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Puerto Rico Medicaid Struggles Under Block Grant

By Marissa Evans, CQ Roll Call

June 21, 2016 -- As Republican lawmakers consider funding the Medicaid program through a capped grant allotment doled out to states, Puerto Rico is struggling to keep its program afloat under the same parameters.

While the territory faces a $72 billion debt crisis, its joint federal-state health insurance program for the poor and disabled is also enduring dark times. Officials say part of the reason the territory is in debt is because of having to borrow to keep Medicaid running. Officials are talking about potentially cutting beneficiaries off the rolls if things do not improve.

Puerto Rico's looming Medicaid crisis comes amid mounting frustration among state and federal lawmakers alike about the hefty price tag of the program nationwide. Spending on the program increased to $498 billion in fiscal year 2014, according to a Medicaid and CHIP Payment and Access Commission report released June 10. Republicans in Congress are mulling the idea of imposing on the program per capita spending caps somewhat similar to block grants, a way intended to motivate states to become more efficient in how they allocate federal dollars for Medicaid. Rhode Island, and Vermont used federal waivers so that their respective Medicaid programs had statewide spending limits based on enrollment projections.

House Speaker Paul D. Ryan, R-Wis., has long pushed for the Medicaid program to have block grant funding.

"This reform ends the misguided one-size-fits-all approach that has tied the hands of so many state governments," Ryan says on his website. "States will no longer be shackled by federally determined program requirements and enrollment criteria. Instead, they will have the freedom and flexibility to tailor a Medicaid program that fits the needs of their unique populations."

Democrats argue these measures could potentially cut people off the rolls if the grant money starts to run out and states must rely more heavily on their own coffers.

That's what is happening with Puerto Rico's Medicaid program. The 2010 federal health law provided the territory an additional $6.4 billion in Medicaid funding that was supposed to last until fall 2019. The law also increased its federal match from 50 percent to 55 percent of medical expenses. But the territory has been burning through the money so fast that it could be gone as soon as mid-2017, according to the Centers for Medicare and Medicaid Services.

Legislation (HR 5278) addressing the territory's debt problems does not include financial aid to keep the Medicaid program afloat. Resident Commissioner Pedro R. Pierluisi, the non-voting representative of Puerto Rico in Congress, introduced a bill (HR 2635) last June to address the territory's Medicaid problem but the legislation has gained little traction.

For Puerto Rico, the federal block grant does not meet the spending needs of its Medicaid program, said Edwin Park, a vice president of health policy for the left-leaning Center for Budget Policy and Priorities. Park points to how program officials have had to deal with rising medical costs to help beneficiaries susceptible to sudden outbreaks like Zika, a mosquito-borne illness that can cause birth defects.

"Looking just at the Medicaid program, it's been chronically underfunded despite great need and reliance on the program," Park said. "Puerto Rico had to cut reimbursement rates and there is now evidence about migration of health providers. Hospitals are not able to make basic investments, providers are not being paid...there's a lot more going on than Medicaid funding shortfalls."

Block grants are also not necessarily a one-size-fits-all for states, according to the MACPAC report. The commission noted that the Rhode Island and Vermont waivers were tailored to the needs of each state. A block grant could change the nature of the program, according to the commission.

"Historically, once put in place, block grants have changed in ways not necessarily anticipated by their architects," the report said. "For example, the real value of block grant funding has tended to decrease over time even though the initial funding for block grants has not been consistently higher or lower than the programs they replaced."

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