Can Puerto Rico Really Have it Both Ways?

If you live in the DC area then you may have seen the advocacy campaign that began running recently regarding Puerto Rico’s looming healthcare crisis.

The million-dollar campaign is being spearheaded by the Puerto Rico Healthcare Crisis Coalition and highlights what the coalition and many Puerto Ricans feel is unfair and dismissive treatment from Capitol Hill.

That perception may not be new when it comes to the Commonwealth’s relationship with Washington but events over the last decade or so have culminated in a serious reexamining of that relationship, both in Puerto Rico and on the mainland.

The coalition’s campaign, when viewed in the context of those events, has left me wondering: Can Puerto Rico continue to have it both ways?

Autonomy or Statehood?

What struck me most in the language of the PHRCC’s campaign was the repeated insistence that Puerto Rico get the same treatment as “the other 50 states.” The issue in these statements is that Puerto Rico is not in fact a state.

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Since becoming a U.S. territory, Puerto Rico has voted four times to determine public sentiment with regard to U.S. statehood. While each of these votes has been subject to the political and social whims of the various decades in which they were held, one theme seems clear: The majority of Puerto Ricans do not want statehood.

While Puerto Rico’s unique status as a semi-autonomous territory has done much to spur the patriotism of its citizens, also preserving a cherished and profitable relationship with the United States, it can be argued that it is also preventing Puerto Rico from being able to robustly confront its economic woes.

A Little History

Puerto Rico has endured almost 10 years of a severe economic downward spiral, the roots of which go back decades.

Since ratifying its constitution and becoming a semi-autonomous U.S. territory in the 1950s, a large portion of Puerto Rico’s economy was based on offering corporate tax incentives, primarily in manufacturing.

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This began to shift dramatically after corporate tax code reforms were made under the Clinton administration. One of the immediate results of these reforms was a sharp decline in manufacturing, which had become a pillar of the Puerto Rican economy.

In response, the Puerto Rican government began to pursue new economic policies, and in many cases had policies forced upon it by the U.S. government, with extremely mixed results.

The aftermath of these reforms, combined with the U.S. banking crisis of the mid-2000s, set the stage perfectly for Puerto Rico’s current crisis.

Back to Health Care

Now in the grips of the worst economic depression in its history, Puerto Rico’s status as semi-independent is preventing it from taking the same measures that would be available to U.S. municipalities, such as Chapter 9 bankruptcy protection. And since Puerto Rico has no representation in the U.S. Congress, it often receives the short end of the stick from Capitol Hill when it comes to policy.

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Health care is a good example. Puerto Rico’s citizens pay the same amount in Medicare and Medicaid taxes as other Americans, but receive a fraction of the federal funding. Puerto Rico has the highest Medicare Advantage enrollment in the U.S. and yet receives 60 percent of the average rate. Policies such as these have contributed to a steady drain of trained medical staff, as physicians leave for the mainland and better compensation.

With this in mind, it’s no surprise that a recent decision by the Centers for Medicare & Medicaid Services (CMS) became the flashpoint for the PHRCC’s campaign. The CMS announced it will implement an 11 percent cut to Puerto Rico’s Medicare Advantage reimbursements next year, even as the 50 U.S. states see their reimbursements go up an average of 3 percent.

It’s estimated that these reductions will pull $500 million out of the Puerto Rican health care system. On top of that, a provision of the Affordable Care Act that provides significant federal grants to Puerto Rico’s Medicare system is due to expire in 2017.

When you consider that health care makes up 20 percent of Puerto Rico’s Gross Domestic Product, it isn’t hard to understand why the PRHCC is hitting the panic button. If the healthcare sector implodes, then it could be the final nail in the coffin of the Puerto Rican economy.

Perhaps it’s time for Puerto Rico to make a choice one way or the other.

Mat Gries is an account manager at Goddard Gunster.

Can Puerto Rico Really Have it Both Ways?