American Samoa, CNMI, Guam, Puerto Rico, and the U.S. Virgin Islands are five territories of the United States. With the exception of Puerto Rico, the populations in the territories are small relative to the states, and are generally poorer. Within broad federal guidelines and under federally approved plans, territories have some discretion in setting Medicaid and CHIP eligibility standards and provider payment rates; determining the amount, scope, and duration of covered benefits; and developing their own administrative structures. For example, similar to the states, unless they have obtained a waiver, the territories’ Medicaid programs are required to cover certain benefits—known as mandatory Medicaid benefits—and can choose to cover additional benefits, known as optional benefits. While the states also have similar discretion, the territories have been afforded greater flexibility, including the ability to set their own income eligibility levels for certain populations and determine income eligibility using a locally established poverty level instead of the federal poverty level (FPL). Also like the states, territories can operate their CHIP programs as a separate program, include CHIP-eligible children in their Medicaid program, or use a combination of the two approaches. Significant differences exist in how Medicaid and, to a lesser extent, CHIP are funded in the territories as compared with the states. For example, the federal matching rate for states’ Medicaid programs, the Federal Medical Assistance Percentage (FMAP), is based on a state’s per capita income in relation to the national per capita income, with poorer states receiving higher federal matching rates than wealthier states. In contrast, the Medicaid FMAP for the territories does not recognize their capacity to pay for program expenses. Although PPACA increased the territories’ FMAP from 50 to 55 percent, this percentage is fixed at the lower end of the range available to states. For the CHIP program, the federal government matches states’ and territories’ program spending at a rate higher than Medicaid, known as the enhanced FMAP. However, territories’ matching rate for CHIP spending is similarly fixed at the lower end of the range available to the states. Additionally, federal Medicaid funding in states is not subject to a limit, provided the states contribute their share of program expenditures for services provided. In contrast, federal Medicaid funding in each territory is subject to a statutory cap. In general, once their Medicaid and CHIP funding is exhausted, territories must assume the full costs of their programs. These funding differences, along with differences in the costs of health care in the territories compared with the states, have contributed to lower federal and territory Medicaid program expenditures in the territories. For example, in the aggregate, total Medicaid expenditures in all five territories comprised less than one half of one percent of the total national Medicaid expenditures in fiscal year 2014. However, when examined separately, Puerto Rico had Medicaid enrollment and expenditures similar to some states. Specifically, in fiscal year 2014, Puerto Rico ranked 11th in Medicaid enrollment nationally and ranked 42nd in total Medicaid expenditures. Like the states, territories must report their quarterly program expenditures for Medicaid and CHIP on the CMS-64 no later than 30 days after the end of each quarter, which is used to reimburse them for their federal share of these expenditures. In recent years, legislation to provide temporary increases in Medicaid and CHIP funding has been enacted. For example, the American Recovery and Reinvestment Act of 2009 (Recovery Act) provided the territories with a 30 percent increase in their Medicaid caps from fiscal year 2009 through the first quarter of fiscal year 2011, as well as federal matching funds to encourage Medicaid providers to undertake health information technology (HIT) initiatives. Most recently, PPACA appropriated $7.3 billion in additional Medicaid funding to the territories, the majority of which is available through fiscal year 2019. According to CMS officials, this funding can be used once territories expend their Medicaid and CHIP funding each year. PPACA also permanently increased territories’ Medicaid FMAPs and CHIP enhanced FMAPs to 55 percent and 68.5 percent, respectively. Federal law generally requires state, territory, and federal entities to ensure program integrity by protecting the Medicaid and CHIP programs from fraud, waste, and abuse. Like the states, territories have primary responsibility for such program integrity because they enroll providers, establish payment policies, process claims, and pay for services furnished to beneficiaries. To execute this responsibility, territories may undertake a variety of efforts. For example, although not required, they can establish program integrity units, which are tasked with identifying and recovering improper payments. Territories, like the states, are also required to implement certain program integrity mechanisms or receive an exemption from CMS for doing so. For example, territories must establish Medicaid Fraud Control Units (MFCU), which are tasked with investigating Medicaid fraud and other health care law violations, or receive an exemption from CMS from establishing one. The territories are also required to implement a Medicaid Management Information System (MMIS), which is a claims processing and information retrieval system that includes capabilities for reporting claims data, enrollee encounter data, and conducting pre- and post-payment review. Such information can assist in identifying improper payments. Federal mechanisms are also available to assist in program oversight. For example, CMS can conduct comprehensive or focused program integrity reviews, which assess the effectiveness of state and territory program integrity efforts, including compliance with federal statutory and regulatory requirements. Further, through the Payment Error Rate Measurement (PERM) program, CMS requires states to estimate improper payments in the Medicaid and CHIP program to identify program vulnerabilities and actions to reduce improper payments; however, the agency has excluded the territories from this program. Additionally, OMB’s annual A-133 single audits examine internal controls and compliance deficiencies in certain federal programs, including Medicaid and CHIP, and can be a resource to inform program oversight. Due to the flexibility territories have in administering their Medicaid and CHIP programs, the territories’ program eligibility and benefits not only reflect their unique circumstances, but also differ from one another and from the states. For example, a notable distinction among territories’ program eligibility is that Puerto Rico is the only territory that uses its CHIP funds to cover additional children in its Medicaid programs whose income levels exceed Medicaid eligibility levels. The other four territories use their CHIP funds to pay for services provided to children up to the age of 19 in their Medicaid programs. Additionally, Guam, Puerto Rico and the U.S. Virgin Islands base program eligibility on local poverty levels (LPL) that are more restrictive than federal standards, which has resulted in lower program enrollment than would otherwise be the case. Additionally, unlike the states and other territories, American Samoa does not determine eligibility for its Medicaid program on an individual basis. Instead, it presumes that all individuals with incomes at or below 200 percent of the FPL are eligible. The different methods territories use to determine eligibility affect Medicaid enrollment in each territory, with the estimated percentage of territories’ populations enrolled in Medicaid in fiscal year 2015 ranging from about 17 percent in the U.S. Virgin Islands to 88 percent in American Samoa. (See table 1.) Territories also vary in terms of the range of benefits covered by their respective Medicaid programs. Specifically, Guam covers all of the 17 mandatory Medicaid benefits; CNMI and the U.S. Virgin Islands cover nearly all of the benefits; and American Samoa and Puerto Rico cover 10 of the 17 benefits. American Samoa and CNMI operate their Medicaid programs under broad waiver authority under section 1902(j) of the Social Security Act and, therefore, are not required to cover all mandatory benefits. While the other territories do not operate under this broad waiver authority, CMS acknowledged that the agency has not required them to cover all mandatory Medicaid benefits, citing limited federal Medicaid funding and the unavailability of certain services. Examples of the mandatory benefits most commonly covered by all five territories include Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) services for individuals under 21; inpatient hospital services; outpatient hospital services; and physician services. In contrast, the territories’ coverage of other benefits, such as nursing facility and rural health clinic services, was less widespread, and only Guam covered freestanding birth center services. (See fig. 1.) Officials from the four territories that do not cover all mandatory Medicaid benefits cited multiple reasons for not doing so, including limited funding and a lack of infrastructure. In particular, officials from Puerto Rico and American Samoa said that their programs do not cover nursing facility services due to insufficient funding and because they do not have nursing homes; CNMI officials noted that its program does not cover freestanding birth center services because there are no such facilities in the territory; and due to the lack of available providers, certain specialty services covered by American Samoa, CNMI, and Guam are only available off- island. For example, in CNMI, most cardiac, orthopedic, chemotherapy, and radiation services are only available off-island; in Guam, pediatric oncology, hematology, dermatology, and procedures such as cardiac bypass surgery, are only available off-island. In addition to mandatory Medicaid benefits, each territory has chosen to cover optional benefits, with all five territories providing coverage for outpatient prescription drugs, clinic services, dental and eyeglasses, prosthetics, physical therapy, and rehabilitative services. Optional services commonly covered by states—such as targeted case management, personal care services, and intermediate care facilities for individuals with intellectual disabilities—are not covered by any of the five territories. (See fig. 2.) The recent temporary increases in federal funding have enabled the territories to increase Medicaid and CHIP spending, and avoid federal funding shortfalls. Most notably, PPACA’s appropriation of an additional $7.3 billion in Medicaid funding for the territories—available for expenditure through at least fiscal year 2019—provided them flexibility in terms of when they choose to draw down the additional funds.