Policymakers Should Quickly Give Much-Needed Medicaid Funding Boost to U.S. Territories

As interest grows on Capitol Hill to boost Medicaid funding for the U.S. territories for the next four years, the President and Congress should quickly do so, which would prevent the territories from running out of Medicaid funds early next year.

A new plan from Senate Finance Committee Chair Chuck Grassley and Ranking Member Ron Wyden would significantly raise Medicaid funding in the territories — American Samoa, the Northern Mariana Islands, Guam, Puerto Rico, and the U.S. Virgin Islands — for the next four years. Earlier this year, the House Energy and Commerce Committee passed legislation that would provide four years of increased funding to Puerto Rico and six-year increases for the other territories.

Unlike the states, which receive federal Medicaid funding that covers a specified share of their Medicaid spending, the territories receive a fixed block grant each year that’s unrelated to need. For example, Puerto Rico’s allotment for fiscal year 2020 (which began October 1) is $375.1 million, but it’s projected to spend almost $2.8 billion.

And while each state’s Medicaid matching rate is tied to its relative per capita income and can go as high as 83 percent, the territories’ matching rate — which would be 83 percent if based on their per capita income — is fixed at 55 percent.

Policymakers provided the territories with additional federal Medicaid funding in recent years, but most of it expired on September 30, leaving a small amount available until the end of this month. Since September 30, the President and Congress have let the territories spend these remaining funds and their 2020 allotments without requiring them to spend any of their own money, but those funds won’t last more than a few months. Puerto Rico’s federal funds will run out by the beginning of February, as its governor recently told congressional leaders.

Inadequate and unstable funding has left the territories unable to provide the full range of Medicaid benefits and provide coverage to all who need it. Moreover, some of the cash-strapped territories have struggled to provide their own matching funds.

Washington’s failure to address the territories’ funding shortfall would cause significant harm. Puerto Rico and the Virgin Islands are still recovering from the devastating hurricanes of 2018. American Samoa is in the midst of a measles outbreak that has caused public health officials to shut down public services across the entire territory. Without stable funding, residents of the territories will suffer further harm. For example, the territories may have to cut benefits such as prescription drugs and dental care, and people could lose their Medicaid coverage altogether, including over half of the enrollees in Guam and the Virgin Islands. Increasing numbers of doctors could leave Puerto Rico due to low reimbursement rates for their services, as the governor’s letter explains.

Like the House bill, the Grassley-Wyden package would let the territories improve their Medicaid programs by raising their funding allotments and the rates at which the federal government covers the cost of services. Puerto Rico’s allotment would rise to $2.6 billion for 2020, with an additional $200 million available if it makes a much-needed increase in provider payment rates. The bill would set Puerto Rico’s federal matching rate at 76 percent for four years, and the other territories’ rate at 83 percent.

Higher allotments and a higher federal match should enable the territories to both maintain and improve their programs. At a June 20 House hearing, Medicaid officials from the territories agreed that adequate federal Medicaid funding at a higher matching rate would help them better align their programs with federal Medicaid rules, including standards for eligibility and benefits.

Under Grassley-Wyden, the territories would have to report annually on how they have used their increased funding to improve their Medicaid programs. The package also includes significant measures that would hold Puerto Rico accountable for spending the funds to benefit its residents, including audits, requirements to make progress toward and eventually comply with the same program integrity requirements as the states, contracting reform, and ongoing tracking of federal funds.

Policymakers should act quickly to boost and stabilize Medicaid for the territories.