The Board notes Medicaid funding shortfalls starting FY26
The Financial Oversight and Management Board has conditionally approved two sets of contract actions submitted by the Puerto Rico Health Insurance Administration (ASES), while warning that rising Medicaid costs and the expiration of federal funding could increase the Commonwealth’s fiscal burden over the next two years.
The approvals issued in separate letters dated June 30 and July 2 point to the same underlying concern: Puerto Rico’s Medicaid program is becoming more difficult to sustain as temporary federal support nears expiration.
In the June 30 letter, the Board approved the eighteenth amendment to ASES’s Plan Vital contracts with MMM Multihealth, Triple-S, and Menonita, subject to conditions. The amendment retroactively increases capitation rates for the Third Rating Period by 1.5 percent, adding $35.1 million to reconcile actual medical and pharmacy costs for Fiscal Year 2025. ASES said the adjustment will be paid entirely from Special Revenue Funds tied to Medicaid drug rebates, but the Board made its approval contingent on receiving and reviewing a formal budget reprogramming request to release those funds.
The Board also noted that ASES has not finalized rates for the Fourth Rating Period, which began on October 1, 2025. It warned that any future rate increases must be backed by identified Commonwealth resources. ASES’s projections indicate Puerto Rico will exceed the federal Medicaid funding cap, creating shortfalls of about $63.5 million in FY2026, $8.7 million in FY2027, and $15.4 million in FY2028. Costs above the cap are ineligible for federal matching funds and must be covered entirely with local dollars.
Those concerns are expected to intensify in FY2028, when temporary federal provisions are set to expire. These include the enhanced 76 percent Federal Medical Assistance Percentage (FMAP) and approximately $4 billion in supplemental Medicaid funding. Without that support, the Commonwealth could be required to absorb a much larger share of Plan Vital’s costs. The Board urged ASES to evaluate long-term funding options and identify sufficient local resources to keep the program operating beyond 2028.
The July 2 letter addressed ASES’s proposed 2027 Platino wraparound contracts with MCS Advantage, MMM Healthcare, and Triple-S Advantage. The Board approved those contracts, subject to conditions. The agreements set an $80 per-member-per-month rate for prescription drug benefits for dual-eligible beneficiaries, a $8 decrease from the 2026 rate. ASES attributed the decrease to higher federal Medicare Part D subsidies and drug-price reforms under the Inflation Reduction Act. The projected Calendar Year 2027 cost is $274 million, funded by federal, general fund, and special revenue sources.
As with Plan Vital, the Board required ASES to secure additional Special Revenue Funds via a prior-year release and to submit updated fund availability certifications once the FY2028 budget is finalized. The Board also directed ASES to provide a spending assessment by December 15, 2026, comparing actual expenditures to budget projections.
The Board tied the Platino contracts to the same broader warning: any increase in Medicaid program costs, including wraparound payments, must be fully funded by Commonwealth resources. It also noted that ASES submitted the Platino contracts just five days before the requested execution date, falling short of the 15-business-day requirement under the Board’s Contract Review Policy.
The Board also pushed ASES to begin a new competitive procurement process for Plan Vital services. ASES has already used one contract extension through September 2026 and must complete a full procurement cycle before the final allowable extension expires on September 30, 2027. The Board requested quarterly status updates beginning September 30 of this year.
Together, the letters indicate that the Board is allowing ASES to move forward with key health insurance contracts, but only while pressing the agency to prove that Puerto Rico can pay for Medicaid costs, which may soon rely more heavily on local funding.
