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Sunsetting Puerto Rico Medicaid Money Gets Democrats’ Attention

June 18, 2019, 9:41 AM

More than 900,000 Puerto Ricans will lose their Medicaid coverage in September unless Congress acts, and now Democrats are rolling out plans to aid U.S. territories.

Supplemental federal funds of some $11 billion for Puerto Rico will expire at the end of the fiscal year. Once that happens, the commonwealth, which currently has over $70 billion in debt, will have no choice but to rely on a federal matching system for U.S. territories that ignores its massive levels of poverty.

The House Committee on Energy and Commerce’s health subcommittee will hold a hearing June 20 to address the looming situation in Puerto Rico. It will consider restructuring federal assistance programs in the territories to mirror state programs, which take poverty levels into account.

“The ideal is to treat the U.S. citizens in those territories as U.S. citizens,” Michael Melendez, a retired Medicaid administrator for the Center for Medicare & Medicaid Services, said. “If everybody has to stop at the red light, then everybody has to stop at the red light, not just people that live in the mainland. If they’re going to be held to certain requirements, let them meet those requirements, but fund the program at the same level that states get the funding.”

Democrats Weigh Bills

The hearing comes just a week after Sen. Bernie Sanders (I-Vt.) introduced S. 1773, which seeks state-level Medicaid funding for Puerto Rico and the other U.S. territories. The bill is cosponsored by seven Democrats, including fellow 2020 hopefuls Sen. Elizabeth Warren (D-Mass.), Kirsten Gillibrand (D-N.Y.), Cory Booker (D-N.J.), and Kamala Harris (D-Calif.). The Senate referred the bill to the Finance Committee June 11, but it’s unlikely to move in a Republican-controlled Senate.

Rep. Stacey Plaskett (D-V.I.) introduced a similar bill in the House, H.R. 1354, in February. It awaits action in the Energy and Commerce and Ways and Means committees.

Congress has been willing to help Puerto Rico before. In 2016 it passed the Puerto Rico Oversight, Management, and Economic Stability Act, a bipartisan effort to address Puerto Rico’s massive debt.

An adviser from a Puerto Rican activist group said a bill in the works between Reps. Frank Pallone Jr. (D-N.J.) and Darren Soto (D-Fla.) could be a long-term fix to the problem instead of another extension of interim funds. Neither representative’s office responded to requests for comment.

“What I’m hearing is that they want a multi-year fix that increases funding, eventually creating state-like treatment for Puerto Rico so they don’t have to keep dealing with this,” the advocate said.

Puerto Rico Governor Ricardo Rossello previously sent letters to Congress requesting $15.1 billion over the next five years and a new funding system for territories.

Funding Disparities

All states receive federal reimbursement for every dollar they spend on Medicaid, called a Federal Matching Assistance Percentage.

American Samoa, Guam, the Northern Mariana Islands, Puerto Rico and the U.S. Virgin Islands receive their federal money at a set matching rate of 55%, while states have their rates set based off of average income. For instance Mississippi, one of the nation’s poorest states, receives the highest federal matching assistance at 76.98%.

According to Census data, Puerto Rico’s median household income was $19,775 in 2018. If federal matching rates functioned for territories like they do for states, Puerto Rico would receive a matching rate of around 83%.

States also receive open-ended funding. The federal government will keep matching them at their percentage rates as long as the states are willing to pay their end. Conversely, funding for territories is restricted by a federal spending cap, so there’s a limit of how much aid will be federally matched.

When the Money Runs Out

When $4.8 billion hurricane relief aid from the Bipartisan Budget Act of 2018 expires in September, Puerto Rico’s Medicaid will rely on what remains of the $6.3 billion provided by the Affordable Care Act. But that money is also set to expire in September.

The Medicaid commission released a report in October highlighting the uncertainty around safety-net services existing to aid estimated 900,000 potential uninsured. It found that money from the ACA was already “nearly depleted” as of February 2018.

To address this fiscal cliff, the Democratic legislation proposes eliminating the spending cap placed on territory funding and replacing the set fixed 55% federal matching rate with one that adjusts based off income.

To contact the reporter on this story: Sam McQuillan in Washington at smcquillan@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com; Andrew Childers at achilders@bloomberglaw.com