The Price Of Inequality For Puerto Rico

Maria Levis – December 29, 2015

Blog_PuertoRicoPuerto Rico is in the midst of an economic and fiscal crisis and without congressional action the situation could become a humanitarian crisis.

Andrew Weiss, Treasury Testimony to the Senate … Committee on October 21, 2015

The effects of the Puerto Rico fiscal and economic crisis on the lives of the Puerto Rican people are profound, with hundreds of thousands forced to leave the Island in search of jobs and their family’s sustenance. While it is easy—and partly correct—to blame the local politicians, federal actions are also responsible for the current crisis. Federal policymakers fear that new actions to attend to the crisis may be expensive, but the cost of inaction may be higher.

Puerto Ricans have been United States (U.S.) citizens since 1917, and while Puerto Ricans living in the 50 states have the same rights as other U.S. citizens, Puerto Ricans living on the Island are subject to territorial statutory limitations with significant implications. In no area is this as apparent as in health care, and the results have been devastating to the health of those who live on the Island.

Puerto Rico (P.R.) has the lowest Medicaid ($1,571 per enrollee vs. $5,790 in the U.S.) and Medicare ($5,208 per enrollee vs. $8,700 in the U.S.) annual spending in the nation while cost of living remains comparable (Note 1). These significant disparities in funding may start to explain why residents of the Island also face the highest national prevalence of diabetes (13.7 percent P.R. vs. 9.3 percent U.S.), hypertension (42.3 percent P.R. vs. 32.5 percent U.S.), and fair or poor self-rated health status among adults (35.4 percent P.R. vs. 16.9 percent U.S.). Children on the Island are also affected with the highest pediatric asthma rates in the nation (14.1 percent P.R. vs. 9.2 percent U.S.), and what until recently was the highest premature birth rate in the world (11.8 percent P.R. vs. 9.6 percent U.S.).

Who Absorbs The Costs Of Out Migration?
More than 10 percent of the Island’s population has already fled with 430,367 Puerto Ricans immigrating to a U.S. state at a growing pace from 2009 to 2014. Those immigrating to the States have a lower median income when compared to the general P.R. population, with 74 percent of those moving indicating that their reason for leaving was to work or find work (Note 2). This massive out migration is coming at a considerable personal and financial cost to all involved.

These shifts in population have already significantly increased federal and state government expenses. As of December 2014, 40 percent of the 3.5 million Island residents accessed health insurance via Medicaid and 21 percent via Medicare. These numbers are even more staggering when we take into account that Medicaid eligibility levels for Puerto Rico tend to be significantly lower for most populations with eligibility for a family of three on the Island set at 38 percent federal poverty level (FPL) versus an eligibility of level of 133 percent FPL to which all states were entitled as a result of Medicaid Expansion.

Since those emigrating from the Island are younger and have lower incomes than the general P.R. population, we can assume that at least 40 percent of these will continue as Medicaid and CHIP beneficiaries in their new States of residence. Based on this assumption, Puerto Rican immigration over the past five years could have added approximately $802.5 million in additional annual Medicaid spending (Table 1). The states that have received the most Puerto Ricans over the past five years are Florida, New York, Pennsylvania, and Georgia.

Table 1Table1

The 2014 American Community Survey (ACS) one-year estimates show 83,844 additional Puerto Rico residents moving to the States. Assuming the out migration of Puerto Ricans stays constant we can expect an annual Medicaid spending increase of approximately $194 million (Note 3). However, if the crisis continues, these numbers can only be expected to grow.

The Real Costs Of Underfunding Puerto Rican Medicaid
Federal and state spending is not offset by enrollment reductions in the Puerto Rico Medicaid program because the local program is severely underfunded and federal funding for the Island is statutorily capped at approximately 19 percent of costs for the P.R. Medicaid program, which is significantly below the federal medical assistance percentage (FMAP) of 55 percent to which it is entitled.

By the same token, Medicare spending on the Island is significantly lower than in any state even though Puerto Ricans on the Island pay the same in Medicare payroll taxes. Although it is difficult to assess additional expenses to the Medicare program due to migration from the Island, it is obvious that the Federal Government saves a significant amount of funding from enrollees who decide to live on the Island versus in the States. According to 2015 Medicare Advantage Program Ratebooks and Supporting Data, the average amount that the Centers for Medicare and Medicaid Services (CMS) pays for Medicare Fee for Service (FFS) for an enrollee on the Island is 42 percent lower than the States’ average and for a Medicare Advantage enrollee that amount is 32 percent lower (Table 2).

Table 2Table2

In a recent Congressional hearing, the U.S. Department of Treasury presented a Roadmap for Congressional Action to attend to the Puerto Rico Crisis, which includes attention to what it terms “a long-term solution to Puerto Rico’s historically inadequate Medicaid treatment.” The Administration’s proposal includes the removal of the cap on the Puerto Rico Medicaid program, improvements to the quality of coverage by offering access to additional services on par with those of Medicaid beneficiaries in the States, a transition period to upgrade health system, quality, accountability, financial management, and other actions to “alleviate some of the fiscal challenges and risks created by the current insufficient and unstable federal funding.”

A Case For Fairness
While the Obama Administration has prompted Congress to take immediate action on its proposals, more can be done. Congress can also act to remedy the negative effects of differing and contrasting statutes affecting the U.S. citizens living in the Territories with respect to the Medicaid and Medicare disproportionate share hospital (DSH) program payments, Hospital Value-Based Payments Program, Medicare Part B automatic enrollment, Medicare Hospital adjustments, Medicare Advantage, and Part D Low Income Subsidies.

By the same token, the Obama Administration can act on the full extent of the authority granted to the Secretary of the Department of Health and Human Resources to establish a pilot or demonstration project for Territories to effectively transition to improved quality and value-based payments since current pathways, for many reasons, remain inaccessible. Additionally, the Secretary can use her authority to eliminate the steep impact of recent Medicare Advantage cuts until better data is available to effectively assess the real cost of health care for enrollees on the Island. Finally, both Congress and the Administration should also act to eliminate the systematic exclusion of Puerto Rico from most National Statistics which, as we have evidenced in recent Senate Hearings, have made the Puerto Rico crisis more difficult to resolve with scant data to help carve out alternatives for a way forward.

The adoption of these policies will not only help reverse health disparities, they may also help alleviate the Island’s fiscal situation with Medicaid underpayments alone accounting for more than a fifth of the Island’s current fiscal deficit. These policies, combined with a package of local and federal actions aimed at restoring economic growth, restructuring the debt, increasing transparency, and establishing sound fiscal controls, can help deter out migration and steer Puerto Rico out of the crisis.

Congress and this Administration have appropriated over a trillion in funding over the past decade to bail out the automobile and banking industries. While the long-term damage of this crisis on Puerto Rico can only increase dependence on the federal government, the Puerto Rican people are not asking for a bail out. In the area of health, Puerto Ricans on the Island are only asking for equal rights.

As is apparent in the case of Puerto Rico, inequality does indeed have its costs, and it is a steep price to pay for the Federal Government, the State Governments, the Puerto Rican Government, and the millions of U.S. citizens and families who call the Island home.

Note 1
This estimate for annual Medicare spending per enrollee in Puerto Rico is based on a calculation of Medicare Advantage spending reported by every managed care company reporting Medicare Net Premium to the P.R. Office of the Insurance Commissioner in corporate reports submitted in 2014 and CMS Medicare FFS 2013 Data for Part A and Part B Total Reimbursement and Enrollment and Medicare Advantage/Part D Contract Enrollment Data Monthly Enrollment by CPSC for December 2014. In this analysis Medicare FFS 2013 data was used as a proxy for 2014 data since this data is not yet available and trends for Medicare FFS have shown little variation over the past two years.

Note 2
For data on those moving from Puerto Rico to work or find work please see page 22 of the file that is referenced. The information in Spanish specifies that from 2011-2012 84 percent of men and 67 percent of women left the Island to work or find work. This information was averaged according to the weight of each group.

Note 3
This calculation was performed by multiplying the number of P.R. residents that moved to the States in 2014 (83,844) by the estimated number of these who are Medicaid Eligible (40 percent) by the average national Medicaid expense per beneficiary ($5,790).

Los comentarios para este artículo han sido cerrados.