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Why House Bill’s Medicaid Funding for Puerto Rico, Virgin Islands Falls Way Short

The additional federal Medicaid funds for Puerto Rico and the U.S. Virgin Islands in the HEALTHY KIDS Act — which the House Energy and Commerce Committee passed on a party-line vote yesterday to continue funding the Children’s Health Insurance Program (CHIP) — fall well short of what those U.S. territories need in enhanced federal financial support for their Medicaid programs after Hurricanes Maria and Irma.

To use the full amounts available under the bill — $1 billion for Puerto Rico, roughly $30 million for the Virgin Islands — these territories would have to boost their own Medicaid spending. That’s because the regular federal Medicaid matching rate for territories is only 55 percent, meaning that for every $1 of Medicaid spending, the federal funding contributes 55 cents while the territories must contribute the other 45 cents. Also, as explained below, the federal government provides Medicaid funding for territories only up to a capped amount, above which the territories must pay 100 percent of additional costs.

Requiring Puerto Rico and the Virgin Islands to boost their Medicaid spending is highly unrealistic, since the hurricanes likely have drastically reduced their ability just to maintain their current spending. It also contrasts sharply with the federal response to Hurricane Katrina, when the federal government picked up 100 percent of Medicaid costs related to Katrina survivors. The inadequate additional Medicaid funding for the territories likely reflects, in part, House Republicans’ demand that the bill also include provisions to fully offset the cost of that additional funding.

Even before the hurricanes, the Medicaid programs of the territories were suffering from the effects of an inequitable financing formula. For the states, the federal government picks up a fixed share of states’ Medicaid costs and continues to pay the federal share as those costs rise. For the territories, however, the federal government pays 55 percent of the costs within a highly inadequate block grant — a fixed amount of federal funding that’s well below their actual Medicaid costs. That is, once a territory’s spending exceeds its federal block grant, the territory is responsible for 100 percent of Medicaid costs going forward.

Moreover, if the territories’ matching rates were based on the same formula used for the states, Puerto Rico’s federal matching rate would be 83 percent and other territories’ rates would also be much higher than the current 55 percent. Due to the combination of the current formula and the capped block grant structure, the federal government effectively picked up only 15-20 percent of Puerto Rico’s Medicaid costs before the Affordable Care Act (ACA).

The ACA gave the territories additional Medicaid funding available through 2019, but Puerto Rico has nearly exhausted its share of those funds. The supplemental funds that the White House and Congress provided this May would have maintained Puerto Rico’s existing Medicaid program only until next April even without the hurricane, the Medicaid and CHIP Payment and Access Commission estimates. Without more funding, Puerto Rico will likely have to cut up to 900,000 people off Medicaid — more than half of its total enrollment.

House Republicans argue that their bill’s Medicaid funding provision aims only to address this fiscal cliff — the point at which all supplemental federal Medicaid funding is exhausted — which Puerto Rico would have faced even without the hurricane. But the bill’s $1 billion increase would have enabled Puerto Rico to sustain its pre-hurricane Medicaid program for less than a year. (A related provision would very modestly increase Puerto Rico’s underlying block grant for two years.) Many more residents will likely need Medicaid due to Hurricane Maria, and their average medical needs will likely be greater. Moreover, the additional $30 million the Virgin Islands would receive would provide no immediate benefit if it can’t raise its own spending to address its greater Medicaid needs post-Hurricanes Irma and Maria.

To help residents of Puerto Rico and the Virgin Islands get needed health care and sustain the islands’ damaged and deeply stressed health care systems, the White House and Congress should instead enact the following short- and long-term policies:

  • Temporarily increase both Medicaid block grant funding and the federal matching rate for Puerto Rico and the Virgin Islands. The block grant increase should be sufficient to sustain the underlying program and address the higher demands that the hurricanes created. The federal matching rate should rise as well — to 100 percent on a temporary basis — since neither Puerto Rico nor the Virgin Islands will be able to finance their current share of Medicaid costs anytime soon.
  • Extend to the territories the federal government’s current financial partnership with the states. Policymakers should eventually eliminate the cap on Medicaid funding for Puerto Rico, the Virgin Islands, and the other territories. And federal Medicaid matching rates for the territories should be set as they are set for the states. (As a condition of the matching rate increase, the territories should raise their minimum Medicaid eligibility levels and strengthen their benefit standards.) That would also help Puerto Rico and the Virgin Islands cope with future natural disasters.

In addition, working with the Medicaid agencies of Puerto Rico and the Virgin Islands, the Centers for Medicare & Medicaid Services (CMS) could adopt the following Medicaid policies administratively to improve hurricane recovery efforts:

  • Allow self-attestation of eligibility factors. Letting the islands’ Medicaid agencies temporarily accept individuals’ self-attestation of eligibility factors such as citizenship, identity, immigration status, and income would reduce administrative burdens, both at enrollment and when redetermining beneficiaries’ eligibility. Survivors of disasters often lose vital documents, have trouble replacing them, and have many other priorities related to the disaster. In 2005, CMS gave states directly affected by Hurricanes Katrina and Rita (and states that hosted evacuees) authority to do this under emergency section 1115 demonstration projects.
  • Simplify applications and delay eligibility redeterminations. Letting the islands’ Medicaid agencies temporarily use abbreviated application forms and delay scheduled redeterminations of eligibility would help both residents and agencies. People may be temporarily displaced and experience delays in receiving and responding to requests sent by mail. Delaying redeterminations can also give agencies more time to handle the likely higher volume of new applicants. New York City took similar steps after the September 11th attacks.