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Medicaid Cuts in the U.S. Territories

The Energy and Commerce Committee of the House of Representatives voted on April 25 to cut Medicaid funding in the U.S. territories by 65% while leaving Medicaid funding in the fifty states intact, providing a real life example of what it means to lack representation in Congress.

There is a long history of inequity and underfunding for the territories under the federal Medicaid program.  The fifty states and the District of Columbia can receive unlimited federal payments for Medicaid as long as they contribute their portion of matching funds.  The territories, however, face an annual Medicaid spending cap.  In Fiscal Year 2009, Puerto Rico—which is home to 3.7 million people—had a federal spending cap of merely $272.4 million.  To put this in context, Oregon, which is similar in population size to Puerto Rico, received $2.9 billion in federal Medicaid funding in Fiscal Year 2009, even though per capita income in Puerto Rico is far lower.  Oregon received over ten times more funding than Puerto Rico.

The General Accounting Office documented this unequal allocation of resources in its 2005 report entitled “Multiple Factors Affect Federal Health Care Funding” (GAO-06-75), in which it observed that per capita Medicaid spending in the territories was far below that of the states.  Specifically, average Medicaid spending per person was only $50 in the territories, compared to $565 per person in the U.S. nationwide and over $800 per person in Mississippi and West Virginia.

The results of this inadequate and inequitable funding have been predictable.

A study published in the Archives of Internal Medicine (June, 2011) found that patients at hospitals in the territories fared significantly worse than patients at hospitals in the states.  The study identified funding disparities under Medicaid, as well as under other federal laws, as likely causes of the differences in health outcomes.  The study concluded that “eliminating the substantial quality gap in the U.S. territories should be a national priority.”

Yet when the Energy and Commerce Committee was directed to find budget cuts, they found an easy target in the territories, whose Members of Congress lack voting privileges in the House of Representatives.  The Committee proposed to cut $6.3 billion in Medicaid funding in the territories while leaving Medicaid spending in the states untouched.

Over fifty organizations weighed in with the Committee in protest.

The territorial Representatives explained the implications of the cuts in a letter to Committee Chairman Fred Upton (R-OH):

[T]he federal government pays at least 50 percent of the Medicaid program’s cost in each of the states and upwards of 80 percent in the poorest states.  By contrast, federal law imposes an annual cap on funding in the territories.  Historically, the territories’ caps were shockingly low.  In Puerto Rico’s case, for example, the federal government typically paid less than 20 percent of total Medicaid program costs in any given year.  As a result of chronic underfunding by the federal government, too many patients in the territories receive inadequate care, too many providers in the territories are not adequately compensated for their service, and too much of the financial burden associated with health care delivery must be borne by the territorial governments themselves.

Puerto Rican Governor Luis Fortuno explained the situation in broader terms:

As a fiscal conservative, I fully support efforts to responsibly reduce the cost and size of government, and have taken dramatic steps to do just that in Puerto Rico.  However, I strongly believe it is fundamentally wrong to single out the U.S. territories to bear the brunt of cuts that are not shared by the rest of the nation, especially when the territories already do not have parity with the states in healthcare programs.

Although the House of Representatives is expected to pass this provision, Puerto Rico and the other territories may be spared this time as there have been no signs that the Senate plans to follow the lead of the House.  Yet the ability – and willingness – of the House to single out the territories for undesirable policies is clear, and it is worth monitoring in the future by all Americans who care about how our democracy works.

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