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  October 9, 2017

Puerto Rico Faces a Medicaid Crisis

On top of the devastating impact of recent hurricanes and an ongoing debt crisis, Puerto Rico's Medicaid funding will run out as early as the end of the year unless Congress acts explains CEPR's Mark Weisbrot
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AARON MATÉ: It's The Real News. I'm Aaron Maté. Puerto Rico's recovery faces many challenges. Hurricane Maria caused tens of billions of dollars in damages on top of the island's more than $100 billion in debt. There's another looming threat. Unless Congress takes action, Puerto Rico's Medicaid funding will run out as early as the end of the year. That would mean stripping about half a million people of their health insurance right when they may need it most.

Mark Weisbrot is co-director of the Center for Economic and Policy Research. Welcome, Mark.

MARK WEISBROT: Thanks for having me, Aaron.

AARON MATÉ: This issue of Medicaid has not gotten very much attention, but as I said, it's a looming threat. As early as the end of the year, the money for it could run out. Explain for us the situation.

MARK WEISBROT: Puerto Rico doesn't get the same kind of Medicaid funding as the states do. In fact, it gets much less. As a result, that contributed a lot to the debt that they have, because it's hundreds of millions of dollars a year that they lose as compared to what they would get reimbursed from the federal government if they were a state. There was a temporary allocation of money to make up for Obamacare, because they weren't covered by that, again because they're not a state. That's what's running out.

We actually just did a paper on that, which people can get at That's the Center for Economic and Policy Research. The paper looked at what's going to happen when this money runs out and more and more people leave Puerto Rico to go to the United States. We just looked at the states that they go to. They're going to get Medicaid here, which is much, much more expensive. If the federal government doesn't do anything, it will cost them and the states somewhere between $11 and $23 billion over the next decade, more than if they just allocated the money so that people would stay in Puerto Rico and be treated there.

AARON MATÉ: In terms of the scale of this, this could impact about half a million people?

MARK WEISBROT: I don't know the exact number of people. First of all, it also depends on, our paper was looking at how many would migrate as well. You've had 10% of the population's left the island in the last decade and of course after the hurricane, it could accelerate even more.

AARON MATÉ: How has Puerto Rico's financial situation impacted its ability to pay for Medicaid? So many companies are on the island, like Walmart, in part because of the huge tax loopholes that they enjoy. To what extent has that contributed to an inability of the island to cover the Medicaid expenses of its residents?

MARK WEISBROT: The whole crisis in Puerto Rico is a result of a series of decisions that are mostly made in Washington and in the international treaties that Washington signs that Puerto Ricans don't really have a voice in. There were tax loopholes for corporations investing there and some of those were actually eliminated. Those are taxes to the federal government. That actually brought, before they were eliminated, investment to the island. That's why you see these articles in the paper today about the pharmaceutical industry. There's a big lot of drugs that the U.S. needs, pharmaceuticals are actually produced there.

The real crisis is a result, the most acute part of the crisis right now is the debt, because in March of last year, the U.S. government, the Congress and the administration, appointed a financial oversight board. They came up with a 10-year austerity program, after Puerto Rico has already suffered 10 years of no growth, really, since 2005. The economy stopped growing. Here they are with three times the child poverty rate we have in the United States, and 2.5 times the unemployment. We just had a lost decade without any growth, and the U.S. government is imposing or trying to impose another 10 years like that just to squeeze as much possible debt service out of them, which they really cannot pay.

I think that's what most people don't really know, most people in the United States. They see the hurricane. They see the damage, the tens of billions of dollars of reconstruction that they're going to need, and they don't see that if even this hurricane had not even hit, they got hit with something worse than a hurricane that was already condemning the island to at least a quarter century of no growth and increasing poverty and a spiral of out-migration and economic shrinking. That is their future even without the hurricane, and now they have this on top of it.

AARON MATÉ: Mark, is it fair to say that it was worse than the hurricane, given the scale of devastation that we're seeing right now?

MARK WEISBROT: I think so. The damage from the hurricane is not as much as what you would get from another decade and a half or two decades of economic decline.

AARON MATÉ: Presumably at least, the island would at least still have power, but I digress. Let me just correct the figures that I said before. Actually, about half the island is enrolled in Medicaid services of some kind, so that's half of 3.4 million people. If the funds run out as early as the end of the year, it would mean about 500,000 people being cut off the program entirely.

Mark, over the past week we've seen a few developments on this debt front. President Trump initially suggested that the debt will have to be wiped out. The next day, his budget director, Nick Mulvaney said there's going to be no federal bailout for Puerto Rico. How do you think, as we wrap up here, it's going to play out?

MARK WEISBROT: It's really tough, because you have, even if that whole austerity plan that the financial oversight board proposed had worked the way it's supposed to, you still, and that's with massive cuts and healthcare, in pensions, and education, they want to cut the university by 30%, even if they did all that, they would only pay the creditors $7.9 billion of the $74 billion that's owed. That's what I mean by this debt is not sustainable. It's going to have to be canceled. Trump was actually right in saying that they have to cancel the debt. Of course, once his cabinet weighed in, they walked back from it. You've got Goldman Sachs and other creditors that are involved. That's going to have to be ... They literally cannot pay this debt. The question really is, how much suffering is the federal government going to inflict on Puerto Rico before they actually recognize that reality?

AARON MATÉ: How will that outcome be determined?

MARK WEISBROT: That's very tough to say. You did have 145 members of Congress sign that letter for more U.S. military resources for distribution of food and gasoline and everything, so there is a voice in Congress. There's the Congressional Progressive Caucus. There's various members of Congress who care about it. You will continue to get pushback from Congress, but at this point it's really not clear how it's going to play out. Obviously, they cannot pay this debt. They cannot suffer through another decade and a half of economic decline, increasing unemployment, poverty, immigration. These are not viable. They're not solutions but they're not even viable scenarios.

Something is going to have to give. There is a block in Congress. There are 145 members of Congress signed the last letter to Trump for more relief and more U.S. military resources to be deployed for distribution and you do have other Congressional offices that are fighting for Puerto Rico, but so far, we don't really see anything from the administration or the Congress as a whole, so we really don't know how it's going to end.

AARON MATÉ: Meanwhile, have you picked up any signals from the Wall Street firms that hold the debt, what they're going to be doing in their approach to this issue, these bonds that they hold that they presumably want a return on?

MARK WEISBROT: They're in part right now, with the government of the island trying to get more, because they rejected, imagine, they actually rejected this completely horrible austerity plan from the fiscal oversight board. They wouldn't accept it because they didn't think it gave them enough. They want to squeeze more.

It's actually a little bit stupid from their point of view, because if they allowed the economy to grow and then had a restructuring of the debt and the cancellation of a lot of it, which they're never going to get anyway, they could even possibly get a little more in the future. That's what happened with Argentina, for example, when they had their default and restructuring. The creditors still got some money further in, after the economy had recovered.

AARON MATÉ: We'll leave it there. Mark Weisbrot, co-director of the Center for Economic and Policy Research, thank you.


AARON MATÉ: Thank you for joining us on The Real News.


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