12-1 

SECTION 12-SOCIAL WELFARE PROGRAMS IN THE TERRITORIES 

CONTENTS 

Coverage and Participation in Selected Programs 

Expenditures for Selected Major Social Welfare Programs in the 

 Territories 

Special Rules 

 SSI Coverage 

 Nutrition Assistance Block Grant for Puerto Rico and Grants for the 

Northern Marianas and American Samoa 

 Public Assistance Programs 

Health Programs 

 Medicaid 

 State Children's Health Insurance Program 

Consolidation of Certain Grants for Insular Areas Other than Puerto Rico 

Certain Tax Provisions that Affect Low-Income Families with Children 

References

COVERAGE AND PARTICIPATION IN SELECTED PROGRAMS

 Most social welfare programs available in the 50 States and the District of 

Columbia are also available in the territories. The territories are: the 

Commonwealth of Puerto Rico, Guam, the Virgin Islands, the Commonwealth of 

the Northern Mariana Islands, and American Samoa.1

 Social welfare programs 

discussed in this chapter provide retirement and disability benefits, financing of 

health care, unemployment compensation, public assistance for low-income persons 

or families, education benefits, job training, and social services. 

 Social welfare programs can be divided into two categories: 

1. Federal Programs that Make Direct Payments to IndividualsCThese 

programs have Federal eligibility and benefit rules and are administered 

directly by the Federal Government.2

2. Federal-State ProgramsCFor these programs, States and sometimes 

 

1

 For an overview of how the territories are politically organized and their history see Brunno & Laney 

(1996). This section discusses the availability of social programs in the five major territories and 

provides an overview of special rules that apply there. It does not discuss Federal financial assistance for 

three areas that were formally part of the trust territories and are now independent in "free association" 

with the United States: the Marshall Islands, the Federated States of Micronesia, and Palau. (The fourth 

area of the trust territories, the Northern Marianas, became a Commonwealth of the United States.) These 

areas remain eligible for some residual aid from the United States. 

2

 This chapter's classification of programs making "direct" payments to individuals differs from that 

found in Federal budget documents and the U.S. Census Bureau publication Consolidated Federal Funds 

Report. This chapter classifies unemployment compensation (UC) as a Federal-State program because 

States administer and design their own programs within Federal guidelines. UC is not a grant-in-aid 

program, so that other documents classify it as a direct payment to individuals. Food stamps is also 

classified as a Federal-State program because it is administered by the States.
12-2 

localities have a role in the design, administration, and often financing of 

benefits and services. For the territories to participate in the joint 

Federal-State programs, Federal law must make them eligible, but the 

territory’s government must act to meet conditions for Federal assistance. 

 Table 12-1 shows the coverage of residents of the territories by selected 

social welfare programs directly administered by the Federal Government. With the 

exception of Supplemental Security Income (SSI), residents of the territories are 

eligible for social benefits on virtually the same basis as residents of the States. 

TABLE 12-1--COVERAGE OF RESIDENTS OR WORKERS IN THE 

TERRITORIES FOR SELECTED SOCIAL WELFARE PROGRAMS 

MAKING DIRECT PAYMENTS FOR INDIVIDUALS 

Program Puerto 

Rico 

Virgin 

Islands Guam Northern Marianas 

American 

Samoa 

Social Security Yes Yes Yes Yes Yes 

Medicare Yes Yes Yes Yes Yes 

Supplemental Security Income No No No Yes No 

Guaranteed Student Loans Yes Yes Yes Yes Yes 

Pell Grants Yes Yes Yes Yes Yes 

Source: Congressional Research Service. 

 Table 12-2 summarizes the availability in each territory of major social 

programs that are operated jointly by the Federal Government and the respective 

territory. Coverage under the Unemployment Compensation Program is determined 

in the Federal Unemployment Tax Act (FUTA), which applies to Puerto Rico and 

the Virgin Islands but not the other territories. Though coverage is determined in 

FUTA, program design is left to the territory. The Food Stamp Program itself 

operates only in the Virgin Islands and Guam, with special grant programs 

operating in Puerto Rico, the Northern Marianas and American Samoa. The other 

nutrition programs, for which benefits are fully federally financed but 

administration is left to the States, generally apply in the territories. 

 Most Federal-State social welfare programs other than those discussed above 

are grant-in-aid programs by which the Federal Government helps finance benefits 

and services in State or local programs. Territories, like States, may choose not to 

participate in grant programs. Participation in a program entails accepting Federal 

rules and guidelines and sometimes providing State or local dollars to match 

Federal dollars. 

Table 12-2 shows whether Federal law makes the territory eligible to 

participate and whether the area participated in the program in fiscal year 2003.
TABLE 12-2--FEDERAL-STATE SOCIAL WELFARE PROGRAMS IN THE TERRITORIES, FY 2003 

Puerto Rico Guam Virgin Islands Northern Marianas American 

Program Eligible Participating Eligible Participating Eligible Participating Eligible Participating Eligible Par

Unemployment Compensation Yes Yes Yes Yes No NA No NA No Public Assistance and Related Programs: 

 TANF Yes Yes Yes Yes Yes Yes No NA Yes  Aid to the Aged, Blind, or Disabled Yes Yes Yes Yes Yes Yes Yes No No  Child Support Enforcement Yes Yes Yes Yes Yes Yes Yes No Yes  Foster Care and Adoption  Assistance 

Yes Yes Yes No Yes No No NA Yes 

Medical Assistance1 Yes Yes Yes Yes Yes Yes Yes Yes Yes 

Social and Support Services: 

 CCDBG Yes Yes Yes Yes Yes Yes Yes Yes Yes 

 Social Services Block Grant  (Title XX)

Yes Yes Yes Yes Yes Yes Yes Yes Yes 

 Older Americans Act Yes Yes Yes Yes Yes Yes Yes Yes Yes 

Food and Nutrition Assistance: 

 Food Stamp Program No NA Yes Yes Yes Yes No NA No  Nutrition Assistance2 Yes Yes No NA No NA Yes Yes Yes 

Child Nutrition Yes Yes Yes Yes Yes Yes Yes Yes Yes 

 (WIC) Yes Yes Yes Yes Yes Yes Yes No Yes 

Education and Training3 Yes Yes Yes Yes Yes Yes Yes Yes Yes 

Child Protection: 

 Child Welfare Services Yes Yes Yes Yes Yes Yes Yes Yes Yes  Promoting Safe and Stable Families Yes Yes Yes Yes Yes Yes Yes Yes Yes CAPTA Yes Yes Yes Yes Yes Yes Yes Yes Yes 

1 “Medical Assistance” includes Medicaid, SCHIP, and the Maternal and Child Health Block Grant. 2 “Nutrition Assistance” Block Grant (Puerto Rico) and Special Grants for "Food-Stamp-Like" Programs (Northern Marianas and American Samoa). 3 “Education and Training” includes Compensatory Education for the Disadvantaged and Workforce Investment Act programs. 

NA- Not applicable. Source: Congressional Research Service.
12-4 

EXPENDITURES FOR SELECTED MAJOR SOCIAL WELFARE 

PROGRAMS IN THE TERRITORIES 

 Table 12-3 shows Federal expenditures for selected major social welfare 

programs in the territories. For some Federal-State programs, such as Medicaid, 

State Children’s Health Insurance Program (SCHIP), child support, and the 

programs for the aged, blind, and disabled, the table shows the Federal share of 

expenditures. Where the territories are required to match Federal expenditures with 

their own funds, the territory's match is not shown. For programs that make direct 

payments to individuals such as Social Security and Medicare, Federal outlays 

represent the total amount spent by the program in the territories. 

TABLE 12-3--FEDERAL FUNDING FOR SELECTED MAJOR SOCIAL 

WELFARE PROGRAMS IN THE TERRITORIES, FY 2002 

[In Thousands of Dollars]

Puerto 

Rico Guam Virgin Islands 

Northern 

Marianas 

American 

Samoa 

Social Insurance: 

Social Security $4,561,070 $99,610 $115,645 $10,256 $30,312 

Medicare 1,416,073 1,307 23,179 1 1

Unemployment Compensation 334,865 NA 17,419 NA NA 

Public Assistance: 

SSI NA NA NA 3,870 NA 

Aid to the Aged, Blind, or Disabled 21,618 674 707 NA NA 

Temporary Assistance for Needy 

Families 

72,550 4,021 2,847 NA NA 

Child Support Enforcement 23,384 4,032 3,516 NA NA 

Foster Care and Adoption Assistance 13,631 NA NA NA NA 

Health Care for Low-Income Persons and Families: 

Medicaid 192,900 5,880 6,080 2,100 3,470 

SCHIP 30,297 1,158 860 364 397 

Social and Support Services: 

Social Services Block Grants2

 8,793 293 293 59 54 

CCDBG2

 47,374 4,001 2,199 1,636 2,663 

Older Americans Act 2

 14,633 2,290 2,677 727 1,300 

Nutrition Assistance: 

Food Stamps NA 54893 20597 NA NA 

Nutrition Assistance Block Grant2

 1,350,518 NA NA 6,126 5,300 

Child Nutrition 181,180 5,637 6,434 UA UA 

WIC 168,475 6,257 5,562 NA 5,536 

1

 Less than $500 in reported expenditures. 

2

 Grant award or obligations rather than expenditures. 

Note- UA denotes unavailable data, and NA denotes not applicable to the territory either because it 

is ineligible or eligible but not participating in the program (see Table 12-2). 

Source: For programs providing direct payments for individuals (Social Security, Medicare, and 

Supplemental Security Income) and Unemployment Compensation: U.S. Bureau of the Census, 

Consolidated Federal Funds Report: 2002 (May 2003). Aid to the Aged, Blind, or Disabled, 

TANF, Child Support Enforcement, Foster Care and Adoption Assistance, Medicaid, SCHIP, 

Social Services Block Grant, CCBDG, and Older Americans Act programs: U.S. Department of 

Health and Human Services. Nutrition assistance: U.S. Department of Agriculture, Food and 

Nutrition Service. 
12-5 

SPECIAL RULES 

SSI COVERAGE 

 The Social Security Amendments of 1972 (Public Law 92-603) ended 

matching grant programs to the 50 States and the District of Columbia for 

assistance to needy adults who are aged, blind, or disabled and replaced them with 

Supplemental Security Income (SSI). The new SSI Program provided a Federal 

entitlement program of cash payments for individuals in these groups. However, 

although later extended to the Northern Marianas, SSI was not extended to Puerto 

Rico, Guam, and the Virgin Islands. The old grant programs for the needy, aged, 

blind, and disabled authorized under four separate titles of the Social Security Act3

continue there. The territories determine benefit amounts. In contrast, the regular 

SSI Program has federally determined benefits (though States may supplement 

federally financed benefits). 

NUTRITION ASSISTANCE BLOCK GRANT FOR PUERTO RICO AND

GRANTS FOR THE NORTHERN MARIANAS AND AMERICAN SAMOA 

 Among the territories, the regular Food Stamp Program operates only in Guam 

and in the Virgin Islands. They are considered “States” for food stamp purposes, 

although some slightly different rules apply in calculating benefits (see the section 

of the Green Book covering the Food Stamp Program for these differences). 

Moreover, restrictions on the eligibility of noncitizens under the regular program 

apply in Guam and the Virgin Islands. 

 The Omnibus Budget Reconciliation Act of 1981 (Public Law 97-35) 

replaced the regular Food Stamp Program in Puerto Rico with a special Nutrition 

Assistance Block Grant. Puerto Rico was given almost complete authority in 

designing its program within the funding provided by the block grant (an indexed 

amount standing at $1.395 billion in fiscal year 2003): Puerto Rico’s eligibility 

standards and benefit levels are lower than the regular Food Stamp Program; instead 

of requiring that all benefits be spent on food items, Puerto Rico earmarks 75 

percent of benefits specifically for food; and restrictions on the eligibility of legally 

resident noncitizens established for the regular Food Stamp Program do not apply. 

 The Northern Marianas and American Samoa also receive nutrition 

assistance grants. The Commonwealth of the Northern Marianas receives a 

periodically negotiated grant ($7.1 million in fiscal year 2003) and operates a 

program much like the regular Food Stamp Program (although with lower eligibility 

standards and benefits and a requirement that a portion of benefits be spent on 

locally produced foods). American Samoa gets an indexed grant ($5.6 million in 

fiscal year 2003) and operates a program limited to helping low-income elderly and 

disabled persons. Restrictions on the eligibility of legally resident noncitizens 

 

3 Title I, Grants to States for Old-Age Assistance for the Aged; Title X, Grants to the States for Aid to the 

Blind; Title XIV, Aid to the Permanently and Totally Disabled; and Title XVI, Grants to the States for 

Aid to the Aged, Blind, or Disabled. 
12-6 

established for the regular Food Stamp program do not apply in the Northern 

Marianas and American Samoa. 

 The section of the Green Book covering the Food Stamp Program provides 

some additional information on nutrition assistance in the territories. 

PUBLIC ASSISTANCE PROGRAMS 

 Combined Federal funding for public assistance programs for Puerto Rico, 

Guam, and the Virgin Islands is capped at a maximum dollar amount for each 

jurisdiction. The cap for the territories covers the combined Federal grants for 

Temporary Assistance for Needy Families (TANF); grant programs discussed 

above that operate in these areas instead of SSI; and programs under title IV-E of 

the Social Security Act (Foster Care, Adoption Assistance, and Independent Living 

Programs). 

 Table 12-4 shows public assistance Federal funding caps and the estimated 

FY2002 expenditures in the territories. The caps are not subject to adjustment or 

increases under current law. 

 

TABLE 12-4--PUBLIC ASSISTANCE FUNDING FOR THE TERRITORIES, 

FISCAL YEAR 2002 

[In Thousands of Dollars]

Territory 

Total 

Federal 

Funding 

Cap 

Estimated TANF 

Expenditures 

(including 

matched 

funding)1

Estimated 

Expenditures 

for Aged, 

Blind, or 

Disabled 

Assistance 

Estimated 

Expenditures for 

Title IV-E programs: 

foster care, 

independent living, 

and adoption 

assistance 

Puerto Rico $107,255 $72,550 $21,618 $11,409 

Guam 4,686 4,012 674 NA 

Virgin Islands 3,554 2,847 707 NA 

American Samoa 1,000 NA NA NA 

1

 If a territory does not tap all the funds available under the terms of the laws governing TANF, 

assistance to the aged, blind, or disabled, or Title IV-E (for adoption and foster care assistance and 

independent living costs), additional Federal funds (up to the capped amount) are available if the 

territory provides a 25-percent match. American Samoa is not eligible for funding for assistance to 

the aged, blind, or disabled (although it uses its nutrition assistance grant to aid these persons). 

The Northern Marianas is not eligible for any of these programs (although it is eligible for SSI 

assistance). 

NA-Not available. 

Source: Congressional Research Service and the U.S. Department of Health and Human Services. 

 Puerto Rico, Guam, the Virgin Islands, and American Samoa are also eligible 

for certain TANF funds in addition to these caps. They can receive additional 

funding for the Welfare-to-Work Grant Program, bonuses for high performance and 

reductions in out-of-wedlock births, and evaluations. 

 TANF operates in three territories: Puerto Rico, Guam, and the Virgin 

Islands. American Samoa is eligible, but has declined to participate.
12-7 

HEALTH PROGRAMS 

MEDICAID 

Financing 

 In the 50 States and the District of Columbia, Medicaid is an individual 

entitlement. There are no limits on the Federal payments for Medicaid as long as the 

State is able to contribute its share of the matching funds. In contrast, Medicaid 

Programs in the territories are subject to spending caps. Table 12-5 shows Medicaid 

caps for fiscal years 1983-2004 for each of the territories. For fiscal year 1999 and 

subsequent fiscal years, these caps are increased by the percentage change in the 

medical care component of the Consumer Price Index (CPI-U) for All Urban 

Consumers (as published by the Bureau of Labor Statistics). The Federal Medicaid 

matching rate, which determines the share of Medicaid expenditures paid for by 

the Federal Government, is statutorily set at 50 percent for the territories. 

Administration of Medicaid Programs in the Territories

 The territories operate their Medicaid Programs under rules different from 

those that apply to the 50 States and the District of Columbia. The territories are 

not required to cover the same eligibility groups and they use different financial 

standards (income and assets tests) in determining eligibility. For example, 

Medicaid requires States to cover certain mandatory eligibility groups such as 

poverty-related pregnant women and children, qualified Medicare beneficiaries, and 

specified low-income Medicare beneficiaries. For the territories, on the other hand, 

coverage of these groups is optional. Furthermore, because the territories must 

operate their programs under funding caps, the Centers for Medicare and Medicaid 

Services (CMS) are more flexible in oversight of Medicaid Program rules and 

regulations with regard to services required to be covered by the plan. Finally, the 

territories are exempt from the requirement to offer program beneficiaries freedom 

of choice of providers. However, the territories are required to meet certain rules 

that apply to the States. For example, with regard to rules about amount, duration, 

and scope of covered services, the territories must meet the same standards that 

apply to the States and the District of Columbia so long as they are using Federal 

matching payments for their services. 

 Puerto Rico4

- In 1994, Puerto Rico established a new public agency, the 

Puerto Rico Health Insurance Administration, for the purpose of implementing 

“Reforma,” a privatized, island-wide, managed care delivery system. Medicaid 

services in the Commonwealth of Puerto Rico are covered under Reforma. Once 

the Commonwealth has spent all of its combined Medicaid and SCHIP capped 

allotments, care provided through the Medicaid program is completely funded by 

Reforma dollars. In addition, the Commonwealth utilizes a “Catastrophe Fund” 

 

4 Medicaid Program descriptions come from information provided by the U.S. Department of Health and 

Human Services, Centers for Medicare and Medicaid Services, Center for Medicaid and State 

Operations, Policy Coordination and Planning Group. These descriptions represent the Medicaid 

programs operating in the outlying areas as of FY2002. 
12-8 

(consisting of territory-only funds) to provide certain types of off-island care for 

Reforma enrollees. 

 Puerto Rico uses its own poverty level (the Commonwealth poverty level) to 

determine eligibility for the program. The Commonwealth poverty level of $8,220 

per year for a family of four is substantially lower than the mainland level5

 and has 

not changed since 1998. Medicaid eligibility determinations are made by the Office 

of Economic Assistance to the Medically Indigent, Puerto Rico Department of 

Health. The Medicaid Program extends coverage to both the categorically needy 

(AFDC and TANF-related groups) and the medically needy. Mandatory and many 

optional services are covered. Puerto Rico does not have an SSI Program, but SSIrelated eligibility groups such as Old-Age Assistance, Aid to the Blind, Aid to the 

Permanently and Totally Disabled, and so forth do exist. 

TABLE 12-5--MEDICAID FEDERAL SHARE LIMITS, 

FISCAL YEARS 1983-2004 

Fiscal Year Puerto Rico Guam Virgin Islands Northern Marianas American Samoa 

1983 $45,000,000 $1,400,000 $1,500,000 $350,000 $750,000 

1984-1987 63,400,000 2,000,000 2,100,000 550,000 1,150,000 

1988 73,400,000 2,320,000 2,430,000 636,700 1,330,000 

1989 76,200,000 2,410,000 2,515,000 693,350 1,390,000 

1990-1993 79,000,000 2,500,000 2,600,000 750,000 1,450,000 

1994 116,500,000 3,685,000 3,837,500 1,110,000 2,140,000 

1995 122,200,000 3,870,000 4,030,000 1,160,000 2,240,000 

1996 128,100,000 4,060,000 4,220,000 1,220,000 2,350,000 

1997 133,000,000 4,210,000 4,380,000 1,270,000 2,440,000 

1998 167,000,000 5,090,000 5,260,000 1,810,000 3,010,000 

1999 171,500,000 5,230,000 5,400,000 1,860,000 3,090,000 

2000 177,500,000 5,410,000 5,590,000 1,930,000 3,200,000 

2001 184,400,000 5,620,000 5,810,000 2,010,000 5,620,000 

2002 192,900,000 5,880,000 6,080,000 2,100,000 3,470,000 

2003 201,400,000 6,140,000 6,350,000 2,190,000 3,620,000 

2004 210,100,000 6,400,000 6,620,000 2,280,000 3,780,000 

Source: Table prepared by the Congressional Research Service based on data from the Centers for 

Medicare and Medicaid Services. 

 The yearly categorically needy income standard in FY2002 for a family of 

four was $1,536. The medically needy income eligibility standard for a family of 

four was $8,220. The territory-only program covers individuals with annual income 

twice the Commonwealth poverty level (i.e., $16,440 for a family of four). 

 Guam- Guam’s Medicaid program is administered by the Department of Public 

Health and Social Services, Bureau of Health Care Financing. Guam claims 

Federal funds only for covered services to categorically needy individuals that meet 

an income eligibility threshold of 100 percent of the FPL. The medically needy 

were included until October 1984, but after that have been covered with territorial 

funds only. Guam has chosen to cover certain optional categorical groups, and does 

 

5

 In 2002, the poverty guideline in the 48 contiguous States and the District of Columbia was $18,000 for 

a family of four (see the Federal Register, v. 67, no. 31, February 14, 2002, p. 6931-6933).
12-9 

pay Medicare premiums (i.e., buy-in) for individuals entitled to both Medicare and 

Medicaid. Guam does not have an SSI Program, but SSI-related eligibility groups 

such as Old-Age Assistance, Aid to the Blind, Aid to the Permanently and Totally 

Disabled, and so forth, do exist. All mandated services, except rural health clinics 

and nurse-midwife services, are provided, as well as many optional services. When 

these services are not available on Guam, but are medically necessary, off-island 

services including transportation are provided. Almost all patients are sent to 

Hawaii, or occasionally to California. All off-island care, except emergency care, 

must be preapproved and is based on negotiated rates. 

 Virgin Islands-The Virgin Islands’ Medicaid Program is administered by the 

Bureau of Health Insurance and Medical Assistance under the Virgin Islands 

Department of Health. The program covers categorically needy and medically 

needy individuals. The Virgin Islands does not have an SSI Program, but the 

mainland eligibility classifications of Aid to the Blind, Old-Age Assistance and Aid 

to the Permanently and Totally Disabled exist. The Virgin Islands does not cover 

poverty-level eligibility groups, but Medicaid does pay Medicare premiums (i.e., 

buy-in) for these eligible for both programs. In FY2002, the medically needy 

income level for a family of four was $8,500; the categorically needy standard for a 

family of four was $3,156. Mandatory and many optional services are provided. 

Medicaid beneficiaries requiring services not available within the islands are sent to 

Puerto Rico or the mainland for care. 

 Commonwealth of the Northern Mariana Islands (CNMI)-CNMI’s Medicaid 

program has operated under a Section 1902(j) waiver of the Social Security Act 

since October 1, 19896

. The program is administered by the Department of Public 

Health and Environmental Services. CNMI is the only U.S. territory which has SSI, 

and its entire Medicaid program is based on SSI requirements. All individuals 

receiving SSI cash payments are eligible for Medicaid simply by filling out an 

application. Additionally, individuals with income below 150 percent of the SSI 

Federal benefit rate are eligible for CNMI’s Medicaid program. Although CNMI 

does not have a medically needy program as such, anyone can spend down to 

become eligible for any month in which medical costs reduce income to the 

Commonwealth’s Medicaid eligibility threshold. CNMI pays Medicare premiums 

(i.e., buy-in) for dually entitled individuals. All mandated services, except rural 

health clinics and nurse-midwife services, are provided by the Commonwealth 

Health Center on Saipan. Certain covered services, such as nursing facility and 

home health services are only available off-island. For medically necessary care 

which cannot be provided in CNMI, patients are sent to Guam, Hawaii, or 

occasionally the mainland-generally to California. 

 American Samoa-The Medicaid program in American Samoa has operated 

under a Section 1902(j) waiver since January 29, 1983. In American Samoa, 

 

6

 Section 1902(j) refers to the section of the Social Security Act under which authority is granted to 

waive certain Medicaid program rules. Under a Section 1902(j) waiver, the only Medicaid requirements 

that may not be waived include: (1) the 50 percent Federal medical assistance percentage (FMAP); (2) 

the capped Medicaid allotments for Guam; and (3) payment may not be made for services that are not 

described in Section 1905(a) of the Social Security Act. 
12-10 

Medicaid eligibility determinations are based on a system they call “presumptive 

eligibility.”7 Annually, American Samoa estimates the number of individuals who 

fall below an estimated-needs or poverty level. Individuals whose income falls 

below this level are determined to be poor and are thus eligible for the territory’s 

Medicaid Program. The poverty level for American Samoa is computed by 

multiplying the poverty level for the United States, as determined by the Office of 

Management and Budget (OMB), by the lower of (1) the ratio of American Samoa’s 

median income to the U.S. median income or (2) the ratio of the territory’s median 

income to that of the State receiving the highest Federal match rate, and then 

adjusting this computation by a deflector factor. The numbers of “presumed 

eligibles” are determined by comparing census data, previous year tax returns, or 

survey data with the estimated poverty levels. All mandated services except rural 

health clinics, early and periodic screening, diagnosis, and treatment, and nursemidwife services are covered; however, nursing facility services and home health 

are not provided on-island. American Samoa also provides coverage for a number 

of optional services. Other practitioner services and private duty nursing are 

provided off-island. Off-island services are generally provided in Hawaii, or 

occasionally on the mainland. 

STATE CHILDREN’S HEALTH INSURANCE PROGRAM 

Financing 

 All of the territories have chosen to participate in the State Children's Health 

Insurance Program (SCHIP) created in the Balanced Budget Act of 1997 (Public 

Law 105-33). Each has an approved State plan and will match their Federal 

program dollars with territory funds. Except for a special rule for funding, SCHIP 

will operate in the territories on the same terms as in the States. The program 

provides funds at a 65 percent matching rate to the territories up to a maximum cap. 

The cap for the territories is a special set-aside, Guam receives 3.5 percent, the 

Virgin Islands receives 2.6 percent, American Samoa receives 1.2 percent, and the 

Northern Mariana Islands receives 1.1 percent. 

 The fiscal year 1999 Omnibus Appropriations Act provided an additional 

$32 million in appropriations for the territories only for that year.8

 These additional 

funds brought the fiscal year 1999 SCHIP Federal share available to the territories 

to $42.67 million. P.L. 106-113 increased the territories’ original appropriation for 

allotment (as specified in the Balanced Budget Act of 1997) to be shared (as 

specified above) by: $34.2 for each of FYs 2000 and 2001; $25.2 million for each 

of FYs 2002 through 2004; $32.4 million for each of FYs 2005 and 2006; and 

$40 million for FY 2007 (see Table 12-6). 

 

7

 Presumptive eligibility under Medicaid and SCHIP normally means a period of time for which a person 

is “presumed eligible” for Medicaid or SCHIP benefits. During this time, services may be rendered and 

billed to the Medicaid or SCHIP Program with the understanding that an official eligibility determination 

will be made and the beneficiary will be properly enrolled shortly after receiving services. American 

Samoa uses the term “presumptive eligibility” to refer to its process for setting its income eligibility limit 

for coverage under its Medicaid Program.

8

 P.L. 105-277. 
12-11 

 SCHIP funds not drawn down from a jurisdiction’s Federal allotment by the 

end of each fiscal year continue to be available for 2 additional fiscal years, 

providing each jurisdiction a total of 3 years to draw down its allotment of Federal 

matching funds for a given fiscal year. For example FY2002 allotments are 

available through FY2004. A jurisdiction must draw down its entire allotment from 

a given fiscal year before it may access the next year’s funding. Under SCHIP law 

as enacted in 1997, allotments not spent by the end of the applicable 3-year period 

will be redistributed by a method to be determined by the Secretary of Health and 

Human Services (HHS) to jurisdictions that have fully spent their original 

allotments for that year. Redistributed funds not spent by the end of the fiscal year 

in which they are reallocated will officially expire. 

 The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection 

Act of 2000 (BIPA-2000), incorporated by reference into P.L. 106-554, created a 

special rule for the redistribution and availability of unused FY1998 and FY1999 

SCHIP allotments. The rule decreased the amount available for redistribution to 

States that had spent all of their allotments by allowing States that had not spent all 

of their allotments to retain some of their unspent funds. Each territory that spent 

its original allotment (i.e., all territories) received an amount that bears the same 

ratio to 1.05 percent of the total amount available for redistribution as the ratio of its 

original allotment to the total allotment for all territories. Reallocated funds were 

made available through the close of FY2002. 

 Finally, SCHIP redistribution legislation has been addressed again by the 

108th Congress because at the close of FY2002, the FY2000 unspent allotments 

were subject to reallocation. The legislation impacts the amount of Federal funds 

available for expenditure by the outlaying areas. 

 On August 15, 2003, the President signed into law, P.L. 108-74, to extend 

the availability of FY1998 and FY1999 reallocated funds through the end of 

FY2004, and to establish a new method for redistributing unspent allotments for 

FY2000 and for FY2001 among all jurisdictions. The new reallocation method 

detailed in P.L. 108-74 builds on the BIPA-2000 reallocation rule. Under this new 

rule, 50 percent of the unspent funds for each of FY2000 and FY2001 will be 

distributed among States and Territories that spent their entire allotment for a given 

year, and the remaining 50 percent of unspent funds will be retained and distributed 

among States that have not used their entire allotments. Each territory is to receive 

an amount equal to 1.05 percent of the total amount available for redistribution for 

each of those years multiplied by that territory’s proportion of the original allotment 

for all territories. P.L. 108-74 makes redistributed funds from the FY2000 

reallocation available through the end of FY2004. Redistributed funds from the 

reallocations for FY2001 are to be available through the end of FY2005. (Estimates 

of the Federal funds available to each of the outlaying areas based on the 

reallocation rule of P.L. 108-74 are detailed in Table 12-6). 

Administration of SCHIP Programs in the territories 

 All territories have opted to use their SCHIP funds to expand their Medicaid 

Programs. As noted above, the territories’ Medicaid Programs operate under a cap 
12-12 

on their regular Medicaid expenditures. Once those caps are reached, the territories 

provide coverage to eligible children with territory-only funds.9

 Guam, American 

Samoa, the Northern Marianas, and the Virgin Islands (but not Puerto Rico) may 

use SCHIP funds to cover Medicaid eligible children after their Medicaid Federal 

caps have been exhausted.10 Puerto Rico may use SCHIP funds to insure eligible 

children between 100 and 200 percent of the Commonwealth poverty level. 

Finally, the territories are different from the 50 States and the District of Columbia 

in their reporting requirements for their SCHIP Programs. Under rules promulgated 

by the U.S. Department of Health and Human Services (HHS), the territories are 

exempt from the definition of a “State” for the purposes of the requirements of 

quarterly statistical reporting. In each of the territories, the benefit package for the 

title XXI program is the same as is offered by the Medicaid program. 

CONSOLIDATION OF CERTAIN GRANTS FOR INSULAR AREAS 

OTHER THAN PUERTO RICO 

 Public Law 95-134 authorized any Federal agency to consolidate grants for 

the territories of Guam, the Virgin Islands, the Northern Marianas, and American 

Samoa. Each of these areas is permitted to submit a single application and is paid a 

single sum that could be expended on any purpose allowable under any of the 

programs in the consolidated grant. The areas are permitted to determine the 

proportion of the consolidated grant to be spent on various activities. Public Law 

95-134 also permits the administering agency to waive matching and application or 

reporting requirements. 

 The U.S. Department of Health and Human Services permits Guam, the 

Virgin Islands, the Northern Marianas, and American Samoa to consolidate up to 

22 grant programs, including the Social Services Block Grant, Maternal and Child 

Health, child welfare services, and Child Abuse and Neglect State Grants. HHS 

permits these areas to submit a single report in lieu of individual reports required for 

the individual programs. 

 

9 Under an interpretation of the law by the U.S. Department of Health and Human Services, funds 

provided by SCHIP to expand Medicaid Programs do not count against the caps on Medicaid 

funding. 

10 This is under the Centers for Medicare and Medicaid Services’s interpretation of section 2110(b)(3) of 

 the Social Security Act that waives the rule that SCHIP funds can be used only for children ineligible 

for Medicaid or group health plan if that coverage was provided by a health insurance program that was 

in operation before July 1, 1997, and received no Federal funding.
12-13 

TABLE 12-6--SCHIP FINANCIAL PROGRAM INFORMATION, FOR 

COMMONWEALTHS AND TERRITORIES FISCAL YEARS 1998-2004 

Territory 

Total 

Federal 

Allotment 

in 

Dollars1

FY1998 

SCHIP 

Redistributed 

Funds for 

Territories 

(available 

through 

FY2004)2

FY1999 

SCHIP 

Redistributed 

Funds for 

Territories 

(available 

through 

FY2004)2

Estimated 

FY2000 

SCHIP 

Redistributed 

Funds for 

Territories 

(available 

through 

FY2004)3

Estimated 

FY2001 SCHIP 

Redistributed 

Funds for 

Territories 

(available 

through 

FY2005)4

Total 

Federal 

funds 

available 

for 

each 

fiscal 

year 

 Fiscal Year 1998

Puerto Rico $9,835,550 $19,558,283 NA NA NA $29,393,833 

Guam 375,813 747,314 NA NA NA 1,123,126 

Virgin Islands 279,175 555,148 NA NA NA 834,323 

American 

Samoa 128,850 234,870 NA NA NA 352,983 

Northern 

Marianas 118,113 256,222 NA NA NA 385,072 

Total 10,737,500 21,351,837 5 NA NA 32,089,337 

 Fiscal Year 1999 

Puerto Rico $39,101,750 NA $27,109,556 NA NA $66,211,306 

Guam 1,494,063 NA 1,035,846 NA NA 2,529,909 

Virgin Islands 1,109,875 NA 769,485 NA NA 1,879,360 

American 

Samoa 512,250 NA 355,147 NA NA 867,397 

Northern 

Marianas 469,562 NA 325,551 NA NA 795,113 

Total 42,687,500 NA 29,595,585 NA NA 72,283,085 

 Fiscal Year 2000 

Puerto Rico $41,116,950 NA NA $21,221,544 NA $62,338,494 

Guam 1,571,063 NA NA 810,867 NA 2,381,930 

Virgin Islands 1,167,075 NA NA 602,358 NA 1,769,433 

American 

Samoa 538,650 NA NA 278,011 NA 816,661 

Northern 

Marianas 493,762 NA NA 254,844 NA 748,606 

Total 44,393,737 NA 5

 23,167,624 NA 67,561,361 

 Fiscal Year 2001 

Puerto Rico 41,116,950 NA NA NA $27,113,142 $68,230,092 

Guam 1,571,062 NA NA NA 1,035,928 2,607,044 

Virgin Islands 1,167,075 NA NA NA 769,587 1,936,662 

American 

Samoa 538,650 NA NA NA 355,194 893,844 

Northern 

Marianas 493,763 NA NA NA 325,595 819,358 

Total 33,075,000 NA NA NA 29,599,500 62,674,500 

 Fiscal Year 2002 

Puerto Rico 30,296,700 NA NA NA NA 30,296,700 

Guam 1,157,625 NA NA NA NA 1,157,625 

Virgin Islands 859,950 NA NA NA NA 859,950 

 
12-14 

TABLE 12-6--SCHIP FINANCIAL PROGRAM INFORMATION, FOR 

COMMONWEALTHS AND TERRITORIES FISCAL YEARS 1998-2004-

continued

Territory 

Total 

Federal 

Allotment 

in 

Dollars1

FY1998 

SCHIP 

Redistributed 

Funds for 

Territories 

(available 

through 

FY2004)2

FY1999 

SCHIP 

Redistributed 

Funds for 

Territories 

(available 

through 

FY2004)2

Estimated 

FY2000 

SCHIP 

Redistributed 

Funds for 

Territories 

(available 

through 

FY2004)3

Estimated 

FY2001 SCHIP 

Redistributed 

Funds for 

Territories 

(available 

through 

FY2005)4

Total 

Federal 

funds 

available 

for 

each 

fiscal 

year 

American 

Samoa 363,825 NA NA NA NA 363,825 

Northern 

Marianas 396,900 NA NA NA NA 396,900 

Total 33,075,000 NA 5

 NA NA 33,075,000 

 Fiscal Year 2003 

Puerto Rico $30,296,700 NA NA NA NA $30,296,700 

Guam 1,157,625 NA NA NA NA 1,157,625 

Virgin Islands 859,950 NA NA NA NA 859,950 

American 

Samoa 396,900 NA NA NA NA 396,900 

Northern 

Marianas 363,825 NA NA NA NA 363,825 

Total 33,075,000 NA NA NA NA 33,075,000 

 Fiscal Year 2004 

Puerto Rico 30,296,700 NA NA NA NA 30,296,700 

Guam 1,157,625 NA NA NA NA 1,157,625 

Virgin Islands 859,950 NA NA NA NA 859,950 

American 

Samoa 396,900 NA NA NA NA 396,900 

Northern 

Marianas 363,825 NA NA NA NA 363,825 

Total 33,075,000 NA NA NA NA 33,075,000 

1

 Includes total Federal allotments in dollars as specified by BBA 1997 (P.L. 105-33), and additional 

appropriations for the territories as specified in P.L. 105-277 and P.L. 106-113. 2 The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA2000) incorporated by reference into P.L. 106-554, created a special rule for the redistribution and 

availability of unused FY 1998 and FU 1999 SCHIP allotments. P.L. 108-74 extends the availability 

of unspent FY1998 and FY1999 reallocations through the close of FY2004. 

3

 Estimates based on CRS analysis of State expenditures at the close of FY2002 and new 

redistribution method detailed in P.L. 108-74. 

4

 Estimates based on CRS analysis of CBO projections of FY2001 funds available for redistribution 

at the close of FY2003 and redistribution method detailed in P.L. 108-74. 

5

NA-Not applicable. 

Source: Table prepared by the Congressional Research Service based on data from the Centers for 

Medicare and Medicaid Services Administration. 
12-15 

CERTAIN TAX PROVISIONS THAT AFFECT LOW-INCOME 

FAMILIES WITH CHILDREN11

 Residents of Puerto Rico are exempt from the Federal personal income tax, 

and hence are not eligible for tax provisions that affect low-income families with 

children such as the earned income credit (EIC) and the dependent care tax credit 

(DCTC). Residents of the other territories also do not pay Federal personal income 

taxes. However, residents of the Virgin Islands, Guam, and the Northern Marianas 

benefit from the EIC and the DCTC of the Federal Tax Code because their 

territorial tax systems “mirror” the Federal income tax. Territories generally use the 

Federal income tax system as their own, though residents pay their taxes to the 

territory and not the Federal Government. Federal law requires the Virgin Islands to 

use the Federal income tax system as the territorial tax system. Guam, the Northern 

Marianas, and American Samoa also are required to mirror the Federal income tax 

unless they execute an agreement with the Treasury Department meeting conditions 

required to establish an independent tax system. Only American Samoa has 

executed such an agreement. 

 The corporate Tax Code includes two tax credits offered to employers who 

hire welfare recipients: the work opportunity tax credit and the welfare-to-work tax 

credit enacted in Public Law 105-34. U.S. chartered corporations operating in the 

territories are eligible for these two credits because the Federal corporate tax is 

levied on their worldwide income. 

 Corporations chartered in territories are considered “foreign” corporations 

under the Federal Tax Code. Therefore, companies chartered in Puerto Rico would 

not benefit from Federal tax credits for employers that hire welfare recipients. 

However, companies chartered in the Virgin Islands, Guam, and the Northern 

Marianas that operate under mirror tax systems benefit from these credits under 

territorial tax systems. 

REFERENCES

Brumbaugh, D.L. (1994, June). Federal taxes and the territories: An overview

(CRS 94-498E). Washington, DC: Congressional Research Service. 

Brunno, A., & Laney, G.P. (1996). U.S. insular areas and their political 

development (CRS Report 96-579 GOV). Washington, DC: 

Congressional Research Service. 

U.S. Bureau of the Census. (1999, April). Consolidated Federal Funds Report. 

Washington, DC: U.S. Department of Commerce. 

 

11 For a general discussion of the application of Federal taxes in the territories, see Brumbaugh 

(1994).