Pierluisi Introduces Comprehensive Bill to Improve Treatment of Puerto Rico and Other Territories Under Medicaid and Medicare
Washington, DC—Resident Commissioner Pedro Pierluisi today introduced H.R. 2635, the Improving the Treatment of the U.S. Territories Under Federal Health Programs Act of 2015, a comprehensive bill that would eliminate or mitigate nearly all of the disparities that Puerto Rico and the other territories face under the Medicaid and Medicare programs. Some of the provisions in the legislation incorporate standalone bills that the Resident Commissioner has already introduced, while other provisions are new. Certain provisions apply to all five territories, whereas others are specific to Puerto Rico. In total, the 26-page bill contains three separate titles consisting of 16 sections.
“This is the first time that a Member of Congress has introduced legislation to address the broad range of inequalities that the territories confront under federal health programs. The bill serves as a blueprint for federal policymakers, identifying the various problems that exist under current law and proposing fair and realistic legislative solutions to each problem,” said Pierluisi.
The bill would create new federal rules governing Medicaid in the territories. Medicaid, the health program for low-income individuals, is funded in part by the federal government and in part by the state or territory government. In the states, there is no limit on the amount of funding the federal government will provide for Medicaid as long as the state provides its share of matching funds. The federal contribution—known as an FMAP—can range from 50 percent for the wealthiest states to 83 percent for the poorest states. By contrast, the amount of funding that the federal government provides to support the Medicaid program in each territory is capped. When Pierluisi took office in 2009, Puerto Rico’s cap was only $260.4 million a year. In addition, the FMAP for each territory was just 50 percent.
During the Resident Commissioner’s tenure, federal law has been amended to substantially improve the treatment of the territories under Medicaid, but this treatment—especially in the case of Puerto Rico—remains deeply inequitable. In 2010, Congress enacted the Patient Protection and Affordable Care Act (ACA). The bill provided $7.3 billion in additional Medicaid funding, with Puerto Rico receiving $6.4 billion of that amount. This funding can be drawn down by a territory between the fourth quarter of Fiscal Year 2011 and the end of Fiscal Year 2019.
“As a result, Puerto Rico now receives $1.1 to $1.3 billion a year in federal Medicaid funding. This is a major improvement but still far less than Puerto Rico would receive if it were a state. For context, Mississippi receives $3.6 billion a year and Oregon, which has roughly the same number of people as Puerto Rico, receives $5 billion,” said Pierluisi.
Moreover, the $7.3 billion expires at the end of the Fiscal Year 2019. This has been called the Medicaid funding “cliff.” The Puerto Rico government has only $3.5 billion of its $6.4 billion in funding remaining, and could deplete its funding in 2018 or even 2017. If this funding is not replenished, the territories will go back to receiving Medicaid funds under the old formula—which for Puerto Rico means less than $400 million a year. Last month, Pierluisi wrote a letter to President Obama and delivered a floor speech about the cliff, so that federal officials can begin working now on a bipartisan plan to address this problem before it arrives.
“The bill I am filing today would provide a sustained and more equitable level of Medicaid funding for the territories and avert the cliff. Starting in Fiscal Year 2017, the bill would provide the territories with state-like treatment within well-defined parameters. Specifically, each territory’s Medicaid program could cover individuals—whether they are children, pregnant women, disabled or elderly individuals, parents, or adults without children—whose family income is equal to or less than 100 percent of the federal poverty level, with the federal government providing state-like funding for that purpose,” said Pierluisi.
The federal poverty level is $11,770 for a family of one; $15,930 for a family of two; $20,090 for a family of three; and $24,250 for a family of four.
“In essence, as long as a territory government covers individuals whose household income is within these limits, the federal government would fund the territory’s Medicaid program as if it were a state Medicaid program. That means that the annual funding cap would be eliminated. Each territory would receive an FMAP based on its per capita income, which would result in an 83 percent FMAP for Puerto Rico. However, the limiting principle is that if a territory wants to cover individuals earning above 100 percent of the federal poverty level, it will generally be required to use territory dollars, not federal dollars,” said Pierluisi.
“The policy rationale behind this proposal is simple. Residents of Puerto Rico and the other territories are American citizens. At the very least, the federal government should provide the territories with the funding necessary to provide health coverage to their residents who live at or below the federal poverty level. Because the Puerto Rico Medicaid program has always received inadequate federal funding, it has never been able to cover individuals earning anywhere close to 100 percent of the federal poverty level. It is time for that to change,” said Pierluisi.
Pierluisi’s bill also includes a number of other provisions designed to enhance patient care by improving the treatment of hospitals, physicians, and Medicare Advantage beneficiaries and plans in Puerto Rico.
The bill would correct four disparities that harm Puerto Rico hospitals and their patients. First, the bill would include the territories in the Medicaid disproportionate share hospital (DSH) program, from which they have always been excluded. The bill would provide Puerto Rico with about $130 million in additional Medicaid funding to help island hospitals that treat a high percentage of low-income and uninsured patients. Second, the bill improves Puerto Rico’s treatment under the Medicare DSH program. The current formula disadvantages Puerto Rico because it calculates payments based on the number of patients enrolled in the federal Supplemental Security Income program, which Congress has not extended to the territory. Third, the federal government pays hospitals who serve Medicare patients a base rate, which can then be adjusted upwards based on a variety of factors. Every hospital in the states is paid the same base rate, but Puerto Rico hospitals are paid a base rate that is about 14 percent lower. The bill would eliminate this disparity. Fourth, the bill would correct the exclusion of Puerto Rico hospitals from the Medicare component of the HITECH Act, which authorizes bonus payments for hospitals that become meaningful users of electronic health records.
“The work of a hospital is noble, and it is never done. Their doors are open 24 hours a day, seven days a week. They treat the sick and the injured, the rich and the poor, the young and the old. They are there when a life begins, and often when it ends. There is no reason why hospitals in Puerto Rico should be treated any differently than hospitals in the states when it comes to federal funding,” said Pierluisi.
The bill also includes a provision that would address one of the main challenges facing Puerto Rico physicians, which is inadequate payments under traditional Medicare. The current formula used to compensate doctors seeks to account for variations in the cost of practicing medicine in different areas of the country by using a system called the geographic practice cost index, or GPCI. There is strong evidence that the current GPCI formula disadvantages Puerto Rico and results in insufficient payments to physicians. Therefore, the bill establishes a reasonable floor on Medicare payments to Puerto Rico doctors so they will be fairly compensated for their work.
“There is a well-documented exodus of island physicians to the states, and low payments under Medicare as a result of the GPCI system appear to be a major factor. I will continue to take all steps to address this problem through both administrative and legislative means,” said Pierluisi.
The bill also seeks to assist the 560,000 Medicare Advantage beneficiaries in Puerto Rico, establishing a payment floor to ensure that MA plans on the island receive adequate compensation from the federal government.
“This provision supplements and reinforces the ongoing efforts that I and others are undertaking to convince the Centers for Medicare and Medicaid Services to take immediate administrative action to improve payments for MA plans in Puerto Rico,” said Pierluisi.
Finally, the bill responds to concerns expressed by insurance companies in the territories. The Affordable Care Act imposed an annual fee on insurers, with the first fees due last year. Pierluisi and other territory delegates argued in a 2014 letter to President Obama that application of the fee to insurers in the territories is inappropriate, since the purpose of the fee is to help offset the cost to the federal government of the ACA.
“Because the territories are not eligible to receive many of the benefits of the ACA, it is unprincipled to subject insurers in the territories to this fee, which is designed solely to offset the cost of those benefits. My bill would cut the fee in half for insurers in the territories, reducing the annual amount owed by Puerto Rico insurers from about $158 million to $79 million. As for the remainder, my bill would transfer this funding to the territories to assist them in meeting their local Medicaid match or helping low-income seniors afford prescription drugs,” said Pierluisi.