On July 11, by voice vote, the Health Subcommittee of the House Energy and Commerce Committee reported out essential legislation (H.R. 3631) to avert large federal Medicaid funding shortfalls the territories will face starting in 2020.  Without additional federal funding the bill would provide, the territories would have no choice but to institute damaging cuts to their Medicaid programs.  The full Committee is expected to take up the bill soon.

According to the Medicaid and CHIP Payment and Access Commission (MACPAC), American Samoa, Guam, the Northern Marianas Islands, Puerto Rico and the U.S. Virgin Islands are all projected to exhaust their federal Medicaid funding between the second and fourth quarters of fiscal year 2020.  Unlike the states, where the federal government pays for a fixed percentage of states’ Medicaid costs, the territories are provided a highly inadequate block grant: a capped amount of annual federal funding that is well below the territories’ actual spending needs.  Congress has provided additional, albeit temporary, federal Medicaid funding under the Affordable Care Act to all the territories.  It also has provided other funding to Puerto Rico and the U.S. Virgin Islands under the 2018 disaster relief legislation in the aftermath of Hurricanes Maria and Irma, and to the Northern Marianas Islands as part of 2019 disaster relief legislation.  All of this additional funding, however, has either already been exhausted or is scheduled to expire at the end of September 2019 or December 2019.

The resulting federal funding shortfalls would likely require the territories to institute large cuts to their Medicaid programs, including in enrollment.  For example, MACPAC estimates that without additional federal funding (and assuming Puerto Rico can maintain its own spending but cannot increase its contributions to the cost of the Medicaid program in response to the shortfall, which is highly likely), Puerto Rico could be forced to cut its Medicaid enrollment by nearly 500,000 people, a cut of 36 percent.  Yet, according to the American Community Survey, nearly 60 percent of children in Puerto Rico relied on Medicaid for their health coverage in 2017.  Medicaid officials from Guam and the U.S. Virgin Islands recently testified to Congress that they would have to cut their enrollment by half.  It is important to remember, however, that the territories already cover low-income individuals and families at far lower income eligibility levels than in the states by using a local poverty level rather than the federal poverty level.

The territories would also likely have to make significant cuts to the benefits their Medicaid programs cover, even though the territories (with the exception of Guam) do not provide the mandatory benefits that all states have to cover, as the Government Accountability Office (GAO) has found.  For example, MACPAC notes Puerto Rico covers only 10 of 17 mandatory Medicaid benefits; it does not cover nursing home, home health care or non-emergency transportation, among others.

The bill reported by the Health Subcommittee of the House and Energy Commerce Committee would increase the territories’ Medicaid block grant amounts over the next several years.  It would also raise their federal matching rate from the 55 percent rate that would otherwise apply under current law.  Specifically, Puerto Rico’s annual block grant would be increased to about $3 billion for each of the next four years (2020-2024), with its federal matching rate set at 83% for 2020 and 2021 and 76% for 2022 and 2023.  For the other territories, the bill would increase the block grant to $84 million for American Samoa, $127 million for Guam, $60 million for the Northern Marianas Islands and $126 million for the U.S. Virgin Islands for each of the next six years (2020-2025).  For the U.S. Virgin Islands, the federal matching rate would be increased to 100% for 2020, 83% for 2021-2024 and 76% for 2025.  For American Samoa, Guam and the Northern Marianas Islands, the federal matching rate would equal 100% for 2020 and 2021, 83% for 2022-2024 and 76% for 2025. Taking into account the higher federal matching rate, these block grants should be sufficient to allow Puerto Rico and the other territories to maintain their existing Medicaid program, avoid instituting damaging cuts over the short- and medium-term and make some modest programmatic improvements.

The bill would also require each territory to submit an annual report to Congress on how the additional federal funding and increased federal matching rate was used to increase access to care such as increasing provider payments, expanding benefits and improving provider networks.  In addition, the territories would be required to take up certain program integrity and systems improvements.

Of course, it is critical that Congress also consider a long-term approach to ensure that Puerto Rico and the other territories have sufficient federal funding to not only sustain their existing programs but also to improve them significantly.  As we have written, a sound House bill (H.R. 3371) that was recently introduced would avert the immediate federal funding shortfalls but then starting in 2025, entirely eliminate the federal funding cap on Puerto Rico and effectively set the federal matching rate at 83 percent on a permanent basis.  A key element of the bill would also require Puerto Rico, over time, to make sustained improvements to its Medicaid program and come into much fuller compliance with federal eligibility and benefit requirements that now apply to the states.  Such an approach could be applied to all the territories.