The Medicaid program in Puerto Rico differs from United States Medicaid programs in several important ways. First, it operates within a larger, centrally administered health care delivery system. Approximately half of Puerto Rico's 3.2 million inhabitants are poor and depend upon the public health system for their medical care. Second, recipients are not free to choose their own provider, but are referred to the proper level of care by public health care system professionals. Third, this system has a low average recipient cost. Fourth, Congress has "capped" the Federal financial participation since 1968. Finally, despite the economic constraints and large Medicaid population, health status in Puerto Rico compares favorably with that in the United States. This study describes the organization and operation of Puerto Rico's Medicaid program in terms of basic expenditures and utilization data. The Puerto Rican program is an important example of an alternative health care delivery system for the poor. It is interesting in the contrast it provides to United States Medicaid programs and as a case study of how such a program operates when Federal financing is "capped" over a period of time.