Puerto Rico’s Oversight Board Certifies Fiscal Plan: What are the Implications for Medicaid?

As I have previously written, a robust and resilient Medicaid program is essential to Puerto Rico’s long-run recovery from the devastation of Hurricanes Maria and Irma.  Its residents disproportionately rely on Medicaid for their health coverage due to their low incomes and relative lack of access to private insurance.  For example, 62 percent of children in Puerto Rico — and 48 percent of its residents overall — were enrolled in Medicaid in 2016.  Moreover, after the hurricanes, there is a significant risk that more residents of Puerto Rico will likely become eligible for Medicaid in coming months — offset to some degree by the effects of overall population decline due to outmigration — and the average medical needs of beneficiaries may also increase.  Congress recognized the important role Medicaid is playing in the post-hurricane recovery by enacting critically needed temporary financial assistance for the Medicaid programs of Puerto Rico and the U.S. Virgin Islands as part of the Bipartisan Budget Act of 2018 in February.

On April 19th, the Financial Oversight and Management Board of Puerto Rico certified the Commonwealth of Puerto Rico’s fiscal plan, which includes a major overhaul of the island’s Medicaid program Mi Salud.  While much of the fiscal plan’s Medicaid provisions focus on delivery system reforms to improve quality and lower costs as well as lower prescription drug costs, other provisions raise substantial concerns.  Among the key takeaways from the certified fiscal plan:

  • Higher costs due to greater need for services among beneficiaries. The fiscal plan acknowledges that Medicaid spending per beneficiary could increase due to greater behavioral and mental health needs in the aftermath of the hurricanes.  As the Center for American Progress finds, many Hurricane Katrina survivors, particularly children, suffered from severe depression and post-traumatic stress disorder.  That’s consistent with recent media reports showing greater demand faced by suicide prevention programs in Puerto Rico.
  • Commitments to qualify for the entire temporary increase in federal Medicaid funding. $1.2 billion of the $4.8 billion temporary funding increase for Puerto Rico included in the Bipartisan Budget Act of 2018 is conditioned on the Secretary of Health and Human Services certifying that Puerto Rico is taking reasonable and appropriate steps to implement modernized Medicaid data management systems and demonstrate progress towards establishing a Medicaid fraud control unit, neither of which is currently in place.  The fiscal plan commits to have a fully operational Medicaid fraud control unit, which it is already in the process of establishing. Moreover, it also commits to implementing a fully functional Medicaid Management Information System (MMIS). Nevertheless, it is critical that Puerto Rico takes immediate actions to fulfill these commitments in order to demonstrate compliance and ensure it has access to the full federal Medicaid funding increase made available (as well as make it difficult for the Secretary to inappropriately withhold certification for the $1.2 billion in funding).
  • Potential increases in beneficiary cost-sharing and elimination of benefits.  The fiscal plan proposes annual targets for reductions in Puerto Rico’s Medicaid spending.  If these targets are “unachievable” with the other proposals included in the fiscal plan such as its delivery system reforms, it proposes to impose cost-sharing on certain services, with higher cost-sharing for beneficiaries with higher incomes.  Research, however, shows that cost-sharing increases disproportionately reduces utilization, including needed services, among low-income individuals.  In addition, the fiscal plan proposes to reduce Medicaid coverage for certain “optional” benefits that the federal government does not require states to cover, for which at least one state or territory does not cover.  Examples listed in the fiscal plan include dental and vision, therapy services and durable medical equipment and prosthetics. Puerto Rico, however, already does not cover 10 of the 17 mandatory benefits required by federal law (including not covering nursing home care) and offers very limited benefits under the comprehensive Early and Periodic Diagnostic Screening and Treatment (EPSDT) benefit for children.  Eliminating or restricting further benefits would result in even less access to needed services among Puerto Rico’s Medicaid beneficiaries.
  • Efforts to reduce Medicaid “over-enrollment”.  The fiscal plan proposes to use various data sources to address the problem of over-enrollment, where Puerto Rico’s Medicaid program continues to reimburse managed care plans for some enrollees who have become ineligible, including individuals who have moved and become residents elsewhere in the United States.  The fiscal plan points out that post-hurricane outmigration could exacerbate this problem. This initiative, however, raises concerns because it may result in some Medicaid beneficiaries who have temporarily evacuated to states like Florida losing their health coverage. If they plan to return to Puerto Rico and have not become residents of states on the mainland, they would not otherwise be eligible for the Medicaid programs of those states and would remain eligible for Mi Salud with Puerto Rico still responsible for providing their health coverage.  It is essential that such enrollment verification efforts do not result in inappropriate disenrollment of Mi Salud enrollees who continue to be eligible as they remain residents of the Commonwealth.

Clearly, the most troubling aspects of the fiscal plan’s Medicaid proposals are its proposals to potentially increase beneficiary cost-sharing and further cut benefits.  If eventually implemented, they would place many low-income beneficiaries in Puerto Rico at risk of foregoing needed services and treatments, even though their health needs are likely to be greater in the aftermath of the hurricanes.  

The fiscal plan includes these damaging potential Medicaid cuts because of the federal funding shortfalls Puerto Rico will face after the temporary Medicaid funding increase expires on October 1, 2019.  That’s why Congress should consider permanent Medicaid financing changes to sustain and strengthen the Medicaid programs in Puerto Rico as well as the U.S. Virgin Islands and the other U.S. territories over the long run.  Such improvements would help ensure that Puerto Rico maintains and expands Medicaid coverage for its low-income residents, continues to improve access to and quality of care and strengthens its severely stressed and damaged health care system.  It would also make its Medicaid program far more resilient and responsive in the event of another hurricane or other natural disaster.

Edwin Park is a Research Professor at the Georgetown University McCourt School of Public Policy’s Center for Children and Families.