Highlight on Puerto Rico: Just how bad will Puerto Rico’s Medicaid funding crisis be?

Puerto Rico is in danger of a serious Medicaid funding crisis beginning late 2017, according to a data point report by the Office of the Assistant Secretary for Planning and Evaluation (ASPE) under the HHS Secretary from January 12, 2017. Under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), territories like Puerto Rico receive not only an increased funding rate, but a temporary additional Medicaid funding amount for spending above their statutory caps for use between July 2, 2011 and September 30, 2019 (ACA sec. 2005), and another sum provided in lieu of funding for individuals enrolling in health insurance exchanges to be used by December 31, 2019 (ACA sec. 1323). (States only would only receive the sec. 1323 funding when the sec. 2005 funding is exhausted.) Amounting to $6.4 billion, these funds will not reach 2019 but instead will be depleted as early as the first quarter of fiscal year 2018 (or the fall of 2017). The route that Puerto Rico takes in responding to this funding crisis could take this situation from bad to worse.

Background and ACA

Both states and the federal government pitch in to jointly fund the Medicaid program. The amount that comes from the federal government is called the federal medical assistance percentage (FMAP). How much FMAP a state receives is based on its per capita income, with the average being 57 percent (50 percent for wealthier states, 75 percent for the poorest), adjusted on a three-year cycle. U.S territories, like Puerto Rico, however, receive an FMAP amount that varies greatly from that of states because their rates are capped by statute.

Puerto Rico faces immense poverty, with individuals being eligible for Medicaid with an annual income of only $6,600 (compared to $15,800 for the continental U.S.) and families with an income of $10,200 ($32,319). Over one million people are enrolled in Medicaid in Puerto Rico. Under the per capita income formula used to calculate the FMAP of states, and still considering the statutory maximum that is in place, Puerto Rico would receive 83 percent (93 percent absent the statutory maximum). Instead, Puerto Rico’s Medicaid expenditures are matched at 55 percent. This is an increase from the 50 percent that was in effect prior to passage of the ACA.

 Possible scenarios

Two scenarios are provided in the report as options for Puerto Rico to approach the exhaustion of funds. First, Puerto Rico could continue to spend the same amount of its own funds in fiscal year (FY) 2018 as in 2017, adjusting for inflation on a per-enrollee basis, which would result in a decrease in spending to 44 percent less than that required to maintain current enrollment of over one million today. Around 500,000 people would lose coverage. Although this scenario is similar to the funding that was in place prior to the ACA, considering that officials may choose to prioritize infrastructure and debt payments over Medicaid, they may decide on scenario two.

The second option is that Puerto Rico spends none of its own unmatched funds over those necessary to get the maximum federal funding, but that would result in spending being 80 percent less than that required to maintain the current enrollment, and nearly 900,000 individuals would lose Medicaid coverage.

In either case, it is assumed the Puerto Rico will reduce coverage (lowering income eligibility levels or capping enrollment) rather than reduce benefits for those covered by Medicaid.

MedPAC votes to recommend recalculation of MA benchmarks

The Medicare Payment Advisory Commission (MedPAC) unanimously voted to recommend that the HHS Secretary modify the calculation of Medicare Advantage (MA) benchmarks. The recommended change, discussed at the January 12, 2017, MedPAC meeting, would increase spending between $750 million and $2 billion over one year and between $5 billion to $10 billion over five years. Mark Miller, executive director of MedPAC, suggested, however, that previous coding recommendations from the June 2016 report could offset the increased cost.

CMS sets the MA county benchmark based on the average risk-adjusted per capita Part A and Part B fee-for-service (FFS) spending in the county. While this calculation includes all beneficiaries in Part A or Part B, MA enrollees must be in both Part A and Part B. MedPAC policy analyst Scott Harrison noted that 12 percent of FFS beneficiaries are enrolled in Part A only, and Part A-only beneficiaries spend less than half than what those with Part A and Part B spend on Part A. This, he said results in an underestimate of FFS spending compared to MA spending, which leads, in turn, to an understatement of MA benchmarks.

To make calculations more reflective of MA enrollment, the members voted on a draft recommendation, which they also discussed at the December 2016 meeting, that the HHS Secretary should calculate MA benchmarks using FFS spending data only for beneficiaries enrolled in both Part A and Part B.

CMS already adjusts the rate calculation in Puerto Rico so that it is based on beneficiaries who are enrolled in both Part A and Part B. In the April 2016 Announcement of Calendar Year 2017 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter, CMS stated in response to a comment that it would consider expanding this Part A and Part B adjustment to all counties in the future.

At the same meeting, MedPAC also voted to recommend that the Secretary should require hospitals to add a modifier on claims for all surgical services provided at off-campus, stand-alone emergency department facilities. The modifier would allow Congress and CMS to track the growth of off-campus emergency departments, which are reimbursed at higher rates than urgent care centers.

Puerto Rico should see the benefits of letting optometrists prescribe medication

Puerto Rico should consider giving optometrists the authority to prescribe certain medications, to benefit patients and improve competition among eye care providers, according to a statement issued by the Federal Trade Commission (FTC) staff and the Antitrust Division of the Department of Justice (DOJ). The agencies issued the statement in response to a request from Puerto Rico Rep. Jose L. Báez Rivera to enable optometrists in Puerto Rico to use and prescribe medications to diagnose and treat eye diseases. If the Puerto Rican legislature expands the services that optometrists can provide, optometrists will share in authority already granted to optometrists in all 50 states, the District of Columbia, and other U.S. territories.

SB 911

Puerto Rico Senate Bill 991 would give optometrists who undergo additional training the authority to prescribe and use medications for the diagnosis and treatment of eye diseases. The expanded scope of practice would give authorized optometrists prescribing authority that is consistent with authority already held by ophthalmologists in Puerto Rico. The bill would also redefine the practice of optometry as “the examination, diagnosis, and treatment of any illness, condition, or disorder of the human visual system, including the eye or adnexa. The additional functions and procedures would be authorized for optometrists that pass a 120-hour course on the treatment and management of ophthalmic diseases. No optometrists would be permitted to perform surgery under the bill.


According to the Centers for Disease Control and Prevention (CDC), Puerto Rico has the highest percentage of adults in the United States and its territories reporting severe difficulty seeing or blindness. The FTC and DOJ determined that expanding the scope of the practice of optometrists beyond the current limits—maintaining only restrictions necessary to ensure patient health and safety—could facilitate beneficial competition and improve vision in Puerto Rico. The agencies asked Puerto Rican lawmakers to consider how additional competition could improve barriers to access and reduce the cost of eye care. Because optometrists are typically easier to visit than ophthalmologists and, in many areas, outnumber them, the agencies believe expanding the scope of optometrists’ practices could help them better serve as a first line of defense against eye disease.

Administration seeks to better align Puerto Rico’s health care with the mainland

While HHS has invested over $9.5 billion in Puerto Rico from 2009 to 2014 to improve health care systems and health outcomes of the 3.5 million Americans living in Puerto Rico, the Obama Administration seeks to do more through additional funding for Medicare and Medicaid programs and supplemental funding to reduce transmission of the Zika virus. Secretary Burwell and HHS announced that they are working closely with other members of the Administration and key stakeholders to not only address the current fiscal crisis in Puerto Rico, but to help ensure that residents of Puerto Rico get access to quality and affordable health care.


HHS has used available resources to help the more than 1.6 million Medicaid enrollees in Puerto Rico’s health care system, of whom 600,000 could lose their coverage when its one-time Medicaid funding run out in 2019. For example, through the fiscal year (FY) 2016 budget, HHS provided Puerto Rico and the territories access to the Medicaid Drug Rebate Program to lower prescription drug cost in Medicaid.

The Administration believes that more meaningful measures are needed that will require legislation. As such, the Administration’s FY 2017 Budget proposed three principle reforms to the Medicaid program to raise the standard of care in Puerto Rico to a level that better aligns with the mainland: (1) lift the federal cap on Medicaid funding to Puerto Rico and the other U.S. Territories; (2) immediately increase the federal Medicaid share from 55 percent to 60 percent and raise it to 83 percent over time as Puerto Rico and the other territories successfully strengthen and modernize their Medicaid programs; and (3) expand eligibility to 100 percent of the federal poverty level over time.


The Administration’s FY 2017 Budget proposes giving the HHS Secretary the authority to adjust Medicare’s disproportionate share (DSH) payments to better account for the higher costs of low income patients in Puerto Rico. Both DSH and uncompensated care payments depend, in part, on patients being eligible for Supplemental Security Income (SSI), which Puerto Ricans do not receive. As such, HHS plans to further address the distribution of uncompensated care payments to Puerto Rico in its 2017 Inpatient Prospective Payment System (IPPS) Final rule, especially if CMS continues to determine uncompensated care payments using SSI days. HHS also plans to accelerate the alignment of the formula to pay hospitals in Puerto Rico with the formula used in the 50 states, which would increase hospital payment rates in Puerto Rico by approximately 5 percent.

Supplemental Zika virus funding

Because Puerto Rico is experiencing ongoing active transmission of Zika, on February 8, 2016, the Administration made a request to Congress for a temporary one-year increase in Puerto Rico’s Medicaid Federal Medical Assistance Percentage (FMAP). This would provide an estimated $250 million in additional federal assistance to support health services for pregnant women at risk of infection or diagnosed with Zika virus and for children with microcephaly, and other health care costs. The request would not make any changes to Puerto Rico’s underlying Medicaid program, and the additional funding will not count towards Puerto Rico’s current Medicaid allotment. Unlike the states, Puerto Rico’s Medicaid funding is capped, which gives it limited capacity to respond to emergent and growing health needs.

Other Administration efforts

Since 2009, the Administration has made the following efforts in Puerto Rico: (1) invested in expanding early childhood education and child care programs; (2) provided access to health insurance and health care services through the Children’s Health Insurance Program (CHIP) and Medicaid; (3) supported food safety and security monitoring projects; (4) helped people with disabilities and older adults to live with dignity and independence; (5) funded 20 health centers treating over 330,000 people in 2014; and (6) established eight new service delivery sites with the help of $5 million in funding in 2015.