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Senior Treasury Advisor Warns of Upcoming Medicaid Cliff for Puerto Rico, Urges Congress to Act

A U.S. Department of Treasury senior official expressed deep concern over Puerto Rico’s health care funding and its upcoming Medicaid “cliff” at a speech before the National Tax Association on Friday.

“PROMESA was designed to stem the immediate crisis and address the most
urgent aspects of the problems facing the Island,” Treasury Department Counselor Antonio Weiss explained.  “PROMESA does not, however, provide the Island with the tools it needs to prevent another crisis when federal healthcare funding is exhausted next year.”

The Medicaid “cliff”

Medicaid, the health program for low-income individuals, is funded partly by the federal government and in part by state (or territory) governments. In the 50 states and the District of Columbia, there is no limit on the amount of funding the federal government will provide so long as the state provides its share of matching funds. The federal contribution—known as the Federal Medical Assistance Percentage (FMAP)—can range from 50 percent of all Medicaid expenditures in the wealthiest states to 83 percent in the poorest states.

By contrast, there is a “ceiling” or “cap” on the annual amount of funding that the federal government provides to Medicaid programs in each U.S. territory. In Fiscal Year 2008, the cap for Puerto Rico was extraordinarily low: $260.4 million.  That year, Puerto Rico spent upwards of $1.4 billion on health care for its Medicaid population.  Even though the official federal matching rate was 50%, the U.S. government matched only 16% of Puerto Rico spending due to the federal spending “cap.”

Starting in 2009, federal law was changed to improve the treatment of the territories under Medicaid, but this treatment remains deeply inequitable and is also temporary.  The first funding increase raised each territory’s annual ceiling by 30 percent from October 1, 2008 through June 30, 2011.

In 2010, Congress enacted the Patient Protection and Affordable Care Act (ACA). The territories were excluded from major provisions of the bill, but were provided $7.3 billion ($6.4 billion for Puerto Rico) in additional Medicaid funding. (In addition, each territory’s FMAP was modestly increased from 50 percent to 55 percent, a change with no material impact since the actual matching rate was far lower due to the “cap” on federal funding to territories under Medicaid.)

Although the $7.3 billion in additional Medicaid funding that the territories received under the ACA officially expires at the end of the Fiscal Year 2019, the funds have been depleted more quickly to address crisis situations and are now expected to run out in 2017 —the Medicaid funding “cliff.”

“Puerto Rico provides health insurance coverage to more than 1.6 million Americans through
Medicaid and the Children’s Health Insurance Program, covering nearly half of its
population,” noted Weiss in his remarks at the National Tax Association. “When one-time additional funds provided by the Affordable Care Act are exhausted, which could happen by the end of next year, up to 900,000 Americans living in Puerto Rico could lose coverage, including the most vulnerable populations on the Island.”

If pool of funding from the ACA is not seamlessly replenished, each territory will go back to its previous level of Medicaid funding which, for Puerto Rico, means annual federal funding of less than $400 million a year.

To place Puerto Rico’s funding level in context, during fiscal year 2014 (which began on October 1, 2013 and ended on September 30, 2014), Mississippi had a 73 percent FMAP and received $3.6 billion in federal funds; Oklahoma had a 64 percent FMAP and received $3.0 billion in federal funds; and Oregon had a 63 percent FMAP and received $5.0 billion in federal funds. Puerto Rico faces a debt of roughly $70 billion.

Zika Compounds Health Problems

Weiss called Puerto Rico’s expected deterioration in Medicaid services “especially troubling” given the public health threat from Zika. He confirmed that as of November 9, the Centers for Disease Control and Prevention recorded 30,439 Zika cases in Puerto Rico, explaining further that fiscal constraints have impaired the territory’s response.  He insisted that “Congress must act to eliminate the healthcare funding gap in order to protect the well being of the Island’s 3.5 million residents.”

Read the full text of Weiss’s remarks here.



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