverage for up to 15,000 of its 27,000 enrollees and stop outreach efforts to enroll about 15,000 to 20,000 residents who are eligible but not enrolled. It would also postpone health care infrastructure projects that hurricane damage has made necessary.

The Medicaid officials agreed on the need for stable, ongoing funding at a matching rate based on each territory’s relative income and that responds to both ongoing need and changes in circumstances.