Puerto Rico Shows Harm of Medicaid Caps
The 2018 federal budget passed in October proposes cutting Medicaid by about $800 billion over the next 10 years through funding caps and block grants, and similar cuts and caps were part of the past year’s Affordable Care Act “repeal and replace” efforts.
Puerto Rico, where the federal government’s Medicaid spending has been capped since 1968, provides a warning of the harm such a move would inflict in the states, according to a journal article co-authored by a School of Public Health researcher.
Writing in the American Journal of Public Health, the authors described the state of Medicaid in Puerto Rico, a US territory with 3.5 million residents, 46 percent of whom are enrolled in Medicaid or the Children’s Health Insurance Program (CHIP). Even before Hurricane Maria devastated the island in September, the authors wrote, the Puerto Rican Medicaid program was already severely strained, cutting federally mandated benefits and reducing eligibility. Because of lower reimbursements, an estimated 1,400 to 3,000 physicians have left Puerto Rico for higher-paying jobs in the continental US.
“A Medicaid block grant would force very difficult decisions on state leaders,” says co-author David K. Jones, assistant professor of health law, policy & management. “They would either have to cut what benefits are offered, decrease how much they pay providers, or increase taxes. None of these options are politically palatable. Puerto Rico’s experience shows just how devastating this approach would be for poorer states.”
The federal funding cap for Medicaid in Puerto Rico was introduced in 1968, and set to cover 50 percent of the territory’s expenditures. The cap rises with the medical consumer price index, but now covers less than 18 percent of Puerto Rico’s Medicaid expenditures. “If Puerto Rico’s federal Medicaid payments instead were based on per-person income, as is currently the case in the 50 states, then the federal government would pay 83 percent of the commonwealth’s Medicaid bill,” the authors wrote.
Additional funding through the Affordable Care Act to expand Medicaid will soon expire, creating a “cliff” that will lead to yet more reductions in the program. Although Congress approved an additional $296 million to help Puerto Rico’s Medicaid funding shortfall, and, in the aftermath of Hurricane Maria, is considering more Medicaid funds as part of a disaster relief package for the territory, the authors wrote, “congressional aid is unlikely to meet adequately the urgent health needs of Puerto Ricans or to resolve the structural problems caused by the federal government’s underfunding of Medicaid in Puerto Rico.”
The authors said Puerto Rico provides a particularly dire example, but that states would inevitably need to make similarly painful decisions if their federal Medicaid funding were capped. “Medicaid funding caps would unravel the program in many states, leaving millions of low-income persons without any health insurance,” the authors wrote.