We’ve been blogging a lot about Medicaid lately, partly because Congress is discussing reducing federal deficit by limiting entitlement spending (including Medicaid spending), but also because health centers and Medicaid have an important connection.  Put very simply: a strong Medicaid program is essential to:  1) health centers’ financial stability; 2) their ability to serve as high-quality, comprehensive health homes; and 3) health center capacity to improve the health of their communities.  And a strong health center program is critical to reducing Medicaid spending specifically and government spending in general.  We’ve added new materials to our Medicaid webpage on the NACHC website to provide more of the ins and outs of the relationship between health centers and Medicaid, but this blog is a good introduction to why the Medicaid program is important to health centers, and just how important it is.

Part of the linkage between health centers and Medicaid comes from the sheer number of Medicaid patients health centers treat: 37% of all health center patients are Medicaid beneficiaries, which is a total of 8.5 million Medicaid patients nationwide.  Looking at it from the Medicaid program perspective, 1 in every 7 Medicaid beneficiaries receives their care through a health center home.  Running the numbers, it comes out that health centers treat 14% of all Medicaid patients – and they do it for only 1% of total Medicaid spending. The Medicaid program relies on health centers to provide Medicaid beneficiaries with quality, comprehensive, coordinated and cost-effective care; and health centers rely on the Medicaid program to reimburse them for care for over one-third of their patients.  Also important is that health centers are open to all, and even as Medicaid patients may find it increasingly difficult to access care in other settings, the doors of health centers are always open – so long as health centers have the capacity to serve them. This means that changes to Medicaid – for example, a limitation on benefits, eligibility or cost-sharing—highly impacts a large portion of health center patients, and by extension, health centers.

Because Medicaid patients are such a large part of health centers’ patient mix, and because health centers’ care is comprehensive, it is important that health centers are reimbursed adequately and reliably for the care they provide to Medicaid patients.  In recognition of health centers’ role in caring for Medicaid patients and the uninsured, and of the comprehensive set of health center services FQHCs provide, Congress passed legislation in 2000 to require state Medicaid programs to pay health centers fairly using a Prospective Payment System (PPS) that covers the bundle of services a health center provides.  This system is unique to health centers and in Medicaid and it ensures that a state can pay a health center no less than their calculated PPS rate for a visit with a Medicaid patient – a rate that is fair and related to the health centers’ cost of care.  PPS payments cover about 80% of the average health center’s costs today.

Since this PPS has been mandated for FQHCs, Medicaid has become health centers’ best and most reliable payer, and health centers know they will recoup adequate reimbursement for the large bloc of Medicaid patients they care for.  This is essential for health centers to balance their budgets since they know they’ll receive payment for at least one third of their patients on average.  It also gives a health center the ability to use their Federal Section 330 grant for its intended purpose:  to cover the cost of care for the uninsured, rather than backfilling Medicaid underpayments.  In fact, the uninsured are about 39% of health centers’ patient load – so if Medicaid did not pay adequately, and the uninsured can pay for only a portion of the cost of their care, health centers would go un-reimbursed for approximately three-quarters of the visits they provide.

Health centers’ mandate to provide comprehensive primary care to all who seek it is a cornerstone of the Health Centers Program, and health centers will continue to live out their mission to increase health care access for all.  However, health care comes with a cost and a health center must be able to balance its budget to keep doors open, despite having little or no reimbursement for the uninsured patient population.  Weakening health centers’ payment system under Medicaid would destabilize health centers’ bottom lines and severely erode the network of America’s health centers –urban and rural – and it would put every health center patient, not just Medicaid patients, in jeopardy of losing their health center home. This unique relationship between health centers and Medicaid means that when Medicaid policy is on the table, health centers must be a part of the discussion and our voices need to be heard.