Puerto Rico has faced many Medicaid cliffs in the past: dates when U.S. Medicaid funding will expire and leave the territory without the funds to provide critical medical care to the residents of the Island. Every upcoming Medicaid cliff means the Island’s representatives and allies have to rush to persuade Congress to extend the funding. The next cliff looms on October 1, 2027.
What will happen on October 1, 2027?
If no changes are made, October 1, 2027, will be the end of most U.S. funding. The last time Puerto Rico faced this type of funding “cliff” was 2023, and Congress responded by passing a law providing Puerto Rico with over $3.2 million for Medicaid expenses in every year since 2023.
The amounts increased every year to keep up with inflation: $3.275 million in 2023, $3.325 million in 2024, $3.475 million in 2025, $3,645 million in 2026, and $3,825,000,000 in Medicaid funding up in 2027. The spending, however, covers only the 2027 Fiscal Year, which technically began on October 1, 2026 and ends on September 30, 2027. The On October 1, 2027 the $3+ million supplement of annual Medicaid funding will expire.
States receive reimbursement for their Medicaid spending based on how much the health services provided under Federal law cost. Puerto Rico receives reimbursement only up to the capped amount. Since that capped amount is less than the amount needed to treat the 1.3 million Puerto Ricans on Medicaid for services that would be covered by Federal law in states, the territory already has to limit care in ways states don’t have to.
Why does this happen?
The capped Medicaid funding and lower than normal reimbursement rate have for decades caused Puerto Rico’s Medicaid system to be severely underfunded. Since too little money is supplied to meet the needs of the people who rely on Medicaid in the territory, the funds run out.
Congress has used a few different excuses to justify this inequity. First, Congress has argued that since Puerto Rico residents don’t generally have to pay income tax, it is acceptable to provide less in benefits. This reasoning, however, does not take into account that no beneficiaries of Medicaid, a need-based program, generally pay much if anything in taxes, even if they live in a state. Furthermore, low income Puerto Ricans already have unequal access to refundable tax credits state-based low income workers receive. Their lack of full access to both Medicaid and refundable tax credits, a proven work incentive, adds insult to injury rather than providing a validation.
Finally, some Members of Congress have claimed that Puerto Rico’s administration of the program is inadequate, and it is true that Puerto Rico, which has a limited grant from the U.S. government, does not have access to programmatic oversight that the Medicaid system provides to states. If Puerto Rico were to be fully incorporated into the Medicaid program, the U.S. territory would be able to take advantage of resources for oversight.
Under current law, the Puerto Rico Medicaid Program must comply with the designation of a Program Integrity Lead, which leads the Program Integrity Unit, and a Contracting and Procurement Oversight Lead, which is responsible for certifying that contracts meet federal procurement standards. Compliance with these two requirements has unlocked an additional $75 million to Puerto Rico’s Medicaid allotment each year staring in 2023, according to the Puerto Rico Federal Affairs Administration (PRFAA).
Puerto Rico is also implementing an Asset Verification System, allowing for the electronic review of assets of potential beneficiaries. Additionally, every year, the island must submit a report to Congress stating how increased funding has supported greater access to health care.
Puerto Rico has a Medicaid Fraud Control Unit (MFCU), located in the Puerto Rico Department of Justice and certified by the U.S. Health and Human Services Office of Inspector General, which monitors payment accuracy through the Payment Error Measurement (PERM) program. The PERM cycle ending in 2024 shows an error rate of 2.51%, well below the national overall rate of 5.09% according to PRFAA.
The Puerto Rico government is appealing to Congress to continue supporting healthcare in Puerto Rico. Many legislators from both sides of the aisle have worked in the past to help stave off Medicaid cliffs for Puerto Rico, but there is always risk involved, and the Island’s territory status makes a permanent solution unlikely.
