U.S. Congress to give Puerto Rico short-term Medicaid help

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A worker takes off the U.S and Puerto Rican flag after a rally of U.S. Democratic presidential candidate Bernie Sanders in San Juan

By Robin Respaut and Nick Brown

(Reuters) – Ailing Puerto Rico would receive $295 million in Medicaid funding from the federal government as part of the U.S. Congress’ spending plan to avert a government shutdown, Governor Ricardo Rossello said on Monday.

Rossello said in a statement in Spanish that he was “grateful” for the addition in the spending bill reached late Sunday night.

The full House of Representatives and Senate must approve the bipartisan pact, though prompt passage was expected this week.

Puerto Rico’s public health system is nearly insolvent, a key driver of emigration that has decimated the U.S. territory’s population as it wrestles with $70 billion in debt, a 45 percent poverty rate and unemployment twice the U.S. average.

The island faces a deadline at midnight Monday to negotiate a debt-cutting agreement with creditors, or open itself up to lawsuits over debt defaults. It could also file for a modified version of U.S. bankruptcy to protect itself from such litigation.

One creditor, who owns insured Puerto Rican bonds, said the proposal was “not even close to a good proposal.

“Not just lowball but also not a well constructed proposal,” said Sean Burgess, portfolio manager and lead trader for Puerto Rico strategy at Sarasota, Florida-based Cumberland Advisors.

BANKRUPTCY?

The island’s aggressive lobbying for federal healthcare funding in Washington is seen as a possible detractor to filing bankruptcy, which would not garner sympathy from Congressional Republicans who opposed the in-court restructuring provision in last year’s Puerto Rico rescue law, PROMESA.

The $295 million will help fund the island’s Medicaid budget for fiscal year 2018, which starts July 1, and enable Puerto Rico to contract with managed care health insurance companies that administer the Medicaid program.

Without the money, the island would have to run the Medicaid program on its own, a massive undertaking that Puerto Rico is not equipped to do, said island Health Secretary Dr. Rafael Rodríguez-Mercado.

But Puerto Rico will still need an additional $300 million to fund its entire Medicaid budget for fiscal year 2018, Rodríguez-Mercado told Reuters in an interview on Monday. He hopes that money will come from the Children’s Health Insurance Program (CHIP) in September.

Puerto Rico’s $2.76 billion Medicaid budget has been funded in part by a one-time pool of money provided to U.S. territories under the Affordable Care Act, commonly referred to as Obamacare.

That money is expected to run out by the end of 2017, triggering what island officials call the “Medicaid cliff” — the return to a federal funding cap of $321 million for Puerto Rico’s Medicaid program.

U.S. territories receive proportionately less federal Medicaid reimbursement than U.S. states. Prior to Obamacare, Puerto Rico partially funded its Medicaid budget through bonds, exacerbating the island’s debt crisis.

In recent weeks, Governor Ricardo Rossello has been lobbying to boost Puerto Rico’s healthcare funding, warning that Washington’s failure to do so would leave some 900,000 people without health coverage.

(Reporting by Robin Respaut in San Francisco and Nick Brown in New York. Additional reporting by Richard Cowan in Washington; Editing by Daniel Bases)

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