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Medicaid Security Granted to Puerto Rico for Five Years

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The Consolidated Appropriations Act of 2023, a $1.7 trillion omnibus funding bill, became law on December 29, 2022. It mentions Puerto Rico 41 times, including a lengthy section on Medicaid in Puerto Rico.

It begins with a chart showing the allotment amounts for Puerto Rico for upcoming years:

  • (A) For fiscal year 2023, $3,275,000,000
  • (B) For fiscal year 2024, $3,325,000,000
  • (C) For fiscal year 2025, $3,475,000,000.
  • (D) For fiscal year 2026, $3,645,000,000
  • (E) For fiscal year 2027, $3,825,000,00

For 2028 and thereafter, the allotment should reflect the increase in medical care as reported by the Consumer Price Index for the preceding year. In other words, the amount should reflect inflation.

Background on Medicaid in Puerto Rico

Medicaid is different in Puerto Rico. First, it comes in the form of a capped block grant. This means that the funding for Medicaid does not increase as needs increase.

Second, the amounts reimbursed by the federal government are lower than the funding in the states. For every $100 Puerto Rico’s Medicaid program spends on services, the federal government will reimburse about $55. If Puerto Rico were a state, the reimbursement would come to $83. Under the new Appropriations act, Puerto Rico will be reimbursed at 76% for five years.

Putting these two factors together, we see that Puerto Rico is in a very different position for healthcare funding, compared with states. In Mississippi, for example, the reimbursement rate is 77.76%. if Mississippi spends $1,000 on Medicaid, the federal government will pay the state $777.

For Puerto Rico, the same $1,000 expenditure would be reimbursed at $760. Now imagine that the $1,000 in question is spent after the territory has reached its cap. If that money is spent when Puerto Rico has $50 left before the Medicaid cliff of using up the block grant, then that $1,000 will be reimbursed at $50. Any additional spending will not be reimbursed at all unless Congress allocates additional emergency funds.

Puerto Rico typically staves off the Medicaid cliff as long as possible by providing limited medical coverage to fewer people than would be eligible in a state. Some required services are not offered. Healthcare professionals are paid less. Facilities and equipment are in short supply. Even so, Puerto Rico usually faces a Medicaid cliff every autumn. The government must use precious resources to beg Congress for additional funds.

Long term planning is impossible. Healthcare professionals leave the Island. And many people do without the healthcare they need.

No state could manage under these circumstances. What’s more, Puerto Rico, thanks to its high poverty level, covers a much higher percentage of its population under Medicaid. Fully 47% of Puerto Ricans use Medicaid, compared with 25% for Mississippi. This funding inequity is a major factor in Puerto Rico’s economic crisis.

Appropriations requirements

During the pandemic, when costs spiraled against a backdrop of austerity measures, the allocations increased. However, the increases were temporary. The new Appropriations bill allows Puerto Rico to make plans for the future with confidence, knowing that their Medicaid program will be better funded for some years into the future.

The act also sets some other requirements for Puerto Rico.

By September 30, 2023, Puerto Rico must send a 4-year strategic plan to the Secretary of Health and Human Services. This plan must include goals for Medicaid “workforce development, financing, systems implementation and operation, and program integrity.” For years later they must send “an analysis of the extent to which the territory has achieved, or is making progress toward achieving, the goals described” in the strategic plan. All the usual reporting is also required, as well as additional annual reports.

Puerto Rico must also set a payment floor for physician services equal to 75 percent of Medicare rates. For example, the limit in Mississippi for injections of ESAs for chemotherapy patients is $22.61, while in Puerto Rico it is $25.55, which is identical to the national rate. These amounts are used along with geographic cost practice indices to calculate the fees paid. The amount paid can be less (not more) than the fee schedule, but Puerto Rico will not be allowed to pay any less than 75% of the amount calculated for the fee schedule.

The new law is generous for Puerto Rico, but as experts at Georgetown University have noted, the funding increases are nonetheless insufficient for Puerto Rico and the other territories to fully access needed care among low-income residents without the elimination of their block grant structure and related implementation of permanent state-like financial treatment under which the federal government picks up a fixed percentage of the territories’ Medicaid costs.

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