Fairness for Puerto Rico and the “47%”

“There are forty-seven percent of the people who will vote for the president no matter what….These are people who pay no income tax,” said Mitt Romney at a now well-known fundraising event. The quote became fodder for television newscasts and Obama campaign commercials.

Many Americans were startled to learn that nearly half of all U.S. households don’t pay federal income taxes. To followers of federal policy towards Puerto Rico, this statistic carries a certain irony. The fact that Puerto Ricans do not pay federal income taxes (although they do pay federal payroll taxes, which fund Medicare and Social Security) has been used time and time again to justify unequal treatment of Puerto Rico under federal programs.  Consider:

• Nutrition Assistance. Puerto Rico was removed from the federal food stamp program in 1982 and instead given a limited annual block grant known today as the Nutrition Assistance Program (PAN).  The U.S. Department of Agriculture (USDA) estimated in 2010 that including Puerto Rico in the federal program (now known as (Supplemental Nutrition Assistance Program (SNAP)) would have provided roughly $450 million more to Puerto Rico in fiscal year 2009.   The USDA has also reported that 220,000 more Puerto Ricans in 85,000 families would have received benefits in 2009 if Puerto Rico were part of the federal program, and those benefits would have been $23/month higher than current payment amounts – from an average of $240 to $263.
•  Medicaid.  The Federal government is authorized to spend as much money as States will match (in amounts determined under a federal formula) for their Medicaid programs, but territories receive only a limited capped amount of Medicaid funding.  As a result, Puerto Rico has 3.6% of the U.S. population under the poverty level but receives only .37% of federal Medicaid spending. This smaller payment leads to reduced coverage and services.  Hundreds of thousands of Puerto Ricans who would qualify for Medicaid benefits in the States do not receive them in Puerto Rico.
• Supplemental Security Income (SSI).  SSI is the national program under which the Federal government directly provides assistance – up to $698/month per person – to low-income elderly and disabled individuals. There is no SSI in Puerto Rico.  Instead, like Medicaid, the territorial government receives a limited grant for its most vulnerable members under the Aid to the Aged, Blind and Disabled (AABD) program that SSI replaced in the states in 1972. In September of 2011, this grant enabled the Puerto Rican government to provide a monthly stipend to individuals of only $73.85 – a far cry from the $698 payment under SSI that Puerto Ricans could receive if they lived in a state.  In addition, approximately 38,000 low-income elderly and disabled Puerto Ricans receive AABD benefits — SSI would provide assistance to more than three times as many people if it applied to Puerto Rico.
• Medicare.  Residents of Puerto Rico are disadvantaged in several ways under the Medicare program.  First, Puerto Rico is the only place in the country where individuals must take affirmative steps to opt into Medicare Part B when they qualify for the Medicare program.  When Medicare beneficiaries miss the enrollment deadline, they end up paying a lifetime penalty.  Today, approximately 53,000 Part B beneficiaries in Puerto Rico are paying over $7 million per year in late enrollment fees to the federal government, and an additional 100,000 Medicare eligible seniors in Puerto Rico will have to pay the penalty if they ever do enroll in Medicare as their enrollment period has already expired.   Other Medicare inequities result in less funding for Puerto Rico’s health sector than states receive, and, consequently, fewer resources for patients.  We have already written about how Puerto Rico was inadvertently left out of the Health Information Technology for Economic and Clinical Health Act, which provides bonus payments to hospitals and doctors for using electronic health records. In addition, Puerto Rico hospitals receive less Medicare funding than those in the states for providing the same services due to the way complicated Medicare reimbursement formulas are structured. These funding disparities make a difference in the lives of Puerto Ricans.  A 2011 study published in the Archives of Internal Medicine found that hospital patients in Puerto Rico experience worse outcomes than similarly situated patients living in states. The study concluded that federal funding disparities were the likely cause.

These four social programs continue to spend billions of taxpayer dollars every year to protect the nation’s most sick and vulnerable. People will disagree on the ideal scope of domestic spending and where cuts may be appropriate – that is a battle that appears yet to play out. One thing for sure, however, is that despite growing pressures to rein in spending, billions of dollars are nonetheless being allocated to help people who need food, health care and related assistance in the fifty states while the territory of Puerto Rico is denied similar resources. The argument can be – and has been – made that Puerto Ricans deserve less because they don’t generally pay federal income taxes. But do they deserve this much less when roughly half of people in the states do not pay federal income tax either?