House Advances Medicaid Funding, Senate Expresses Concerns

Congress is working on a bill to resolve inequity in federal healthcare funding between the U.S. territories and the States.

Under the U.S. Constitution, all 50 States are “equal in power, dignity and authority,” and each new state has been admitted “on an equal footing” with all the other states since the 1700s. However, this only applies to States.

Territories may legally be treated differently from the States and differently from one another.

Medicaid is different in U.S. territories

Under Medicaid, there are some significant differences in what is given to the States and what is given to the territories.

States receive 50% to 83% federal compensation for the costs of Medicaid, depending on their per capita income. Puerto Rico, which has a lower per capita income than any State, would receive 83% matching funds if it were a State. As a territory, however, it is legally entitled to a 55% federal funding match. Yet in reality it receives less.

Puerto Rico has a spending cap. When federal healthcare funds reach that limit, no more funds are provided, regardless of the needs in the territory. This means that the actual amount of funding from the federal government can be much lower than 55% — sometimes as low as 15%.

In addition, when a State has increased needs for healthcare funds, perhaps because of a natural disaster, the federal funding automatically expands to meet those needs.  Territories do not have the same access to automatic adjustments.

One of the results of the discrepancy in funding is that Puerto Rico cannot provide all the services that are required by federal healthcare regulations under Medicaid. Nursing home care, certain prescription drugs, and home health services are a few examples of care that is mandated but not provided.  Due to these funding constraints, the territories cover fewer benefits than the states, set their eligibility limits lower, and pay much lower rates to health care providers. Only 10 of Medicaid’s 17 mandatory benefits are covered in Puerto Rico, and the island’s low provider payment rates contribute to an exodus of doctors to the mainland and a provider shortage especially notable in specialized areas such as emergency physicians and neurosurgeons

Puerto Rico’s economic position has also been affected by the great burden of the territory’s Medicaid costs.

Because the funding is clearly insufficient, Congress has allocated additional funds to Puerto Rico at various times. The extra funding, however, has been temporary and will expire.

Territories Health Care Improvement Act

On July 17, the House Energy and Commerce Committee passed a bill that would prevent Puerto Rico and the other U.S. territories from running out of Medicaid money when their current additional federal funding expires later this year. The bill also would let the U.S. territories expand and improve their Medicaid coverage by raising their funding allotments and rates at which the federal government covers the cost of services.

The legislation, sponsored by Reps. Darren Soto (D-FL) and Gus Bilirakis (R-FL), would substantially raise each territory’s capped allotment and matching rate.  Puerto Rico would receive $3 billion annually for four years, a $12 billion increase.  The new funding would support programmatic improvements including higher payment rates for hospitals and physicians, coverage of drugs to treat Hepatitis C, and coverage of Medicare Part B premiums for people eligible for both Medicaid and Medicare.

The bill also includes a requirement that the Secretary of Health and Human Services publish on the department website information about the expenditures made in each of the territories and other integrity measures.

Senate Republicans Express Concerns

On July 17, the chairman and six of the other 14 members of the Republican majority of the Senate committee with jurisdiction over Medicaid raised questions about Puerto Rico’s Medicaid program “as Congress once again faces decisions on Medicaid funding” for the territory.

The day before, a House committee voted on a bipartisan basis to increase Medicaid funding for the islands over the next four fiscal years from about $1.6 billion to $12 billion, Senate Finance Committee Chairman Charles Grassley (IA) led the other six Republicans in writing a letter to Health and Human Services (HHS) Secretary Alex Azar asking the questions.

The letter noted the allegedly corrupt contracting and “lack of transparency” in Puerto Rico’s use of Medicaid funds. It also pointed out the “precipitous” increase in Federal grants that began with the Obama Administration and the “temporary” nature of increases to date. For example, it stated that the senators “are not aware of any rationale” for the amount of the temporary increases in ‘Obamacare.’

It also raised the varying application of Medicaid fraud control rules to the territory.

The senators asked HHS about funding amounts, Puerto Rico’s cost-share, and program integrity requirements.

The letter did not explicitly express opposition to a Medicaid funding increase for the territory as it posed questions about the program in an effort to determine the right amount of an increase. The letter stated that there are “difficulties in assessing “equitable” Medicaid funding for Puerto Rico.”

The PROMESA Congressional Task Force on Economic Growth in Puerto Rico in December 2016 recommended, first, avoiding a ‘cliff’ in Federal Medicaid funding — such as that which Puerto Rico now faces at the beginning of the second quarter of calendar year 2020 — and, then, legislation to provide an ongoing “equitable and sustainable” funding mechanism.

The bipartisan, bicameral panel of members of Congress under then Senate Finance Committee Chairman Orrin Hatch (R), split along party lines on the amount of an increase, with Democrats pushing for $1.2 billion a year and Republicans $800 plus million a year.

That was before the Congress provided $4.8 billion at 100% Federal funding for two years in the wake of Hurricane Maria.

Read the Senate Republican Medicaid Letter

Read the CRS report.