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Policymakers Must Act Quickly to Meet Puerto Rico, Virgin Islands’ Medicaid Needs

More federal aid for Puerto Rico and the U.S. Virgin Islands’ Medicaid programs is essential to their recovery from Hurricanes Maria and Irma, as we explained here and here. When the latest continuing resolution to fund the federal government expires on February 8, President Trump and Congress must finally provide the additional federal Medicaid support that these U.S. territories desperately need as part of a supplemental disaster relief spending bill.

Unlike state Medicaid programs, federal Medicaid funds in the territories come through a highly inadequate block grant — a fixed amount of federal funding that falls well below the territories’ actual Medicaid costs. Moreover, while states’ federal matching rates are based on their per capita income relative to the nation, territories like Puerto Rico and the Virgin Islands receive a fixed matching rate of 55 percent. (That means that for every $1 of total Medicaid spending, the federal government contributes 55 cents and Puerto Rico and the Virgin Islands must contribute the other 45 cents. If Puerto Rico’s matching rate were set under the formula for states, it would be 83 percent.)

Once a territory’s Medicaid spending exceeds its federal block grant, it must cover all Medicaid costs going forward. Before the Affordable Care Act (ACA) provided some additional federal Medicaid funding, as explained below, the federal government effectively covered only 15 to 20 percent of Puerto Rico’s Medicaid costs.

Consequently, steep long-term federal Medicaid funding shortfalls have contributed significantly to Puerto Rico’s troubled fiscal situation. They’ve also added substantial stress to the island’s struggling health care system because Puerto Rico’s health care providers rely heavily on Medicaid for reimbursement; the program covered nearly half of Puerto Rico’ residents before Maria and Irma.

The ACA gave all of the U.S. territories an additional $7.3 billion in federal Medicaid funding, available from July 2011 through September 2019. Puerto Rico has nearly exhausted its share of those funds, so the President and Congress provided another $295 million in May 2017. Even before the hurricanes, Puerto Rico was projected to spend all of its remaining federal Medicaid funds by this April. Without any additional funding, Puerto Rico will likely have to kick up to 900,000 people off Medicaid (more than half of its total enrollment).

Now, in the aftermath of the hurricanes, many more Puerto Rico and Virgin Islands residents will likely need Medicaid, and their medical needs also may be much greater, which means that Puerto Rico may exhaust its remaining federal Medicaid funding before April. Moreover, the hurricanes have drastically reduced Puerto Rico’s and the Virgin Islands’ fiscal capacity to maintain their current Medicaid contributions.

As a result, the federal government must immediately increase federal Medicaid funding for Puerto Rico and the Virgin Islands to ensure that they can provide their residents needed health care. In addition, policymakers must temporarily raise the federal matching rate to 100 percent — since neither Puerto Rico nor the Virgin Islands will be able to pay their current share of Medicaid costs anytime soon.

Policymakers must provide a large enough increase in federal Medicaid funding to sustain the two territories’ underlying Medicaid programs over an extended period, address any higher hurricane-driven demands, and cover the temporary matching rate increase. Finally, as with Hurricane Katrina evacuees in 2005 and 2006, the federal government should ensure full federal funding for states providing Medicaid coverage to hurricane evacuees. Puerto Rico, for example, received waiver approval in late November from the federal Centers for Medicare and Medicaid Services to temporarily reimburse Florida and New York for Medicaid costs related to Puerto Rican beneficiaries who have temporarily relocated to those states after the hurricanes. But under the waiver, Puerto Rico will pay those costs at its regular matching rate, thus incurring substantial costs of its own that it likely can’t afford.

While previous House Republican bills providing Medicaid assistance for Puerto Rico and the Virgin Islands fell well short of what they need, House Republicans were reportedly open to a temporary matching rate of 100 percent and a sufficient increase in overall federal funding during disaster relief negotiations in December. Moreover, while the Trump Administration’s November disaster relief request didn’t include any additional Medicaid assistance for Puerto Rico and the Virgin Islands, the Administration acknowledged the need for such support in its letter to Congress requesting supplemental budget funds, including an increase in the matching rate.

In their recent continuing resolution, the President and Congress not only funded the government through February 8, but they also extended funding for the Children’s Health Insurance Program. But they still haven’t enacted other must-pass legislation, including relief for young immigrants under the Deferred Action for Childhood Arrivals program, an extension of other expiring health provisions like funding for community health centers, and a disaster relief supplemental bill that includes the necessary additional federal Medicaid support for Puerto Rico and the Virgin Islands.

By February 8, the President and Congress must not only extend government funding through the end of fiscal 2018 but enact these other pieces of must-pass legislation.