Home Commentary Op-ed Analysis: V.I. Shortchanged by Federal Medical Funds Formulae

Analysis: V.I. Shortchanged by Federal Medical Funds Formulae


Oct. 25, 2005 — The Virgin Islands and other insular areas are short-changed in the distribution of federal health funds.
This conclusion, not stated quite that baldly in a recent report, can be drawn from a just-issued federal publication, "U.S. Insular Areas: Multiple Factors Affect Federal Health Care Funding." It is a product of the Government Accountability Office (GAO), a Congressional watchdog agency.
As Delegate Donna M. Christensen put it in a press release, "This report confirms what … delegates have been saying for years: that federal funding to the islands for health care is less per capita than it is in the states."
How Government House on St. Thomas views the situation, however, is unclear. Unlike other insular areas such as Samoa, Puerto Rico, and the Marianas, the V.I. government skipped the chance to argue for a more rational distribution of federal health care funds.
How much money?
The controversial distribution of funds does not mean that islanders are healthier than people living on the mainland, nor that island governments spend more of their funds on health issues than the States do.
No, the distribution, the report tells us, is primarily caused by formulae established by Congress, such as the cap on spending for Medicaid in the territory.
One critic of this report, writing to GAO for the Commonwealth of the Northern Mariana Islands, calls these formulae "the terrible wrong of outright discrimination in federal health care funding against… the insular areas."
How many federal health dollars come to the Virgin Islands? And how does this flow compare to the distribution of comparable moneys on the mainland?
As to the first point, the report notes the federal expenditures in the Virgin Islands in fiscal year 2003:

Program    Expenditures in millions of $
Medicare $37.4
HHS grants $14.8
Medicaid $6.5
State Child Health Ins. Program $.9
Total $59.5

Medicare is the health insurance program for older and (after a waiting period) disabled Social Security beneficiaries, no matter how poor or wealthy; the total spent rises a bit every year, as have the Medicaid totals.
The Department of Health and Human Services (HHS) grants are usually to health care institutions, and the total varies from year to year as applications are received and judged. Medicaid provides health care to various groups of low-income persons. SCHIP is for low-income children, and its grants to the Virgin Islands have diminished in recent years.
There are differences among the flows of these funds. Medicare is involved in direct services; it reacts to individuals’ doctors and hospital bills and is open-ended in the sense that all appropriate bills are paid without a maximum or a cap. This program has strong popular support.
The HHS grants, while smaller than the Medicare expenditures, also have a fairly strong level of popular support, as they deal with the health of the entire public. Medicaid and SCHIP, generally, have less political support as they are aimed at the poor. Medicaid programs for the islands, it is generally believed, have even less support because the target population is not only poor, it cannot vote for voting members of Congress.
Medicaid, unlike Medicare, has caps for its island programs. The report indicates that every year the Virgin Islands program runs into its cap, and has to wait for the following fiscal year to pay some of its bills.
Given this policy environment, how much is spent per capita on these programs in the Virgin Islands, and on the mainland? These are the numbers for Medicare and Medicaid:

Program     Virgin Islands  The Mainland
Medicare, per beneficiary $3,178 $6,788
Medicaid, per capita (entire population) $60 $565

So, the distribution of the Medicaid funds is much more tilted against the Virgin Islands and the other insular area than the Medicare system is. The latter program relates directly to individual recipients, while Medicaid services are delivered through states and territories and thus are more subject to limitations.
On the other hand, there is a slight tilt in the other direction in the distribution of HHS grants. Because these are often formula grants, with larger per capita grants for small states (and territories) the Virgin Islands does better with these formulae than with Medicare and Medicaid.
But why are Medicare expenditures per beneficiary lower in the Virgin Islands than on the mainland? Are the Virgin Islands elderly less sick than those on the mainland? Are the costs of medical care half as high in the territory than on the mainland?
None of these suggested variables is examined in the study, but there is one grim set of numbers that helps explain why Medicare costs are lower in the Virgin Islands.
When it comes to major medical procedures among Medicare Part B beneficiaries, there are 297 of these operations per 1,000 beneficiaries per year on the mainland, but only 182 per 1,000 in the Virgin Islands. The report cites: "major cardiovascular procedures such as angioplasty, pacemaker insertion and bypass surgery" as examples of these "major procedures."
Are older Virgin Islanders not getting the operations they need? Are some mainlanders getting operations they do not need? The report is silent on the questions.
Medicare Maze
Another reason why total Medicare expenditures in the Virgin Islands are below Mainland levels may relate to the nitty-gritty of how physicians are paid by the program. Some Virgin Island doctors do not participate in the program because of their stated objections to how their bills are handled.
Source reporter Molly Morris found in a series of interviews that while all the doctors she spoke to were in favor of the program as a matter of public policy, most were vocal about the time their offices and/or billing services must spend with the bill-paying agency — Triple S — in Puerto Rico.
"The office in Puerto Rico is extremely difficult to communicate with" one physician said, "Most people here don’t speak Spanish and most Puerto Ricans do not speak English. Also, I have sent in forms up to 10 times, and they will say they have not received them."
One doctor told Morris that he did not work with Medicare any longer because of the lack of timely payments, and what he regarded as insufficient payment levels.
The percentage of physicians in the Virgin Islands actually participating in Medicare is hard to measure. The Medicare system said that 75 of 83 physicians known to them participated, but there are clearly more than 83 physicians in the islands.
The Source ran a partial sample of 20 of the physicians in the phone book against an Internet listing of Medicare-accepting doctors, and found that 13 of the 20 participated. Adding these together one gets a participation rate of about 85 percent; this rate appears to be lower than that of the mainland, though hard data are lacking.
In contrast to Morris’ findings in the islands, this reporter and his wife have been in touch with well over 20 physicians and medical service providers on the mainland over the last half dozen years, and remember only one (a dermatologist) who would not take Medicare patients.
The Report
While the GAO report raises important public policy issues and offers previously unseen statistical information, it is both a useful and a frustrating document.
Like other GAO documents — and this reporter has been reading them for close to 40 years — this one has the usual very careful, committee-built text, shorn of any glimmer of color or fire.
Further, as Debra Knapp, assistant attorney general for the Marianas, points out in her vibrant commentary on the GAO publication: "This report contains no recommendations. Other GAO reports are replete with recommendations."
Another problem is the structure of the report. It is directed at Washington policy officials and is or
ganized around federal programs. It would have been helpful had there been five chapters; each examining how the federal funding practices impacted each of the five insular areas. Even better would have been territory-specific suggestions about how local governments and health care establishments could improve health conditions within the complex web of federal programs laid on by Washington.
Setting aside the literary and organizational characteristics of the report, the Marianas, American Samoa, and Puerto Rico provided detailed comments on the document. These can be seen as appendices to the report and will be available to anyone reading the main document. The Federal Departments of Health and Human Services and Interior also commented. Further, Christensen mailed out a press release with her reactions.
The comments for the Marianas, written by Knapp, are particularly trenchant.
But despite the health care and fiscal significance of the report — the first one in many years on the subject — the Government of the Virgin Islands was silent. Unlike Samoa, Puerto Rico, and the Marianas, it had no reaction to the drafts of the report sent to it and missed a chance to augment the dialogue on this subject and to argue for a more rational distribution of federal health care funds.
Source readers wanting to read either the summary, or the whole 71-page document, can bring it up on their computers by clicking here.
For thoughts about how, even within the constraints of existing federal programs, the territorial government could expand the flow of federal dollars to these islands see the op-ed column "Getting More U.S. Health Dollars into the Virgin Islands Economy."


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