Territories health funding parity

Summary#

The Territories Health Equity Act of 2025 would amend the Social Security Act and the Affordable Care Act. Its stated goal is to improve how U.S. territories are treated under Medicare and Medicaid; it would also change access to some health coverage and subsidies. The bill has been introduced but is not law, and whether it will pass is uncertain.

  • Starting in fiscal year 2026, Medicaid’s general federal funding limitations would no longer apply to Puerto Rico, the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa. The bill also changes a separate Puerto Rico Medicaid matching-rate limitation.
  • The federal government would set aside $300 million in Medicaid Disproportionate Share Hospital (DSH) allotments for the territories in fiscal year 2026, divided by each territory’s estimated number of low-income or uninsured residents. Later allotments would be subject to increases under an existing formula.
  • Medicare payment rules would change for hospitals in the territories. Rebasing a hospital’s target amount would apply only if it increases that hospital’s payment; a separate target increase would apply to qualifying hospitals outside Puerto Rico.
  • Certain Puerto Rico residents would not owe Medicare Part B late-enrollment penalties for specified months. Starting in 2026, eligible people enrolled in territorial Medicaid would automatically qualify for Medicare Part D premium and cost-sharing subsidies.
  • The Health and Human Services Secretary would have to publish and update Medicaid and CHIP information for each territory, and report to Congress on territories’ exclusion from health insurance exchanges.
  • The Secretary would have to create a way for some people in U.S. possessions without exchange plans to access coverage at least as broad as coverage available through the D.C. exchange, with eligibility for premium tax credits and reduced cost sharing.

What it means for you#

  • Residents of the territories: The bill does not itself change Medicaid income-eligibility rules. It would remove the specified federal funding limitations and change some Medicare subsidies and penalties. If you live in a possession with no qualified health plan offered through an exchange, you could qualify for the new coverage mechanism if you also meet the employer-plan test and other conditions.
  • Certain Medicare beneficiaries in Puerto Rico: The Part B penalty change covers specified months in a five-year period for people who lived in Puerto Rico when they became entitled to Part A, subject to the bill’s date conditions. It applies to premiums for months starting on enactment.
  • Territorial hospitals: Some Medicare payment amounts could increase. The rebased target amount applies only when it would produce a higher payment; the separate target increase excludes Puerto Rico and depends on the hospital’s disproportionate patient percentage.
  • Territorial governments and health agencies: HHS would publish information about Medicaid and CHIP, including eligibility income levels, enrollment, waivers, and federal and local spending.
  • Taxpayers and federal agencies: The bill would require new federal payments and administrative work, but the materials do not estimate the total cost.

Money#

The bill sets a $300 million total Medicaid DSH allotment for the five territories for fiscal year 2026, but no overall cost estimate is available in the supplied material.

  • Later territorial DSH allotments would be subject to increases under an existing formula.
  • The bill would remove the specified Medicaid funding limitations, but does not give a total estimate of resulting federal spending.
  • It would require federal premium tax credits and reduced cost sharing for eligible people using the new coverage mechanism, and Treasury payments to possessions under specified rules. No amounts are estimated.
  • The bill requires HHS to publish information, submit a report, and establish a coverage mechanism. It gives no staffing or administrative cost estimate.

What is unclear#

  • The parent laws are not supplied, so the bill’s changes could not be checked against current law. The bill text does not set out all the existing rules that would be affected.
  • The bill does not explain how the new coverage mechanism would work in practice, how people would enroll, or how coverage disputes would be handled.
  • The Secretary would certify whether a possession has no qualified health plan through an exchange, but the bill does not describe the certification process or timing.
  • The bill does not estimate how much federal spending would result from removing Medicaid funding limitations or changing Medicare payments and subsidies.
  • The Secretary would estimate the number of low-income or uninsured residents used to divide the 2026 DSH allotment; the bill does not specify the estimation method.

Case for#

  • The bill appears intended to address differences in federal health-program funding and coverage between territories and the states.
  • Removing the specified Medicaid funding limitations could give territorial programs more federal support as their costs and enrollment needs change.
  • A territory-wide DSH allotment could direct support to hospitals serving low-income or uninsured patients.
  • Automatic Part D subsidy eligibility for people already enrolled in territorial Medicaid could reduce the need for separate eligibility determinations.
  • Publishing comparable Medicaid and CHIP information could make territorial program rules and federal spending easier to understand.

Case against#

  • Removing the specified funding limitations could increase federal spending, but the bill does not estimate how much or explain how spending would be controlled.
  • The new coverage mechanism depends on future federal rules and certification. Without those details, it is unclear how quickly eligible residents could get coverage.
  • The bill changes several payment formulas, but the materials do not show which hospitals or territories would receive how much more.
  • The new coverage arrangements and subsidy rules may interact with existing territorial programs; the bill does not fully explain that relationship.