The voices of Urban Institute's researchers and staff
April 11, 2017

Puerto Rico’s Medicaid program needs emergency treatment

April 12, 2017

Puerto Rico’s Medicaid program, Mi Salud, is rapidly running out of money, which puts the health of 1.3 million participants at risk.

Because the share of people with Mi Salud coverage is so large, the lack of funding could disrupt the island’s entire public and private health care system, including health services for veterans. This crisis could accelerate the decline in the number of specialist physicians, as doctors leave the island for jobs elsewhere, further limiting health care access. Efforts to curtail the borderless Zika epidemic will be constrained. And thousands of people may move to the mainland to get coverage. Medicaid costs per person per month are higher in the States than in Puerto Rico ($482 versus $167), which means the federal government would end up paying nearly three times as much for those who relocate.  

The dangerous coupling of an economic crisis and unequal federal funding

At the heart of the health funding crisis is Puerto Rico’s economic downturn coupled with the way the federal government funds Puerto Rico’s Medicaid.

The federal government matches states’ spending on Medicaid based on per capita income, with a higher matching rate for low-income states. The poorest state in the United States gets an 83 percent match—that is, the federal government covers 83 percent of the state’s Medicaid costs. But Puerto Rico’s matching rate is fixed at 55 percent. Until the Affordable Care Act (ACA), increased the rate in 2011, the island’s matching rate was fixed at 50 percent.

In addition, the federal government imposes a cap on the island’s Medicaid allocation. In 2014, it was $321 million. This year, the cap is set at $347 million. Puerto Rico is not a state and may not expect to be treated as one in this context, even though it is treated as a state in other policy arenas. If Puerto Rico had been a state in 2011, federal spending would have ranged from $1.1 billion to $2.1 billion, according to estimates generated by the Urban Institute and published by the Government Accounting Office.

The ACA provided Mi Salud a $5.5 billion one-time grant available through 2019. Puerto Rico also received $925 million because it can’t use the federal health insurance exchange and opted not to establish its own. These ACA dollars account for 71 percent of federal Medicaid funding in Puerto Rico, and these funds will run out by the end of this year.

Before the ACA, covering all residents on the government health insurance program was not easy, but Puerto Rico managed to inject over $1 billion a year into Mi Salud. But since 2010, when the economic crisis in Puerto Rico took a turn for the worse, Mi Salud has lived on borrowed time. In 2010, Mi Salud received $2 billion from the American Recovery and Reconstruction Act, but those funds have already been exhausted. With the island’s economic and fiscal crisis, a public debt of $72 billion, and financial markets effectively closed to the island, there is not much money to go around. Since 2012, government funding to Mi Salud has fluctuated between $867 million and $885 million. When the ACA funds are depleted, Puerto Rico’s government won’t be able to pick up the slack, and 900,000 people could be dropped from the program.

Puerto Rico has a poverty rate of 45.5 percent and an unemployment rate of 12 percent. In 2016, nonfarm employment stood at 895,000, the lowest since 1994. Not surprisingly, in 2014, 49 percent of Puerto Rico’s population was enrolled in Mi Salud.

Still, Puerto Rico strives to provide health care access to its low-income population. An Urban Institute study concluded that “despite its perennial fiscal challenges, the commonwealth has continually sought to provide for its low-income residents the same access to health insurance and health care that they would have on the US mainland.” In fact, back in 2008, more than 90 percent of Puerto Ricans had health insurance.

But without additional funding from Congress, Puerto Rico could end up with a higher percentage of uninsured people than the US mainland, a first in at least a decade.

Policy solutions

Governor Ricardo Roselló has put forward proposals to confront the crisis, including proposals to increase out-of-pocket fees, improve system integrity, change the services covered by Mi Salud, and promote competition among insurers. In addition, the Fiscal Oversight Board (created by the Puerto Rico Oversight, Management, and Economic Stability Act) recommends that Puerto Rico cut $1 billion in health funding by fiscal year 2019 to reduce the budget deficit.

A lot is at stake. With a bankrupted government and no ACA funds, 900,000 Puerto Ricans could find themselves without health coverage. And the lack of funds to cover Mi Salud will further depress the struggling Puerto Rican economy.

Solutions to Mi Salud’s funding crisis include extending ACA funds, providing temporary or permanent additional funding, increasing the matching rate, and treating Puerto Rico like any other state when it comes to Medicaid funding. Mi Salud needs emergency treatment. Is there a doctor in the House?  

In this Thursday, Nov. 11, 2015 photo, Brenda Torres opens a screen door for her husband, Jose Gonzalez Ortiz, 42, who suffers from Lou Gehrig’s disease, at their home in Arecibo, Puerto Rico. Puerto Rico’s public health care plan, which receives funding from Medicaid, has denied Gonzalez coverage for the respiratory equipment his doctors say would help his labored breathing as the disease attacks the cells that control his muscles. Photo by Ricardo Arduengo/AP.

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