Predicting the Impact of Transforming the Medicaid Program on Health Centers’ Revenues and Capacity to Serve Medically Underserved Communities

Policy Points Recent federal proposals to use block grants or per capita caps to fund Medicaid would likely lead to cuts in Medicaid funding for health centers, which are an important source of care for Medicaid enrollees. Recent Medicaid §1115 waivers are seeking to change state-level enrollment and eligibility requirements in ways that are expected to adversely affect health center revenues. Proposed Medicaid funding cuts are expected to lead to reductions in service capacity across all health centers over the long term. State policymakers should understand the likely impacts of proposed Medicaid program changes on health centers in their states and allocate funding to help offset lost federal financing. Context In 2017, Congress considered implementing block grants or per capita caps to significantly reduce federal financing of the Medicaid program. Medicaid plays a key role in supporting health centers in their provision of care to patients with Medicaid coverage. Consequently, changes to the program could have serious implications for health centers and their ability to fulfill their mission. Methods We used a mixed-methods approach to (a) test a model simulating the effect of block grants and per capita caps on health centers' total revenues and general service capacity, and (b) augment model assumptions by using information collected from official Medicaid documents and interviews with health center leadership staff. Data came from the Uniform Data Systems (UDS), state- and county-level population projections, structured analyses of waiver documents, and interviews with health center leaders in seven states with approved or pending Medicaid §1115 waivers. Findings By 2024, in states where Medicaid coverage was expanded under the Affordable Care Act, block grant funding for Medicaid would decrease total health center revenues for the expansion population by 92%, and by 58% for traditional enrollees. In nonexpansion states, block grants would decrease health center revenues for traditional Medicaid enrollees by 38%. In expansion states, a per capita cap would, by 2024, decrease health center revenues for the expansion population by 78%, and for traditional Medicaid enrollees by 3%. The per capita cap would reduce health center revenues for traditional Medicaid enrollees in nonexpansion states by 2%. Eliminating the Medicaid expansion population would not fully compensate for health center revenue deficits in expansion states. Health center executives in all sample states expressed significant uncertainty around federal plans to reduce Medicaid funding as well as the financial implications of §1115 waiver requirements. Many interviewees anticipate cutting back on services and/or staff as a result. Conclusions Both block grants and per capita caps would have a detrimental effect on health centers. Although health center leaders anticipate a reduction in services and/or staff, the uncertainty around federal and state proposals hinders health centers from making concrete strategic plans. States should prioritize communicating changes to health centers in a timely manner and be prepared to set aside dedicated funding to address anticipated shortfalls.