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Puerto Rico Health Care Update

This week, HMA Principal Juan Montanez, of our Washington, D.C. office, provides an update on the fiscal crisis in Puerto Rico, the relationship between the fiscal crisis and Puerto Rico’s Government Health Plan (GHP), as well as what may lie ahead for the GHP. Puerto Rico has been in the news over the last couple of years, primarily because of the central government’s inability to meet its debt obligations. In 2015 the central government’s finances reached a point where it could have literally run out of cash to service its debt and fund regular operations. A significant contributor to this fiscal crisis is the cost of and associated funding for the GHP, known colloquially on the island as Mi Salud (“My Health”). This article provides some history and context on the GHP, in addition to outlining current proposals for addressing the program’s impending funding “cliff.”

About the GHP

The GHP in its current form originated in the 1990s, when then Governor Pedro Rossello (a physician) devised a major reform of the island’s public healthcare system. Using proceeds from the sale of numerous health care facilities previously owned by the central government as “seed funding,” in conjunction with matched federal Medicaid funding, the Pedro Rossello administration pursued what is still referred to as “Reforma” – a managed care program whereby individuals below a locally set poverty level could access health care services. The program has undergone changes over time, but key elements have remained constant:

  • A fairly comprehensive package of physical, behavioral and oral health services for both children and adults.
  • No choice of plans or benefit packages.
  • No coverage of long-term services and supports.
  • No coverage of non-emergency medical transportation.
  • No coverage of non-emergency services outside of Puerto Rico.

These elements are driven by local policy, the reality that federal Medicaid funding is capped – i.e. not entitlement level funding as in the U.S. mainland – and the fact that U.S. territories are exempt from the provider freedom of choice provisions of the Social Security Act (SSA).

Currently the GHP is a full-risk capitated managed care program where five MCOs are responsible for all covered benefits to GHP members residing in one of nine regions; only one MCO operates in each region. At present the GHP has approximately 1.3 million members (this figure does not include approximately 250,000 Medicaid-Medicare duals). Current spend on the GHP (excluding duals) is approximately $2.6 billion per year, or about $170 per member per month. This figure is quite low compared to Medicaid program spending in the mainland for two major reasons – the difference in covered benefits between the GHP and Medicaid programs in the U.S. and the difference in costs, particularly labor costs, between the Puerto Rico and the U.S.

At present GHP funding is dependent on three distinct federal funding pools:

  1. Puerto Rico’s CHIP allotment, which is approximately $180 million per year.
  2. The aforementioned capped Medicaid funding, which is statutorily prescribed in the SSA, and amounts to approximately $360 million per year.
  3. A non-recurring Medicaid allotment, which was earmarked to Puerto Rico in the ACA. This funding, which totals approximately $6.3 billion, was designated for Puerto Rico to access between 2011 and 2019.

The GHP has approximately the same level of membership it had prior to the ACA. Even so, the GHP is projected to exhaust the newly available revenue provided in funding pool 3 this year. This impending “Medicaid funding cliff” has received significant news coverage. Prior to these funds being available, the Puerto Rican government was employing general funds to supplement federal funds and maintain a high level of GHP membership – over 40 percent of the island’s population. This placed considerable pressure on the local budget, and has been cited as one of the major contributors to the island’s current debt situation. Upon the exhaustion of funding pool 3, the government will have to substitute general funds for these federal funds – which technically it does not have – or make drastic cuts in GHP benefits and/or membership.

The GHP’s Future

As part of a cost control plan required by the Fiscal Oversight Board currently overseeing Puerto Rico government finances, current Governor Ricardo Rossello – Pedro Rossello’s son – proposed a series of initiatives aimed at controlling the rate of growth in GHP spending:

  • Establishment of uniform fee schedules anchored to Medicare reimbursement
  • Changes in the current “profit-sharing” arrangement between the government and the GHP MCOs
  • Implementation of program integrity policies and associated information systems
  • Reductions in prescription drug spending through increased discounts on brand drugs, enforcement of generic drug dispensing, updates to the GHP’s preferred drug list and implementation of shared-savings initiatives
  • Adjustments to the GHP benefit package, which could include differential benefit packages for different types of members
  • Changes in the GHP’s operating model which may include moving to a single region where multiple entities compete for members and alternative entities to MCOs including ACO-like entities

While the Fiscal Oversight Board approved the cost control plan, details on the aforementioned proposals have not been provided. HMA will closely monitor the evolution of these proposals. For more information, please contact Juan Montanez at jmontanez@healthmanagement.com.

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