Challenges Ahead in Puerto Rico’s Healthcare System

By Jaime Plá Cortés, MHA, Executive President, Puerto Rico Hospital Association

For years, Puerto Rico has faced unequal treatment: we are the only ones subject to an annual federal funding cap and a limited Medicaid matching rate.

Puerto Rico’s Medicaid program, Plan Vital, is financed under a markedly different structure than similar programs in the states. Instead of receiving open-ended federal funding, we are subject to an annual federal funding cap of roughly $500 million and typically receive a 55% Federal Medical Assistance Percentage (FMAP), although Congress has temporarily raised that rate through periodic legislation.

In Puerto Rico, this program serves approximately 1.3 million low-income residents, requiring the local government to cover the remaining 45% of its costs. To put it in perspective, for every dollar spent by the program, the federal government contributes 55 cents, while Puerto Rico must come up with the remaining 45 cents.

Temporary fixes have repeatedly helped. After Hurricane Maria, Congress provided short-term relief that covered Medicaid at 100% federal funding for three months in 2019. Subsequent Joint Budget Resolutions established a formula of 76% federal assistance and 24% local matching funds through September 30, 2027, while also raising the annual limits on federal funding allocations.

The latest federal support, about $4 billion annually from 2023 to 2027, came with certain conditions, including increased annual payments to healthcare providers. However, as that funding nears its expiration, time is running out and the possibility of another fiscal cliff is emerging once again.

The Medicaid cliff, or the looming risk that the program could abruptly run out of federal funding, is a constant. If that happens, Puerto Rico would be forced to make difficult decisions about who remains covered, what benefits can be sustained, and how to pay for care with the money left. For the large population that depends on Medicaid for health insurance, the consequences could be immediate.

Meanwhile, the local government continues to fund its 24% share of the coverage, contributing $1.229 billion in 2025, $1.284 billion in 2026, and a projected $1.326 billion in 2027. When previous allocations from 2023 and 2024 are included, the local government’s total Medicaid contribution reaches $6.085 billion.

Under the Social Security Act, the federal matching rate is capped at 55% (roughly $500 million annually). If that formula were to return, it would increase the fiscal burden on the local government. That is why a permanent solution to Medicaid funding access is urgently needed, requiring swift action from Congress. One of several possible alternatives is eliminating the annual cap imposed on the island. At its core, the goal is to ensure an equitable distribution of funds.

For more than 30 years, the Puerto Rico Hospital Association has advocated before Congress and the federal government to address longstanding inequities in the financing and delivery of healthcare on the island. Throughout that time, the Association has worked to secure a more equitable federal funding structure for Puerto Rico’s Medicaid program, while helping policymakers understand how chronic funding disparities affect patients, providers, health plans and the broader healthcare system. That uncertainty extends beyond institutions, affecting Medicaid beneficiaries by creating ongoing questions about the availability of services, medications, providers and out-of-pocket costs.

Building on those longstanding efforts, a multisectoral task force was created with the goal of, at a minimum, extending Medicaid funding allocations. The effort centers on coordinating all stakeholders in the healthcare sector to strengthen the case for funding parity. In addition, a consensus appears to be emerging around the need to maintain Medicaid funding, including the corresponding $100 million annual increases and yearly cost-of-living adjustments (COLA), while expanding certain services to additional patients.

Looking ahead to 2027, a possible approach would be to extend Puerto Rico’s current Medicaid funding for another five years, with annual increases of roughly $100 million and an 83% FMAP. Ultimately, however, the broader goal is for Puerto Rico to be treated like the states under Medicaid, receiving uncapped, fully federally funded support instead of relying on temporary funding measures.

Protecting Medicaid funding is essential to preventing a potential healthcare access crisis for a significant share of Puerto Rico’s population. These challenges must be addressed over the coming year to ensure the continuity of this critical funding source and provide stability for patients, healthcare providers and institutions across the island. Ultimately, the decisions ahead will determine whether Puerto Rico can move toward a more equitable and sustainable healthcare system, one that ensures continued access to essential services and strengthens the providers that deliver them.