Published on March 25, 2021 / Leer en español

Rosanna Torres

Puerto Rico’s Looming 2019 Medicaid Fiscal Cliff

In seven months, Puerto Rico faces an imminent threat to its healthcare system: lack of sufficient funds to operate. This is not unusual for Puerto Rico nor any of the other U.S. territories. That is because the way funding is provided to the islands is not based on programmatic needs; rather funding is a cyclical reaction to a structural underfunding of the Medicaid programs.

You may recall Puerto Rico has been here before. In early 2018, CNE carefully studied the challenges in Puerto Rico’s Medicaid program and worked with government officials and partner organizations to design an adequate solution to them.  Our work concluded there is a pressing need to bring federal Medicaid funding for Puerto Rico, as well as for the other territories, into full parity with states over time. That means allowing the federal share of the program, known as the federal medical assistance percentage (FMAP), to be calculated for Puerto Rico on the basis of relative per-capita income (as it is in the states) and eliminating the arbitrary cap on funding set by federal law.

Back then, we wrote opinion pieces in congressional newspapers, responded to media requests, and held numerous meetings with Congressional staff to ensure House passage of the funding and to obtain support in the U.S. Senate. The final package included funding for two years and secured an FMAP at 76% with a reasonable cap. While Puerto Rico successfully averted a cliff, two years of funding quickly ran dry.

The U.S. territories have been subject to this type of temporary and limited funding stream from the federal government for decades, and while funding usually gets extended at the eleventh hour, the COVID-19 pandemic has exposed just how delicate the situation is when governments are not equipped to meet growing needs. The severity of the consequences is very real.  Reduced funding could result in having to deny critical services to thousands of people, reducing the eligible population, and slashing provider reimbursement rates, all of which may result in the flight of more primary care physicians and health care providers and lead to massive underutilization of hospitals in the island. What makes matters worse this time around is that it is happening precisely at a time when the world is undergoing a public health crisis.

Last week the House Energy and Commerce Subcommittee on Health held a hearing to examine the impact of the so-called “Medicaid cliff” on each of the U.S. territories. With Members of Congress representing each of the territories, and representation from both the Medicaid and CHIP Payment and Access Commission (MACPAC) and the Government Accountability Office (GAO), the hearing exposed the inadequacies of health care funding in the five territories – Puerto Rico, Guam, U.S. Virgin Islands, American Samoa, and the Commonwealth of the Northern Mariana Islands.  The scale and depth of the challenges vary but the root cause of the problem is the same: the funding simply doesn’t align with the needs.

The solution we proposed back in 2018 has not changed, especially in light of the Oversight Board’s position on the permanence of funding.  Over time, the federal government must bring Medicaid funding for the territories into full parity with states, with uncapped funding and an FMAP calculated on the basis of relative per-capita income.  Based on the testimonies from last week’s hearing, all of the territories agree with this assessment.

Increased federal support will assist Puerto Rico in curbing the exodus of doctors, nurses, and healthcare providers.  It will also allow for the island to come into full compliance with federal Medicaid requirements – such as providing mandatory eligibility and benefits, long-term services and support, prescription drug coverage, among others – finance significant administrative costs and health system infrastructure investments; and help cover monitoring and oversight expenses related to program compliance.

It is increasingly evident that while short-term, limited funding has been necessary in the past to prevent financial shortfalls, it has also created increased uncertainty for government officials that need to make long-term investments and decisions.  It is an unsustainable path forward.  Therefore, as the conversations on Medicaid funding in the territories continue in Congress, the Executive, and the local government, CNE will continue to provide our knowledge and expertise to help marshal a responsible and sustainable solution.