Puerto Rico receives much less federal healthcare assistance as a territory than it would as a state. Puerto Rico’s Resident Commissioner and other members of the legislature have been expressing concern about this inequality for some time. Fixing the inequity has been part of a number of proposals as the federal government looks for ways to improve Puerto Rico’s economic position without creating hardship for the people living on the Island.
Especially with the rise of Zika and the continuing exodus of doctors from the territory, helping with Puerto Rico’s healthcare problems is increasingly seen as an important humanitarian effort.
But repair of the Medicaid situation in Puerto Rico may also help get Puerto Rico’s economy back on track. The Center on Budget and Policy Priorities has recently issued a report concluding that the funding issues played a big part in causing the financial problems that Puerto Rico faces now. Fixing them will be essential going forward.
All 50 states and the District of Columbia pay part of the cost of Medicaid. The part the federal government pays is known as the federal Medicaid matching rate or FMAP. The average FMAP for the States is 57%; the specific amount depends on the average income in each State. Since Puerto Rico has a lower per capita income than any state, it may be surprising that the federal government covers just 55% — only slightly more than the average. If the FMAP were calculated for Puerto Rico as it is for States, the CBPP says, federal funds would cover 83% of the costs.
But in Puerto Rico, the FMAP applies only up to a cap, a small dollar amount each year, much less than the actual health care costs for Medicaid recipients in Puerto Rico. Once that amount has been spent, federal funds end. At that point, the local government must cover all additional costs for Medicaid in Puerto Rico. There is no cap in the States.
When the cap and the FMAP are both taken into account, the federal government ends up covering just 15 to 20% of the Medicaid costs for Puerto Rico. Compare this with 74.17% for Mississippi or 50% for Connecticut. No state receives less than 50%.
“These steep federal Medicaid funding shortfalls have contributed to Puerto Rico’s troubled fiscal situation,” says the CBPP, “and added substantial stress to the island’s struggling health care system.” Almost half of the residents of Puerto Rico are enrolled in Medicaid, and 900,000 of these people could lose their services by the end of 2017 if changes in the funding system are not made.
With these health care costs coming out of Puerto Rico’s government budget rather than the federal government’s coffers, it is very hard for the territory to make ends meet. This is not the result of fiscal mismanagement by the Puerto Rican government; the federal government is passing on costs to Puerto Rico that it doesn’t pass on to the States. Without changing this reality, it will be difficult for Puerto Rico to get on track financially.