Dr. Murphy Asked for a Floor. Dr. Oz Sent a “Certificado de Excelencia”

Imagine trying to predict a massive national election, but you're only allowed to pull

the residents of a single apartment building.

Right.

You'd be completely off.

Exactly.

I mean, you would just be a little bit off.

Your entire model would be totally detached from reality.

You're projecting the behavior of millions based on this tiny, isolated fraction of

the population.

Which is a terrible way to do math, obviously.

Right.

Apply that same logic to how the government funds healthcare for hundreds of thousands

of really vulnerable people, and you start to see the outline of this very real, very urgent

crisis.

Welcome to the deep dive, by the way.

Today we're opening up a stack of documents detailing this escalating bureaucratic and

political battle over Medicare Advantage funding in Puerto Rico.

And the stakes here, I mean, they really couldn't be higher.

We were looking at a whole healthcare ecosystem that functions on a mathematical framework

that is, frankly, entirely counterintuitive.

It's a system intacting over half a million lives, but the mechanisms driving it seem

caught in this bizarre bureaucratic paradox.

And we have a fascinating set of sources to guide us through this for you today.

The primary catalyst is this congressional letter from August 3, 2026.

It was spearheaded by Representative Dr. Greg Murphy and signed by 13 other Republicans.

Sent directly to HHS Secretary Robert F. Kennedy, Jr.

Exactly.

And we also have the official response from September 14, 2026 from CMS, the Centers for

Medicare and Medicaid Services.

That one was signed by Dr. Memedaz on behalf of the Secretary.

Plus, we're looking at this extensive historical record documenting a decade of CMS policy

actions.

It's quite the paper trail.

It really is.

But before we get into the weeds, I do want to establish our ground rules here.

These documents contain politically charged advocacy, you know, and really robust

government defenses.

Oh, absolutely.

And it needs to be clear that we are totally impartial here.

We aren't taking sides.

We aren't endorsing any specific viewpoints left or right.

Our goal is strictly to analyze the facts, the math, and the arguments laid out in the

original text.

Which is so necessary because underneath all that political back and forth is a really

profound structural question about how data dictates human welfare.

I mean, when you isolate the arithmetic from the politics, you find a formula that

is incredibly difficult to defend.

Just on a purely statistical level.

Exactly.

So let's start with the immediate standoff.

We've got this August 2026 demand from Congressman Murphy and his colleagues, and then the September

response from CMS.

In the letter, the lawmakers are asking for a national minimum Medicare Advantage payment

level for Puerto Rico.

Basically a floor.

Right.

A benchmark floor.

And they want it set at 70% of the national average for 2028.

So why 70%, like what's their legal justification for demanding that specific number?

Well, the 70% figure isn't just arbitrary.

The lawmakers are pointing directly to the neighboring U.S. Virgin Islands.

Oh, okay.

Yeah.

The Virgin Islands currently enjoys that 70% benchmark level.

So the Republicans are arguing that under section 1876 of the Social Security Act, CMS

actually has the statutory authority to treat Puerto Rico similarly.

Which makes sense on paper.

Right.

And the gap they're trying to close is massive.

Right now, Puerto Rico's Medicare Advantage benchmarks are sitting at about 41% below

the national average.

Yeah.

41% below.

And that gap, according to the letter, has just been widening continuously since 2012.

So the lawmakers are essentially saying, you know, stop the bleeding.

Set a concrete floor so the funding doesn't drop any further.

Which brings us to the September 14 letter.

Dr. Mehmet Oz responds for the administration.

And he doesn't grant the 70% floor, does he?

He does not.

No.

The response from CMS states they will, quote, take these views into account for

the 2028 cycle.

Standard government speak.

Very much so.

But they maintain that their current approach is specific to Puerto Rico and consistent with

their statutory authorities and their assessment of the relevant data.

So instead of granting the floor, the letter defends CMS's recent record.

Defends it how?

Well, by highlighting some specific incremental adjustments they've already made for the 2027

calendar year.

Okay.

Incremental adjustments instead of a systemic fix.

What kind of adjustments are we talking about here?

One of the main things they highlight is an adjustment for the, quote, propensity of zero

claims.

Propensity of zero claims.

Yeah.

CMS acknowledges that beneficiaries in Puerto Rico generate zero medical claims at a much,

much higher rate than the national average.

So they directed the office of the actuary to bump up the calculations to

reflect nationwide averages.

Okay.

And what did that actually do?

It resulted in a 4.4% increase.

They also point to a regulatory exception they made back in April, 2026.

That one allowed certain dual eligible special needs plans to offer more than one plan in territories

that lack standard Medicare savings programs.

Hold on.

I want to unpack that zero claims adjustment for a second.

Yeah.

Because it sounds like this really dry actuarial term, but there is real human behavior

behind it, right?

Oh, absolutely.

Because if a population has a high propensity for zero claims, it doesn't mean they're

super humanly healthy and just never need a doctor.

Far from it.

Actually, in a lot of underfunded healthcare markets, a high rate of zero claims is a symptom

of poverty.

It's a lack of access.

If a senior is struggling financially and they face out-of-pocket costs or co-pays just

to go see a specialist, they often simply don't go.

They delay care entirely.

And because they delay care, they literally don't generate a medical claim in the system.

Exactly.

They become invisible to the math.

Which means the system looks at the data and says, oh, these people don't cost

very much to treat.

And then it lowers the funding even more.

It is a totally vicious cycle.

The poverty suppresses the data and the data justifies less funding.

That is the exact trap.

And CMS recognized this specific data distortion, which is why they applied that 4.4% bump.

But to the 14 lawmakers writing that August letter, a 4.4% bump is basically a band-aid

on a gunshot wound.

Yeah.

I mean, it feels like a tenant begging the landlord to fix a fundamentally cracked foundation

because the house is sinking.

And the landlord writes back saying, hey, we hear your concerns.

And please note, we just put a fresh coat of paint on the mailbox.

That's a great way to put it.

I mean, the landlord isn't lying about the mailbox.

Right.

But they are completely ignoring the foundation.

And that foundation is where the math gets truly staggering to really understand why

Congressman Murphy and the others are calling this formula rigged.

We have to look at the popularity of Medicare Advantage in Puerto Rico.

All the numbers are wild.

Over 670,000 seniors on the island are enrolled in Medicare Advantage.

Yep.

And according to the sources, that represents 96% of the entire Medicare eligible population

there.

96%.

It is the highest participation rate in the entire nation by a mile.

But here's the kicker.

The funding formula for Medicare Advantage isn't actually based on the 96% who are

in the program.

No, it's not.

By law, Medicare Advantage-based funding is tied to the cost of original Medicare.

To traditional fee-for-service program.

Exactly the FFS program in that specific geographic region.

Let me stop you there, because this brings us right back to the apartment building analogy

from the intro.

If 96% of the seniors are in Medicare Advantage, that leaves only 4% in original Medicare.

Which translates to about 29,000 people.

Wait, so the budget for nearly 700,000 people is being dictated by the medical bills of just

29,000 people.

That's the math.

Statistically, how can a 3% or 4% sample accurately capture the healthcare reality of

an entire population?

I mean, that makes no sense.

No lawmakers argue it absolutely cannot.

The Murphy letter explicitly states that 29,000 beneficiaries is just way too small

a sample to reflect the true cost of a functional program.

The data pool is incredibly shallow.

It actually worked.

And this distortion is magnified when you look at the unique vulnerabilities of this specific

population because Puerto Rico doesn't have the same safety nets as the mainland.

Right, they are missing massive pieces of the federal support structure.

They really are.

They don't have the Medicare Savings Program.

They lack long-term services and supports.

They are excluded from supplemental security income.

And they don't even have the standard Supplemental Nutrition Assistance Program,

right?

SNAP.

Exactly.

No standard SNAP.

Which completely changes the role of Medicare Advantage.

If you're a low-income senior on the mainland, you have this whole web of federal programs

to catch you.

But if you're in Puerto Rico.

If you're in Puerto Rico, and keep in mind, nearly half of these beneficiaries are dual-eligible

for both Medicare and Medicaid, Medicare Advantage basically becomes the de facto

safety net.

It's the only thing keeping the system afloat.

Right.

And when your only safety net is funded by a formula based on a 3% data sample,

you are perpetually starved of resources.

And this isn't some new realization either.

No.

If we look at the historical document in the sources, we see a 12-year record of stakeholders

pointing out this exact flaw.

From calendar year 2016, all the way to 2027, there has been this continuous push on

the administrative record for a benchmark floor.

12 years of asking for the exact same thing.

So if the formula is this obviously broken, and people have been flagging it for

over a decade, how is CMS justified ignoring it?

Have they just been giving the same denial every year?

Well, no, that's the interesting part.

The historical record shows that CMS's rationale for refusing the floor has constantly migrated.

Migrated how?

So in 2016, they claimed that setting a minimum benchmark simply wasn't permissible under

statute.

They said they didn't have the authority.

But then by 2017 and 2018, the reasoning shifted entirely.

Let me guess.

They started arguing that the 3% fee for service data actually was sufficient to establish accurate

benchmarks.

Wait, so they flip-flopped from we don't have the legal power to actually the data

is perfectly fine?

It gets even more confusing.

In 2019, they deferred entirely, saying they would just, quote, continue to analyze

the issue.

Then, from 2020 through 2024, they leaned on this dual argument, saying they had

to follow the local data and claiming there was no evidence that costs should

be higher.

Unbelievable.

Finally, in the most recent cycles, 2025 to 2027, they adopted a totally new phrasing,

stating they have limited discretion to incorporate exceptions.

So they act like the rulebook is written in stone, but they just keep swapping out the

stone.

It's incredibly evasive.

But what about that statutory authority the lawmaker has mentioned, the part about

treating Puerto Rico like the Virgin Islands?

Right.

That is section 1876A4.

It's often referred to as the similar area clause.

It essentially says that if you don't have good data for one area, you can use a similar

area as a proxy.

Which makes perfect sense for a 3% data pool.

You'd think.

But the historical record points out that despite stakeholders explicitly pressing this

specific clause upon CMS in 2024, CMS has consistently failed to even address that

specific text in their refusals.

I have to challenge this premise that CMS has, quote, limited discretion because

earlier you mentioned Dr. Oz highlighting adjustments they did make.

I mean, if their hands are truly tied by the statute, how are they making those other

changes?

And this is exactly what the proven document in our sources explores.

It details four major instances where CMS found the administrative authority to make

significant changes without needing an act of Congress.

So they can do it when they want to.

Clearly.

For instance, in 2012, CMS restricted the baseline calculation to only include beneficiaries

who had both part A and Part B of Medicare.

They recognized that Puerto Rico's auto-enrollment rules were skewing the data, so they administratively

chose to filter it.

They just filtered the data on their own.

Yep.

And then in 2018, they made this massive administrative move regarding quality bonuses.

They essentially reinterpreted a statute to classify 52 out of 78 municipalities in

Puerto Rico as double bonus counties for star-rated plants.

Wow.

They found a way to read the existing law creatively to inject more funding into

those specific areas.

So that is the literal definition of administrative discretion.

Yeah.

They're finding ways to creatively interpret the statute to grant these temporary adjustments.

But when 14 lawmakers ask for a permanent 70 percent floor, suddenly their hands are

magically tied.

They suddenly have limited discretion, right?

It's like a referee who only aggressively enforces the rulebook when it penalizes

the visiting team, but totally swallows the whistle for the home team.

The documents point out this exact contradiction.

It's basically an administrative cat and mouse game.

CMS claims they have the authority for bandaids, but claims limited discretion when asked for

systemic fixes.

Which really brings it to the urgency of this August 2026 letter.

If this cat and mouse game has been going on for 12 years, why did these lawmakers

draw line in the sand right now?

Like why is the 2028 rate announcement the hill they are willing to die on?

Because there is a very real mechanical threat looming, and it revolves around

something called the wage index cut.

The 2028 rates are about to lock in a completely devastating reduction in funding.

Okay.

Stop right there and translate that for me.

What exactly is a wage index, and how does it blow a hole in the budget?

Sure.

So a wage index is essentially a multiplier.

CMS uses it to adjust health care payments based on the local cost of labor.

You know, it costs more to hire a nurse in Manhattan than it does in rural Nebraska,

right?

Right.

So the government adjusts the payments accordingly.

But currently, Puerto Rico is facing a legally locked in 5% per year step down in its applied

hospital wage index.

A mandated 5% cut every year.

What does that look like in real numbers?

Well, the sources provide the specific math for San Juan.

In fiscal year 2024, the wage index for San Juan was 0.6134.

But by fiscal year 2027, it had plummeted to 0.5259.

Wait, a drop from 0.61 to 0.52?

In real terms, that means the government is essentially declaring that the value of a health

care worker's labor in San Juan just dropped by over 14%.

Accumulative 14.26% drop, to be exact.

And keep in mind, this index applies to 62% of the total payment, which represents the

labor-related share of health care costs.

That is brutal.

It gets worse.

The documents project that this downward grind will continue through approximately

fiscal year 2035, eventually dropping the index down to roughly 0.35.

That is just a staggering loss of value.

But wait, if this is a hospital wage index that dropped in 2027, why are the lawmakers

panicking about the Medicare Advantage rates for 2028?

Ah, because of the way the data lags.

It's a lot like seeing a flash of lightning embracing for the thunder.

Okay, I'm following.

The flash happened in 2027 when the wage index dropped.

But the thunder clap, the actual cut to the Medicare Advantage benchmarks, takes

a year to hit.

Why a year?

Because the MA benchmarks rely on five years of fee for service claims.

Before CMS calculates the averages, they reprice that historical data using the

latest parameter.

Oh, I see.

Meaning that massive 14% devaluation of labor from 2027 gets completely baked into

the math for 2028.

Exactly.

The thunder clap hits in 2028.

The cuts aren't just some theoretical future possibility.

The arithmetic is already processed and done.

Wow.

CMS admitted in their 2027 announcement that these wage index policies, quote, will

contribute to declines in the MA rates for Puerto Rico.

So the 14 lawmakers are desperately trying to get the administration to establish the

70% floor before the 2028 rates lock in those devastating cuts.

It sounds like we are looking at a system in absolute gridlock.

Let's pull all these threads together for you listening.

We've got over 670,000 seniors living in a territory that is already missing

vital federal safety nets.

96% of them have chosen Medicare Advantage, making it the highest

participating, highest performing market of its kind in the entire nation.

Absolutely.

Yet their funding is trapped by this totally warped formula, relying on the

medical bills of just 29,000 people.

They are facing a locked in decade-long series of wage cuts that actively

devalue their healthcare workers.

And when lawmakers demand a permanent floor based on a nearby territory,

the government defends its use of temporary administrative band-aids.

It is a scenario where the internal logic of the funding model has entirely

divorced itself from the reality of the healthcare environment it's actually

supposed to support.

Which leaves us with a really profound final thought to mull over.

We've spent a lot of time today on the math and the history, but step

back and consider the principles of our republic.

In our system of government, we operate on the belief that we are

all measured by results and merit.

We design systems to reward efficiency, quality, and high adoption.

That's the ideal.

Right.

Right.

So imagine a scenario in a system supposedly built on merit, where the

single market that overwhelmingly embraces that system, achieving an

astonishing 96% participation rate, is systematically penalized with the

lowest funding in the nation simply because it's an outlier.

The math actively punishes their success.

Exactly.

The lawmakers and our sources are making a really strong

recommendation to the administration to start penalizing the best

performing market in the whole nation.

They're urging Secretary Kennedy to use his administrative

authority to fix a rigged formula.

Because if the absolute best, most outstanding market is being rewarded

as the worst, doesn't that make us pause and think that there is

something completely wrong in the way we measure healthcare?

It absolutely should.

If the best results are being reimbursed the worst, how can we

expect the worst, which is being reimbursed the best, to ever excel?

This is the ultimate healthcare paradox.

When strict adherence to a broken formula overrides common sense, it is no

longer just a data error.

It's a failure of government.

Thanks for joining us on this deep dive.