A Proposal to Stabilize Puerto Rico's Debt Through Medicaid Equity

Abstract

In January 2022, a federal judge ruled that a new debt restructuring framework for Puerto Rico would be in effect to partially relieve the island of its debt obligations to creditors. Despite the judge’s ruling, Puerto Rico remains in a vulnerable economic state and a dysfunctional political environment with a slight projection for growth. Without growth, debt sustainability is a challenge. This proposal to the Majority Leader Chuck Schumer offers adjustments to the excising PROMESA law, which focuses on debt restructuring and fiscal oversight. The recommendation creates a more equitable Medicaid system and expands Medicaid funding for Puerto Rico beyond the statutory limits, along with implementing a Medicaid-focused control mechanism to minimize fraud, waste, and abuse. By stabilizing Medicaid, one of the main cost drivers in Puerto Rico, debt sustainability is a strong possibility, and the territory will be able to meet financial obligations to creditors and its citizens. This paper further examines the current political climate within the Democratic-held Congress and the Executive branch.