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Without a Cushion from Funding Cliff, Health Centers Face 2016 Closures

By John Reichard, CQ HealthBeat Editor

March 10, 2014 -- Community health centers, long a bipartisan funding priority on Capitol Hill, face a sharp drop-off in federal support in fiscal 2016 that could force a number of centers to close, slash staff, or curtail services.

If lawmakers do not intervene, a key part of the strategy for meeting growing demand for healthcare services as coverage expands under the health law will be undermined, advocates for centers say.

Typically located in medically underserved areas, the centers take all comers. They set charges on a sliding scale that varies with income and insurance status. Centers do not provide hospital care but do offer an array of other basic primary care services.

This fiscal year, congressional funding provides $3.7 billion for the centers, consisting of $1.5 billion in discretionary funds, and $2.2 billion in mandatory funding under the health law (PL 111-148, PL 111-152).

In fiscal 2015, the mandatory money grows to $3.6 billion under a five-year health law program championed by Sen. Bernard Sanders (I–Vt). The total would be $5.1 billion, assuming the $1.5 billion in discretionary outlays continues. But in fiscal 2016, the mandatory funds dry up, resulting in a 70 percent drop over year-earlier totals, said Dan Hawkins, senior vice president of the National Association of Community Health Centers.

"There's a big jump in '15, and then there's this cliff," Hawkins said in an interview last week.

Hawkins group has been trying to call attention to the issue, mostly behind the scenes with the Obama administration, but increasingly in a public way. Without a more predictable funding outlook, centers can't effectively plan for staffing and service delivery, he says.

"We can't wait until then," Hawkins said. "Health centers need to have some, I won't say certainty, but some sense of stability looking forward. They're out there hiring providers, physicians, dentists, nurse practitioners, psychologists, they're contracting for space or they're renewing their space contracts."

The centers also are buying equipment and must have "a reasonable expectation that the resources are going to be there," Hawkins said. "Already we know that those resources are not going to come in the form of third party payments for a lot more folks."

That's because coverage expansion under the health law hasn't been nearly as large as authors of the statute projected.

But demand for services is nevertheless growing. When Massachusetts passed its coverage expansion law in 2006, long wait times developed for primary care among people who were newly insured. Expanding community health centers was a big part of lessening the marketplace chaos then and could serve a similar function as more people get insurance cards under the health law, he said.

There's every reason to think Sanders will again champion an extension of mandatory funding. A big part of his pitch likely will be the tradition of bipartisan support for the centers, a priority of White House officials during the presidency of George W. Bush. Center boosters also tout the expansion of primary care as a way to save the health system money.

The Obama administration has heeded the association's lobbying, Its budget proposal unveiled last week would extend mandatory funding of the centers for three more years. In each of fiscal years 2016, 2017, and 2018, it would total $2.7 billion. That's less than the $3.6 billion in fiscal 2015, but a half billion increase over the current level of $2.2 billion.

The centers could feel pressure from other kinds of funding dropoffs. The National Health Service Corp., which places young doctors in medically underserved areas in return for lessening their tuition debts, relies provides almost half of the doctors in community health centers. Mandatory funding for the corps totals $283 million in fiscal 2014 but would end after fiscal 2015.

Obama has proposed to increase funding for the effort sharply, but it too faces the same question that clouds the future of the centers' funding: Will Republicans agree to continue mandatory funding created under the health law, despite their bitter opposition to the overhaul? Hawkins agrees that won't be easy to accomplish but adds "to us, this is not about the ACA, this is about health centers."

On that basis, the centers have a shot at a decent funding outlook, and perhaps the continuation of mandatory funding. But that would likely require payment offsets from other health providers.

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