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Report: Community Health Centers Under Growing Financial Strain Despite Funding Increases

AUGUST 8, 2005 -- Despite increased federal funding, community health centers are under growing financial pressure that will intensify if Congress gives states greater power to reduce Medicaid benefits, health center officials said at a news briefing Monday.

The growth in federal funding, a major Bush administration health care priority since 2000, hasn't kept pace with the rise in health care costs and the growing number of uninsured patients treated by the facilities, according to a report the officials released at the briefing. The event was sponsored by the National Association of Community Health Centers (NACHC).

The centers generally do not turn any patients away, so the federal dollars are increasingly important. The patients treated by the facilities are overwhelmingly poor, with 71 percent earning below the federal poverty level. As a result, any reduction in Medicaid benefits adds to the financial pressure on the centers, the officials said.

According to the report, 40 percent of community health center patients last year were without health coverage. Of those who had insurance, Medicaid was the primary payer.

Because of those realities, any overhaul of Medicaid should not give states the power to reduce benefits or assess new out-of-pocket costs for existing Medicaid beneficiaries, said Dan Hawkins, vice president of the NACHC.

But slimmed-down benefits or higher co-payments would be appropriate for people who qualify under expanded eligibility criteria, he said. The Bush administration says that greater control over benefits would allow states to broaden eligibility for Medicaid coverage.

The administration's overhaul plan makes such "flexibility" a key element of changing Medicaid, but states could water down benefits and charge new out-of-pocket fees for existing Medicaid beneficiaries, not just residents who would qualify for Medicaid expansions.

New Patients
Hawkins said that during the Bush administration, the number of patients treated per year by the facilities has grown by 4 million to a total of 15 million. That's the biggest increase in the 40-year history of federal funding of the centers, he said.

But federal funding as a share of per-patient treatment costs declined from 58 percent in 1999 to 52 percent in 2004, said Hawkins, citing data in the report.

The number of uninsured patients treated by the facilities rose 43 percent between 1999 and 2004, the report said.

The effects of state-level Medicaid cuts are already being seen in Tennessee community health centers, said Mary Bufwack, the head of United Neighborhood Health Services, a Nashville-based organization that runs six centers.

Hundreds of thousands of Tennessee residents have begun losing coverage because of huge cuts in TennCare, the state's expanded Medicaid program, she said.

"As I speak, 1,900 people are losing TennCare every day," she said.

Community health centers in Tennessee won't close their doors because of the state's growing number of uninsured residents, but treating them is going to be "a real struggle," she said.

Some states are not only cutting Medicaid—seven reduced direct funding to the centers in 2005, with those cuts totaling $14 million, according to the report.

The report also said two of every five centers ran operating losses last year and that margins for all centers combined averaged just 0.9 percent. "At such low operating margins, a single unexpected event—a disease outbreak, or a hurricane, snowstorm, or power outage alone—could easily put a health center in deficit, thereby threatening its ability to provide comprehensive care," the report said.

Asked specifically what Congress should do to help centers, Hawkins said lawmakers should "fully fund" the administration's fiscal 2006 request for an added $300 million in federal outlays. Hawkins asserted that added funding will help reduce Medicaid spending by giving center clientele "a medical home."

In other words, by getting regular preventive and primary care at community health centers, center patrons won't end up in the emergency room needing much more costly treatment.

However, the House has approved a fiscal 2006 increase of only $100 million (HR 3010) and the Senate a hike of only $105 million in its version of the same measure.

Hawkins added that medical liability coverage should be extended free of charge to doctors who volunteer their services to community health centers.

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