Congress enhances Medicaid formula for Puerto Rico, pushes disaster aid

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In the latest clash between the Trump administration and Congress over aid to Puerto Rico, lawmakers have succeeded in increasing Medicaid funding and imposed a new mandate to dispense $10.2 billion in disaster mitigation aid.

But the White House has shortened the enhanced Medicaid formula funding to two years from a proposed four years and continues to stall on publication of a Federal Register notice about the availability of the disaster aid.

The bottom line is good news for the U.S. territory as it continues to recover from the devastation of Hurricane Maria in 2017 and completing work on a debt restructuring that could pull it out of bankruptcy sometime next year.

The federal share of Medicaid funding for health services for the poor will jump from 55% to 76% for Puerto Rico under the deal, although advocates for the territory had hoped to increase the federal share to 83%. All other territories, including the U.S. Virgin Islands and Guam, will get the 83% maximum reimbursement rate.

The $10.2 billion for disaster mitigation was appropriated by Congress through the Department of Housing and Urban Development as part of a larger pot of $20.2 billion Community Development Block Grant-Disaster Relief.

But HUD has missed deadlines for publishing a Federal Register notice that’s needed before Puerto Rico can apply for the money.

The money would be used for long-term mitigation work to prevent a future recurrence of the damage caused by Hurricane Maria and to make electrical grid improvements that will withstand future storms.

HUD published a Federal Register notice on Aug. 30 on the availability of disaster relief aid for several states. It didn't include Puerto Rico or the U.S. Virgin Islands, even though Congress set a Sept. 4 deadline for the department to do so.

The new budget prohibits HUD’s chief financial officer from spending any money on the department’s Financial Transformation Initiative until the Federal Register notice is published for Puerto Rico.

The federal share of Medicaid varies among the states, with wealthy states receiving only 55% and poorer states getting up to 83%.

If Puerto Rico was a state, it would qualify for the maximum 83% federal share.

The House Energy and Commerce Committee earlier this year approved legislation to increase Medicaid funding to Puerto Rico for four years and in other U.S. territories for six years.

That plan was revised to four years for all territories under a bipartisan deal recently announced by Senate Finance Committee Chair Chuck Grassley, R-Iowa, and the committee’s ranking Democrat, Sen. Ron Wyden of Oregon.

During final negotiations for a 2020 budget deal last weekend, the Trump administration successfully reduced the commitment to Puerto Rico to two years.

The administration also demanded new measures to improve program integrity by reducing waste, fraud and abuse.

A White House spokesman told Politico the changes are a “win for President Trump and the American people.”

"This administration remains committed to properly prioritizing U.S. taxpayer dollars," Chase Jennings, a spokesman for the White House Office of Management and Budget, told Politico. "With the historical waste we have faced in Puerto Rico, additional funding was not needed or fiscally responsible."

Rosanna Torres, director of the Washington office of the Puerto Rico-based Center for a New Economy, said Puerto Rico is not receiving additional funds to implement the new compliance measures and will have to take the money out of its program funding.

Torres also said four years of increased funding instead of two would have provided more budget certainty to the territory.

Puerto Rico’s funding will increase to $2.623 billion in fiscal 2020 and $2.719 billion in 2021 compared to the current $375 million.

States do not have any cap on how much federal aid they can receive, but Puerto Rico receives a block grant.

Judy Solomon, a senior fellow at the Center on Budget and Policy Priorities, said that the new block grants are expected to be sufficient to fully fund Puerto Rico’s Medicaid program, which serves 1.4 million residents.

“It’s in line with what is needed to sustain the program and make some improvements, particularly paying providers more,” Solomon said. “There’s another $200 million in the bill for each fiscal year if Puerto Rico increases payments to providers to a level that’s 70% of what Medicare would pay. Right now their payments are extremely low and that’s led to essentially an exodus of providers away from the island because they can make a lot more money in the states.”

One of the results of Puerto Rico’s underfunding for Medicaid is that annual individual income to qualify must be below $6,600 while in Medicaid expansion states the income threshold is for people earning less than $17,236.

“The island is very, very poor, so that even with income eligibility set that low, about half of residents qualify for Medicaid,” said Solomon.

Puerto Rico’s Medicaid program also covers fewer pharmaceutical drugs than the states' programs do. Solomon said one example is that Puerto Rico doesn’t cover a drug that cures hepatitis C.

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Hurricane Maria Hurricane Maria Disaster recovery Disaster recovery Public health
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