CONGRESSMAN PEDRO R. PIERLUISI

SPEAKEROF THE U.S. HOUSE OF REPRESENTATIVES NANCY PELOSI

Panel on Federal Ecomomic Recovery and Health Reform Initiatives

in Puerto Rico

The American Recovery and Reinvestment Act

• The Recovery Act became law in February 2009. The purpose of the

bill is to stimulate the struggling national economy and to reduce

unemployment. Thanks to the support of allies like Speaker Pelosi,

nearly all of ARRA’s provisions―formula grants, competitive grants

and even certain tax credits―ultimately applied to Puerto Rico and

the other U.S. territories.

• As of July 16th, Puerto Rico had received $4 billion under ARRA

(Source: Office of the Vice President). It is estimated that the Island

will receive more than $2.5 billion more over the remainder of this

year and 2011. (Source: Government of Puerto Rico).

The American Recovery and Reinvestment Act

● This funding has served as a lifeline for the struggling Island economy,

preventing a difficult situation from becoming far worse. Puerto Rico’s

current unemployment rate is 16.3%, well higher than any state.

Nonetheless, this number would be significantly higher if it were not for the

Recovery Act, which saved or created thousands of jobs on the Island.

● The billions of dollars in stimulus money is being used, for example, to save

and create jobs in various sectors, to help Island schools and students, to

construct roads and bridges, to support and retrain unemployed workers, to

provide food aid and affordable housing to low-income residents, to improve

the quality of drinking water, and to support clean-energy projects.

The American Recovery and Reinvestment Act

Residents of Puerto Rico were even included in certain tax credit programs established in ARRA from which Island residents are usually excluded.

Puerto Rico workers are receiving the Making Work Pay tax credit, which provided

up to $400 dollars per individual and $800 dollars per family in 2009―and is doing so again in

2010. The importance of this credit, which puts money directly into the pockets of hard-

working Puerto Ricans, cannot be overstated.

Island students and their families are receiving the American Opportunity tax credit created by

the legislation, which will provide a credit of up to $1,000 (per eligible student per year) for

college tuition and related expenses.

Both credits are being offered at the local level, with the Puerto Rico treasury being reimbursed

by the federal treasury for the lost revenue. (This mechanism is necessary because residents

of Puerto Rico are not required to pay federal income taxes on their local income.)

The American Recovery and Reinvestment Act

• ARRA also temporarily increased the federal contribution to Puerto

Rico’s Medicaid program by 30%. At the time, this represented the

largest increase in funding to Puerto Rico’s Medicaid program in the

Island’s history, although it would later be surpassed by the increase

provided in the Affordable Care Act. Early versions of ARRA provided

a much smaller funding increase to Puerto Rico and the other

territories―15% or less. But thanks to the help of Speaker Pelosi and

others, the final bill doubled the increase to 30%.

The American Recovery and Reinvestment Act

• This increase―which applied in fiscal year 2009, fiscal year 2010,

and the first quarter of fiscal year 2011―translates into more than

$185 million in additional federal funding during this time period to

help Puerto Rico provide health care to our most vulnerable

residents.

Congress recently extended this 30% increase for another six

months in the Education Jobs Act and Medicaid Assistance, which

translates into $45 million in additional federal funds for Puerto Rico’s

Medicaid program.

The Affordable Care Act

Background● In March 2010, the landmark health care reform legislation known as the

Affordable Care Act was enacted into law.

Residents of Puerto Rico have always been treated differently than their

fellow citizens in the states under federal health programs.

The most extreme case is Medicaid, a joint federal-state program that

provides health care to the poor. The federal government pays a significant

share of the program’s cost in the states―no less than 50 percent for any

state and up to 83 percent for certain states.

The Affordable Care Act

● By contrast, federal law imposes an annual cap on funding for Puerto Rico’s Medicaid

program. The cap was so low that, over the years, the federal government typically

paid about 18percent of Medicaid costs on the Island.

● In light of such disparate treatment, the ACA represented a once-in-a-generation

opportunity to redress, or at least to mitigate, these unprincipled disparities.

● During the debate over the ACA, Speaker Pelosi was absolutely instrumental in

ensuring that the final bill treated Puerto Rico and the other U.S. territories in a fair

manner.

● The process was difficult, but the final result was extraordinary.

Medicaid

● Under the ACA, federal funding for Puerto Rico’s Medicaid program almost

tripleover the next decade. If the ACA had not passed, Puerto Rico would

have received about $3.1 billion between 2011 and 2019. With the ACA, it

will receive about $8.6 billion.

● Early versions of the bill imposed strict restrictions on how this money could

be used and would have delayed allocation of most of the funding until 2014.

By contrast, the final bill provides Puerto Rico with the new money beginning

in 2011 and gives the Island flexibility to use this funding to most effectively

expand coverage and improve care for its most vulnerable residents.

The Health Insurance Exchange

Although earlier versions of the bill excluded Puerto Rico from the

health insurance exchange, which will come into effect in 2014,

the final bill expressly authorizes Puerto Rico to establish an

health care exchange.

Puerto Rico will receive $925 million to provide premium and cost-

sharing subsidies to residents who qualify for the exchange. If

Puerto Rico elects not to operate an exchange, the Island will

receive this $925 million as additional Medicaid money between

2014 and 2019.

Consumer Protections and Insurance Market Reform

As Secretary Sebelius recently confirmed, nearly all of the consumer

protections and insurance market reforms established in the ACA will

apply in Puerto Rico.

Because of the ACA, insurance companies in Puerto Rico, like insurers

in the states, will no longer be able to:

deny coverage based on pre-existing conditions

terminate coverage when an individual gets sick,

establish lifetime or annual limits on benefits,

Consumer Protections and Insurance Market Reform

Puerto Rico will be required to:

make dependent coverage available to adult children until the age of 26

Submit a justification for any ‘unreasonanle’ increases in premium to the state and federal government

implement an effective appeals process so that patients can appeal decisions such as a claim denial. This prohibitions takes effect this year (for new plans)

Provide coverage for certain health services such as vaccinations

• In addition, Puerto Rico is eligible to obtain funding under multiple

federal grant programs created by the ACA, which are designed to

help jurisdictions enforce these various reforms.

Pending Issues in Congress of Importance to Puerto Rico

• Although much has been accomplished on the health care front, some work

remains to be done, particularly relating to the funding provided by the HITECH Act

for the use of electronic records by Puerto Rico hospitals and with respect to

Medicare. Puerto Rico is subject to unequal treatment under this federal program

in several respects.

• The HITECH Act, enacted as part of ARRA, provides incentive payments to doctors

and hospitals under both Medicaid and Medicare to become meaningful users of

electronic health records. The bill inadvertently excluded Puerto Rico hospitals

from the Medicare bonus payments. I have introduced legislation (H.R. 4669 ) to

rectify this mistake, which is supported by the Puerto Rico Hospital Assocation and

the American Hospital Association. Senator Menendez is championing the fix in

that chamber.

Pending Issues in Congress of Importance to Puerto Rico

In addition, with respect to Medicare, I have introduced legislation (H.R.

1501 ) to correct the disparity in the way that Puerto Rico hospitals are

reimbursed by Medicare. Under current law, our hospitals are paid

significantly less per admitted patient than hospitals in the states. This

is because Puerto Rico is the only jurisdiction that does not receive 100%

of the national payment rates. Instead, payments to Puerto Rico

hospitals are derived from a blended formula that is based on 75% of the

national rates and 25% of the local Puerto Rico rates It is estimated that

this fix would increase the total Medicare reimbursements to Puerto Rico

hospitals by at least $24 million per year, which would greatly improve

patient care on the Island.

Pending Issues in Congress of Importance to Puerto Rico

Another important disparity that we face in Medicare deals with Part B

coverage (medical services). Unlike anywhere else in the United States,

Medicare beneficiaries in Puerto Rico are forced to apply for Part B

coverage. Many do not until they realize they need it. This causes them

to deal with severe lifelong penalties for not having done so on a timely

basis. This coverage is automatic everywhere else and so it makes no

sense that we are treated differently

Fixing this disparity would not have a fiscal impact on the program.

Thank you