Examples from Puerto Rico: Why the federal government must stay involved in Medicaid services

November 14, 2017

Three health policy researchers affiliated with the UNC Gillings School of Global Public Health assess the negative consequences of caps on Medicaid funding, in an article published online Nov. 8 in the American Journal of Public Health.

Dr. Jon Oberlander

Co-authors of the article are Jonathan Oberlander, PhD, professor of health policy and management and professor and chair of social medicine in the UNC School of Medicine; Krista Perreira, PhD,  professor of social medicine and adjunct professor of maternal and child health, health policy and management, and health behavior at the Gillings School; and David K. Jones, PhD, Gillings School alumnus and assistant professor of health law, policy and management at Boston University School of Public Health.

Medicaid covers health services for more than 70 million people in the U.S. and constitutes a significant part of state and federal budgets, yet it continues to be part of a huge political struggle related to the Affordable Care Act (ACA).

States currently receive between 50 percent and 74 percent of their Medicaid expenses through federal funding – and up to 85 percent of their costs for the Children’s Health Insurance Program. There is no limit on the funding a state can receive, as the amounts vary based on how many people are enrolled and which services they require. Under the ACA, states that expand Medicaid eligibility receive more generous federal funding.

Bills previously introduced in the House and Senate to repeal major provisions in the ACA also propose major cuts in federal Medicaid spending. Such plans would eliminate the enhanced funding for Medicaid expansion and a substantial decline in Medicaid enrollment. Additionally, states would receive a fixed per-person payment for each Medicaid enrollee or a block grant – a predetermined amount that would not change with the number of enrollees.

Under such proposals to cap Medicaid funding, states could gain more flexibility in spending their health-care dollars but would face difficult decisions about whom to exclude. As the economic burden shifts to the states, the federal government’s commitment to funding health care for the poor would erode.

Oberlander and colleagues note that the limiting of federal Medicaid funding already has been attempted in Puerto Rico, with negative consequences.

“In 1968,” they report, “the statutory cap was set to cover 50 percent of the program’s costs. By 2010, it covered only 18 percent of Puerto Rico’s Medicaid expenditures. If Puerto Rico’s federal Medicaid payments instead were based on per-person income, as is the case in the 50 U.S. states, the federal government would pay 83 percent of the commonwealth’s Medicaid bill.”

Puerto Rico’s response to federal funding limits has been to cover pregnant women and children only up to 50 percent of the federal poverty level and to provide only 10 of the 17 federally mandated Medicaid benefits. In addition, few optional benefits, such as dental services or inpatient mental health services, are offered at all. The damage caused by Hurricane Maria has made the health needs – and the economic challenges – even worse.

“States cannot afford the steep cuts in federal Medicaid financing – about $800 billion over 10 years,” the authors write. “[Yet] Medicaid [remains] an inviting ideological and fiscal target. Indeed, pressures to reduce the federal budget deficit and pay for tax cuts soon could lead Congressional Republicans to reconsider block grants. Puerto Rico’s experiences with capped Medicaid funding are a warning of the dangers that such plans hold for the states.”


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Gillings School of Global Public Health contact: David Pesci, director of communications, (919) 962-2600 or dpesci@unc.edu