The Danger of Medicaid Cliffs

In late September, Congress provided a short-term fix to maintain current levels of Medicaid funding for Puerto Rico until November 21.

Yet if Congress does not act soon, significant federal funds for Puerto Rico will expire at the end of the year, forcing a substantial number of people in Puerto Rico to begin 2020 without health care coverage.

In July, the House Committee on Energy and Commerce passed a bipartisan bill to provide Puerto Rico with additional Medicaid resources combined with accountability measures, but the proposal has not gained traction in the Senate.

Medicaid is the federal program that works together with States and territories to cover the cost of medical care for people with low income and special needs. Medicaid requires certain medical services, and pays a percentage of the costs of those services.

Percentage paid

For States, the percentage paid depends on the per capita income in the State, and may be up to 83%. If Puerto Rico were a State, the federal government would cover 83% of the costs of serving the medical needs of the eligible residents.

In fact, the official percentage covered by federal funds in Puerto Rico is 55%. This means that for every $100 of medical care needed for eligible individuals, the federal government pays just $55.00 instead of $83.00.

Funding cap

But that’s not the whole story. The federal funding is also capped. In a State, the percentage is paid on all the costs. In Puerto Rico, there is a cap. When that amount is spent, the federal government pays no more, regardless of the actual costs of the program.

Because of this limit on spending, the actual percentage paid has in some years been 15 to 20 percent of the total costs of the program.

The funding cap for Puerto Rico was set at $20 million in 1968 and increased to $30 million in 1972 and $45 million in 1981. According to a report in Health Care Finance Review, these amounts were essentially never sufficient to cover the costs of basic medical care in Puerto Rico. “By FY 1979 the $30 million represented only 17.3 percent of the total public health care system expenditures.”

In 2019, the cap is $366.7 million.

Inadequate services

Puerto Rico has coped with the inequity in Medicaid funding by borrowing to cover the costs, and by supplying less care than States. Medicaid mandates 17 services, but Puerto Rico supplies only 10. Long-term care, hospice care, dental care, and prescription drugs are among the services not provided. Health care is provided only in publicly funded facilities, not by private doctors. And legibility is different; many people who would receive Medicaid  if they lived in a State are considered too wealthy for Medicaid in Puerto Rico.

Hurricane Maria’s devastation obviously increased medical needs in Puerto Rico over the past few years. Medical facilities had to pay for extra fuel for generators and access to supplies was an ongoing problem. At the same time, physicians left the Island in increasing numbers.

The cliffs

Puerto Rico is not treated as a State in the Medicaid program and instead has come to rely on time-limited federal funds made available to supplement its capped federal funds. The result has been a series of Medicaid “cliffs” — times when the territory runs out of funds.

As Rosanna Torres, Director of the Center for a New Economy, recently explained in The Hill, “Puerto Rico … must cope with ever-recurring funding cliffs caused by Congress’s unwillingness to provide adequate Medicaid resources on a consistent basis. Instead, U.S. lawmakers have hastily enacted legislative patches over the years to avert these cliffs, and in the process imperiled health care for hundreds of thousands of low-income families.”

It is stressful for families to face the possibility of losing their health care, and health care professionals see their livelihoods threatened. But the cliffs and patches also make it nearly impossible for Puerto Rico to manage healthcare funding efficiently.

Right now, Puerto Rico faces yet another Medicaid cliff just as it is negotiating contracts with managed care facilities. “Imagine sitting at a table and negotiating with someone that has no idea how much money they can afford to pay you,” Torres writes. “The challenges created by uncertain funding cannot be understated.”

The consequences

The uncertainty and insufficiency of health care in Puerto Rico, along with the high level of poverty, have led to high levels of chronic diseases:

  • 16% have diabetes, compared with 9.4% in the U.S. as a whole
  • 42% have hypertension, compared with 29% in the U.S. as a whole
  • 12% have asthma, compared with 8.3% in the U.S. as a whole

(U.S. data is from the Centers for Disease Control.)

Without steady, reliable funding, Puerto Rico’s healthcare system, and the overall health of the residents of the Island, will continue in a vicious circle. Congress should not respond to recent emergency funding, but should remove the funding cap and set the matching rate by the same formula used by the States.

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