Leaders in Congress Concerned About Puerto Rico Medicaid Spending

Two key congressional leaders on Medicaid issues have expressed concern about the Puerto Rico administration’s use of Federal grants to the territory’s Medicaid program.

Medicaid is a program that ensures health care for low income individuals operated by a State or territory, primarily with Federal funds. The program must operate under a plan that incorporates Federal requirements and is approved by the U.S. Department of Health and Human Services (HHS).

In a letter, the congressional leaders asked for reassurance that the Commonwealth government has adhered to its Medicaid spending cap, repaid funding owed to CMS as a result of a July, 2014 administrative decision, and taken steps to control waste, fraud and abuse.

Fred Upton, the Chairman of the U.S. House of Representatives Committee on Energy and Commerce, and Orrin Hatch (R-Utah), the Ranking Minority Member of the Senate Committee on Finance, late last week wrote of their concerns to Marilyn Tavenner, Administrator of HHS’ Center for Medicare and Medicaid Services (CMS). The two members of the Congress are the top Republicans on the committees with jurisdiction over Medicaid issues.

“[W]e have been troubled to watch the economic and fiscal developments in Puerto Rico,” the letter stated.  “As you know, Puerto Rico’s bonds have been downgraded by Moody’s and Fitch Rating due to the territory’s debt and pension obligations, as well as the adoption of a law that makes it easier for some state agencies to not pay their debts.  While it is not our intent to cause additional hardship to the Puerto Rican government as they work through their fiscal challenges, we do believe it is important to ensure that federal Medicaid dollars are appropriately stewarded.”

The letter continued to explain that ‘[o]verall, the economic news out of Puerto Rico raises very serious questions about the territory’s ability and intent to honor commitments it has made to appropriately steward federal dollars.  We believe that, even in these challenging times, Puerto Rico has a fiduciary responsibility to federal taxpayers to ensure moneys are only expended for allowable purposes.  Upholding this responsibility can be a challenging task even in good times, yet it becomes even more important in times of greater risk and uncertainty.”

Upton and Hatch acknowledged that Federal provisions for Puerto Rico’s Medicaid system are different from provisions of law governing Medicaid in the States and the District of Columbia. Most notably, the Federal government provides any funds a State or DC need to operate its Federally approved Medicaid plan as long as local funds match the Federal grants. In Puerto Rico, however, the amount of funds granted is limited and the Commonwealth share of the costs of the program is much higher.

“Obamacare,” the 2010 Patient Protection and Affordable Care Act, included two major changes to Federal funding of Puerto Rico’s Medicaid program: (1)  the law increased the Federal grants by nearly $5.5 billion from July 1, 2011 to September 30, 2019, and (2) the law increased the Federal share of funding 50 percent to 55 percent beginning in Fiscal Year 2011.

For most of Medicaid, the Federal government contributes 50% to 83% of the cost depending upon the States relative wealth or poverty.  If this formula applied to Puerto Rico, the Federal share for Puerto Rico would likely be the maximum 83%.

Obamacare’s optional expansion of Medicaid came with a 100% Federal contribution that will scale down to 90%. In Puerto Rico, however, the Commonwealth government got only a 55% Federal share for expanding Medicaid.

Obamacare also granted Puerto Rico $925 milllion for health insurance subsidies for middle-income individuals from this year through Federal Fiscal Year 2019. Because this amount was so much less than subsidies like those provided in the States would cost — $1.5 billion a year over the six years, the law permitted the territory to use $925 million for its Medicaid program. The Commonwealth is doing so.

On July 16, Tavenner wrote a letter to Puerto Rico Insurance Commissioner Angela Weyne reversing an earlier determination by CMS that it would enforce Obamacare healthcare insurance consumer protections that apply to the territory. The administration of Governor Alejandro Garcia Padilla (“Commonwealth”) party had requested a waiver from the requirements.

Governor Luis Fortuno and the Commonwealth’s representative to the Federal government, who has a seat with a vote only in committees in the U.S. House of Representatives, Pedro Pierluisi, both of whom who want equality and statehood for the territory, had supported application of the consumer protections when Obamacare was enacted into law. And CMS had earlier ruled that it could not waive the legal requirements.

In granting the waiver sought by Garcia Padilla and Weyne, Tavenner noted that it would make Puerto Rico ineligible for the Federal grants related to the consumer protections.  She wrote that the territory “will not have to pay back” grants already spent because of her new “interpretation” of the law because it was “prospective” but “all unspent grant funding must be returned to CMS.”

Upton and Hatch concluded their letter with three requests of Tavenner regarding Puerto Rico. It requested a response within six weeks.

• Determine the amount of health insurance consumer protection grant monies provided Puerto Rico that were unspent as of July 16th and, therefore, are owed to CMS and confirm that CMS has been repaid the funds.
• Confirm that expenditures of Federal Medicaid funds by Puerto Rico have remained under the amounts authorized by Federal law.
• Specify the steps taken by CMS in conjunction with Puerto Rico’s Medicaid program and CMS contractors to review the territory’s Medicaid spending and measures taken to minimize waste, fraud, and abuse since Puerto Rico does not have a Federal Medicaid Fraud Control Unit.

The GAO has estimated that Puerto Rico, if it were a State, would have received up to $1.415 billion more in Federal funds for Medicaid in 2010  than the $685 million it received.

This did not include an additional $1.5 billion if Puerto Rico had instituted a Medicaid long-term facilities care program typical of Medicaid in the States.

The Federal government can fund Puerto Rico’s Medicaid program differently than it funds the program in the States and DC because the Commonwealth is a territory that has not been made a full and permanent part of the Nation but, instead, is a possession of the U.S.

Read the letter.

Read our previous post: Medicaid Cuts in the U.S. Territories