1. CONGRESSMAN PEDRO R. PIERLUISI SPEAKEROF THE U.S. HOUSE OF REPRESENTATIVES NANCY PELOSI Panel on Federal Ecomomic Recovery and Health Reform Initiatives in Puerto Rico

2. The American Recovery and Reinvestment Act The Recovery Act became law in February 2009. The purpose of the bill is to stimulate the struggling national economy and to reduce unemployment. Thanks to the support of allies like Speaker Pelosi, nearly all of ARRAs provisionsformula grants, competitive grants and even certain tax creditsultimately applied to Puerto Rico and the other U.S. territories. As of July 16th, Puerto Rico had received $4 billion under ARRA (Source: Office of the Vice President). It is estimated that the Island will receive more than $2.5 billion more over the remainder of this year and 2011. (Source: Government of Puerto Rico).

3. The American Recovery and Reinvestment Act This funding has served as a lifeline for the struggling Island economy, preventing a difficult situation from becoming far worse. Puerto Ricos current unemployment rate is 16.3%, well higher than any state. Nonetheless, this number would be significantly higher if it were not for the Recovery Act, which saved or created thousands of jobs on the Island. The billions of dollars in stimulus money is being used, for example, to save and create jobs in various sectors, to help Island schools and students, to construct roads and bridges, to support and retrain unemployed workers, to provide food aid and affordable housing to low-income residents, to improve the quality of drinking water, and to support clean-energy projects.

4. The American Recovery and Reinvestment Act Residents of Puerto Rico were even included in certain tax credit programs established in ARRA from which Island residents are usually excluded. Puerto Rico workers are receiving the Making Work Pay tax credit, which provided up to $400 dollars per individual and $800 dollars per family in 2009and is doing so again in 2010. The importance of this credit, which puts money directly into the pockets of hard- working Puerto Ricans, cannot be overstated. Island students and their families are receiving the American Opportunity tax credit created by the legislation, which will provide a credit of up to $1,000 (per eligible student per year) for college tuition and related expenses. Both credits are being offered at the local level, with the Puerto Rico treasury being reimbursed by the federal treasury for the lost revenue. (This mechanism is necessary because residents of Puerto Rico are not required to pay federal income taxes on their local income.)

5. The American Recovery and Reinvestment Act ARRA also temporarily increased the federal contribution to Puerto Ricos Medicaid program by 30%. At the time, this represented the largest increase in funding to Puerto Ricos Medicaid program in the Islands history, although it would later be surpassed by the increase provided in the Affordable Care Act. Early versions of ARRA provided a much smaller funding increase to Puerto Rico and the other territories15% or less. But thanks to the help of Speaker Pelosi and others, the final bill doubled the increase to 30%.

6. The American Recovery and Reinvestment Act This increasewhich applied in fiscal year 2009, fiscal year 2010, and the first quarter of fiscal year 2011translates into more than $185 million in additional federal funding during this time period to help Puerto Rico provide health care to our most vulnerable residents. Congress recently extended this 30% increase for another six months in the Education Jobs Act and Medicaid Assistance, which translates into $45 million in additional federal funds for Puerto Ricos Medicaid program.

7. The Affordable Care Act Background In March 2010, the landmark health care reform legislation known as the Affordable Care Act was enacted into law. Residents of Puerto Rico have always been treated differently than their fellow citizens in the states under federal health programs. The most extreme case is Medicaid, a joint federal-state program that provides health care to the poor. The federal government pays a significant share of the programs cost in the statesno less than 50 percent for any state and up to 83 percent for certain states.

8. The Affordable Care Act By contrast, federal law imposes an annual cap on funding for Puerto Ricos Medicaid program. The cap was so low that, over the years, the federal government typically paid about 18percent of Medicaid costs on the Island. In light of such disparate treatment, the ACA represented a once-in-a-generation opportunity to redress, or at least to mitigate, these unprincipled disparities. During the debate over the ACA, Speaker Pelosi was absolutely instrumental in ensuring that the final bill treated Puerto Rico and the other U.S. territories in a fair manner. The process was difficult, but the final result was extraordinary.

9. Medicaid Under the ACA, federal funding for Puerto Ricos Medicaid program almost tripleover the next decade. If the ACA had not passed, Puerto Rico would have received about $3.1 billion between 2011 and 2019. With the ACA, it will receive about $8.6 billion. Early versions of the bill imposed strict restrictions on how this money could be used and would have delayed allocation of most of the funding until 2014. By contrast, the final bill provides Puerto Rico with the new money beginning in 2011 and gives the Island flexibility to use this funding to most effectively expand coverage and improve care for its most vulnerable residents.

10. The Health Insurance Exchange Although earlier versions of the bill excluded Puerto Rico from the health insurance exchange, which will come into effect in 2014, the final bill expressly authorizes Puerto Rico to establish an health care exchange. Puerto Rico will receive $925 million to provide premium and cost- sharing subsidies to residents who qualify for the exchange. If Puerto Rico elects not to operate an exchange, the Island will receive this $925 million as additional Medicaid money between 2014 and 2019.

11. Consumer Protections and Insurance Market Reform As Secretary Sebelius recently confirmed, nearly all of the consumer protections and insurance market reforms established in the ACA will apply in Puerto Rico. Because of the ACA, insurance companies in Puerto Rico, like insurers in the states, will no longer be able to: deny coverage based on pre-existing conditions terminate coverage when an individual gets sick, establish lifetime or annual limits on benefits,

12. Consumer Protections and Insurance Market Reform Puerto Rico will be required to: make dependent coverage available to adult children until the age of 26 Submit a justification for any unreasonanle increases in premium to the state and federal government implement an effective appeals process so that patients can appeal decisions such as a claim denial. This prohibitions takes effect this year (for new plans) Provide coverage for certain health services such as vaccinations In addition, Puerto Rico is eligible to obtain funding under multiple federal grant programs created by the ACA, which are designed to help jurisdictions enforce these various reforms.

13. Pending Issues in Congress of Importance to Puerto Rico Although much has been accomplished on the health care front, some work remains to be done, particularly relating to the funding provided by the HITECH Act for the use of electronic records by Puerto Rico hospitals and with respect to Medicare. Puerto Rico is subject to unequal treatment under this federal program in several respects. The HITECH Act, enacted as part of ARRA, provides incentive payments to doctors and hospitals under both Medicaid and Medicare to become meaningful users of electronic health records. The bill inadvertently excluded Puerto Rico hospitals from the Medicare bonus payments. I have introduced legislation (H.R. 4669 ) to rectify this mistake, which is supported by the Puerto Rico Hospital Assocation and the American Hospital Association. Senator Menendez is championing the fix in that chamber.

14. Pending Issues in Congress of Importance to Puerto Rico In addition, with respect to Medicare, I have introduced legislation (H.R. 1501 ) to correct the disparity in the way that Puerto Rico hospitals are reimbursed by Medicare. Under current law, our hospitals are paid significantly less per admitted patient than hospitals in the states. This is because Puerto Rico is the only jurisdiction that does not receive 100% of the national payment rates. Instead, payments to Puerto Rico hospitals are derived from a blended formula that is based on 75% of the national rates and 25% of the local Puerto Rico rates It is estimated that this fix would increase the total Medicare reimbursements to Puerto Rico hospitals by at least $24 million per year, which would greatly improve patient care on the Island.

15. Pending Issues in Congress of Importance to Puerto Rico Another important disparity that we face in Medicare deals with Part B coverage (medical services). Unlike anywhere else in the United States, Medicare beneficiaries in Puerto Rico are forced to apply for Part B coverage. Many do not until they realize they need it. This causes them to deal with severe lifelong penalties for not having done so on a timely basis. This coverage is automatic everywhere else and so it makes no sense that we are treated differently Fixing this disparity would not have a fiscal impact on the program. Thank you