The future of Medicaid is uncertain. The current administration is working hard to reduce federal funding for the program. It is not yet certain how much funding will be slashed or how the states and territories will adjust to the cuts, but Puerto Rico will certainly be affected by the expected Medicaid changes.
Nationwide Medicaid changes
Both the House and Senate versions of the current budget bill propose substantial cuts to Medicaid. The House version aimed for over $600 billion in cuts, while the Senate proposals have gone even deeper, with figures around $900 billion over 10 years. These reductions are intended to offset the cost of proposed tax cuts. States and territories will be left to figure out how to manage with less funding, but the Congressional Budget Office (CBO) estimated that the House version alone could result in 10.9 million more people in the United States without health coverage by 2034.
Puerto Rico would be particularly vulnerable for two main reasons: first, Puerto Rico receives much less in federal funding for Medicaid than the states; second, because of the higher poverty rate in Puerto Rico, nearly half of residents receive Medicaid.
The reductions in Medicaid funding do not currently have any actual plans for savings associated with them, but some of the possible ways to save money are already familiar to Puerto Rico:
- Make eligibility requirements stricter, reducing the number of people who get benefits.
- Reduce the covered services.
- Reduce the payments to medical providers.
- Cover and pay for the services by going into debt.
- Cut other services to help pay for the high cost of providing Medicaid.
While Medicaid cuts are unpopular with the American public and much of Congress, those in favor are determined to reduce spending and see the Medicaid cuts as essential to meet that goal. They claim that the changes to Medicaid will reduce waste without harming those who need the support. “Republicans are strengthening the Medicaid program by removing ineligible beneficiaries and sustaining the program for our most vulnerable Americans,” Rep. Brett Guthrie wrote for Fox News. “When states are no longer paying for those who shouldn’t be enrolled in the first place, that frees up money they can invest for those who actually need the care most.”
Changes for Puerto Rico
Puerto Rico is already expecting cuts in Medicaid funding. For one thing, the percentage of Medicaid costs that the territory has reimbursed by the federal government is scheduled to be reduced in 2027. The reimbursement rate, now as the FMAP rate, is based on a formula for the states. States with higher per capita incomes, such as Massachusetts and Connecticut, may have a reimbursement rate of 50%. States with lower per capita income, such as Mississippi and New Mexico, have reimbursement rates closer to 80%. 83% is the highest possible reimbursement rate, and that is the rate Puerto Rico would receive as a state.
Puerto Rico’s FMAP rate was increased to 76% in response to natural disasters and the pandemic, but it is scheduled to fall to 55% in 2027.
Puerto Rico also faces punitive changes to the FMAP rate if the Island cannot meet a January 1, 2026 deadline. That is the date when Puerto Rico is required to have an assets verification system in place. Medicaid rules require that people who apply for Medicaid are not eligible if they have more than a certain amount of assets. For example, they cannot have a large amount of money in the bank or own a valuable piece of real estate. If they have assets like that, they are expected to take care of their own medical costs.
States have had assets verification systems in place for years, but Puerto Rico began working on theirs in 2024. If they can’t get it implemented by January 1, the FMAP will be reduced each year until the system is functioning.
Neither of these changes is definite. Congress has already extended the higher FMAP rate for Puerto Rico before, and the territory’s government may succeed with the assets verification system. But both changes are possible.
Work requirements
Apart from the budget cuts, the current budget bill includes another change for Medicaid: a national work requirement. The idea is to encourage people to become employed, to help reduce poverty, and to cut down on adults taking advantage of Medicaid by choosing not to work. Unfortunately, it hasn’t worked out that way in states which have tried the idea.
Arkansas was the first state to add a work requirement for Medicaid in 2018, and more than 18,000 people lost their benefits. In many cases, these individuals were in fact working but were unable to keep up with required electronic reporting. Lack of internet access, technical skills, or an understanding of the reporting requirements were major hurdles for many people. It’s estimated that about a third of the people in Arkansas who are eligible for Medicaid do not have internet at home. People in rural parts of the state may not have electricity in their homes, let alone internet service. A report in June of that year disclosed that only 455 people (1.7% of the Medicaid population) had been successful in reporting their work activities. While full-time workers and full-time students did not have to report, a 2019 survey found that many people who lost their benefits were in fact working.
In some cases, they did not have enough hours to meet the requirements. Hourly workers in construction, hospitality, and other industries may be given more or fewer hours according to the employers’ needs. And while training programs were an option for people who were unemployed, many rural counties in Arkansas did not have training programs available for all the people who needed them. The outcome was not higher employment, but more people who did not receive needed medical care.
Georgia tried to put work requirements in place, but encountered many of the same problems Arkansas had. Only a small fraction of the people eligible to sign up for the program have done so, and the cost of administration for the program still turned out to be higher than the cost of the original Medicaid program. In fact, Georgia has spent $86 million to keep up with just 6,500 individuals. Even so, they gave up on the plan to check on people’s compliance every month and now only check once a year.
Will Puerto Rico find it easier to put the work requirements in place than Arkansas and Georgia? Puerto Rico has challenges with electricity and internet coverage. While there are an increasing number of work training programs in Puerto Rico, access is limited in rural areas. And the territorial government has limited resources compared to states; the high cost of compliance with the requirements will be a challenge for most states, and it probably will be a challenge for Puerto Rico as well.
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