President Trump’s proposed budget allocates Puerto Rico $1.24 billion more Medicaid spending than the federal government had promised.

Both Puerto Rico’s prior and current governments have highlighted the impending loss of Affordable Care Act funding for the island’s Medicaid as one of the government’s biggest fiscal challenges.

Howard Cure, director of municipal research at Evercore
Evercore director of municipal research Howard Cure said he was unsure what an increase in Puerto Rico Medicaid funding augered for other island federal funding. Bloomberg News

“The news is welcome and could boost [Puerto Rico bond] prices in the short term,” Cumberland Advisors portfolio manager and analyst Shaun Burgess said Wednesday. “I would not speculate on how this could potentially impact [bond] recoveries as there isn’t enough clarity to do so.”

Up to this point federal Medicaid funding in Puerto Rico going forward was supposed to be capped at less than $350 million, according to Gov. Ricardo Rosselló. With the additional allocation, Puerto Rico would get $1.592 billion in federal fiscal year 2018, which will begin Oct. 1, 2017, the governor said .

At this point the Trump budget is just a proposal and must be acted on by the U.S. House of Representative and Senate. Members of both major parties have voiced skepticism about it.

As of 2015 48% of Puerto Rico’s population was dependent on Puerto Rico’s administration of the federal Medicare and Medicaid systems for healthcare, according to Puerto Rico’s October 2016 proposed fiscal plan.

“Thanks to [U.S. Office of Management and Budget director] Mick Mulvaney for understanding Puerto Rico’s health needs,” Rosselló said. “Although we know that the budget will now be discussed in Congress, our administration is lobbying for approval of this measure.”

In the October 2016 proposed fiscal plan, Puerto Rico’s government estimated the cost of the loss of Affordable Care Act funding for Puerto Rico in Puerto Rico’s fiscal years 2017 to 2026 to be $16.1 billion in direct funding and even more if the indirect economic impact is included. According to Center for American Progress, the recently passed American Health Care Act and Trump’s budget would cut Medicaid spending by a total of $1.4 trillion over 10 years. It remains to be seen how these cuts would affect Puerto Rico over that period.

“When compared to the 50 states, Puerto Rico gets shortchanged when it comes to its federal Medicaid monies particularly given the commonwealth’s poverty levels,” said Howard Cure, director of municipal research at Evercore. “Part of the exodus of people leaving Puerto Rico is in the healthcare profession, doctors and nurses, that aren’t reimbursed fully for their services…. I don’t know if this increase in funding is a sign that the federal government might be more generous with other federally funded programs or provide other economic relief for the commonwealth.”

Burgess said, “The PROMESA board has stated they will negotiate the commonwealth’s restructuring based on the fiscal economic growth plan. It is unclear if they [will] alter that plan based on this news or any other positive developments for that matter.”

The restructuring of Puerto Rico’s debt is currently being overseen by a federal judge. However, according to the Puerto Rico Oversight, Management, and Economic Stability Act, the judge is supposed to do the restructuring within the guidelines of the board’s certified fiscal plan, which it approved in March.

The Trump budget allots $1.9 billion for the federal Nutrition Assistance Program in Puerto Rico, according to the El Vocero news web site. However, the budget also plans to eliminate the Community Development Block Grant program. This helps Puerto Rico municipalities fund meals on wheels programs for the elderly, educational, housing and other programs.

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