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Strengthening the Health Care Safety Net

Health Centers & Clinics


Barbara E. Bailey, Ph.D., Chief, Policy Assistance and Development Branch, Division of Community and Migrant Health, Health Services and Resources Administration, U.S. Department of Health and Human Services, Bethesda, MD.

Dennis Braddock, Secretary, Washington Department of Social and Health Services, Olympia, WA.

This session described the characteristics of community health centers as safety net providers (SNPs) and provided an overview of the public subsidies available to pay for care for those without adequate financial means. This session also discussed the potential impact of the phasing out of cost-based payments under Medicaid and highlighted why and how community health centers have sought to participate in managed care programs.

Dr. Bailey began her presentation by describing the origins and background of community health centers. The Equal Opportunity Act of 1964 called for the Office of Equal Opportunity to eradicate poverty by improving the social and economic situation of the Nation. The following year, eight neighborhood health centers were funded to:

  • Eliminate barriers to care.
  • Ensure continuity of care.
  • Promote preventive services.
  • Increase community participation and control.
  • Promote the use of new categories of providers.

Today, there are more than 2,600 community health centers (CHCs) all over the United States, providing a variety of services to meet the task established 35 years ago. CHCs are required to provide:

  • Basic health services.
  • Diagnostic laboratory and radiologic services.
  • Preventive health services, such as cancer screening and immunizations.
  • Referrals for other services, such as mental health and substance abuse.

In addition, services provided at CHCs that distinguish themselves from other SNPs include case management, enabling services such as transportation and translation, and education of patients and the community.

Sources of funding for CHCs include a patchwork of public and private support such as:

  • Medicaid (32 percent).
  • Medicare (8 percent).
  • Other State and local dollars (35 percent).
  • Other Federal dollars (1 percent).
  • Community/migrant health center dollars (27 percent).

CHCs are faced with the challenges of increasing numbers of uninsured, increasing immigration, increasing disparities in health status, managed care, aging of the population, and changes in financing.

Changes in financing are a result of the Balanced Budget Act of 1997, which capped disproportionate share payments (DSH) to hospitals under Medicaid, and Congress is considering further reforms of the DSH program under Medicare. The BBA also sought to phase out cost-based reimbursement for federally qualified health centers (FQHCs) over 5 years; but the Balanced Budget Refinement Act of 1999 (BBRA) delayed the phase-out by 2 years (until 2005) and calls for further study, in part due to opposition from advocates of the uninsured who sought to maintain these payments. Under the BBA phase-out, health centers are estimated to lose $50 million per year in fiscal years 2000 through 2002 and up to $500 million each year after fiscal year 2005.

CHCs are adapting to the these challenges by working to:

  • Increase service.
  • Reduce health disparities.
  • Increase revenue sources.
  • Work with managed care.
  • Integrate systems of care.
  • Achieve and promote operational effectiveness.

In working to increase revenue sources, the Medicaid Safety Net Preservation Act of 2000 was introduced. This act would establish a Medicaid prospective payment system (PPS) to ensure sufficient payment for care to Medicaid payments and would counteract the effects of the BBA phase-out of cost-based reimbursement for FQHCs. This provision was included in Public Law 106-554 (the Medicare, Medicaid, SCHIP Benefits Improvement and Protection Act of 2000), which was passed at the end of 2000 and went into effect January 1, 2001.

Issues that CHCs will continue to face include:

  • Ensuring that CHCs have a stable and generous amount of funding.
  • Taking advantage of technology with regard to electronic medical records, billing, and tracking.
  • Integrating and collaborating among hospitals, health departments, and the private sector.

The goal is for CHCs to be the provider of choice for the populations they serve.

Dennis Braddock is Secretary for the Washington Department of Health and Social Services. Mr. Braddock spoke about CHCs from a Washington State perspective. Washington has an 11-percent uninsurance rate, with 12 percent of the population covered by Medicaid.

State-level direct subsidies supporting safety net functions include FQHC cost-based subsidies ($75 million) comprising capitated, fee-for-service, and dental payments; and State grants to community health centers ($6 million). State-level indirect subsidies include eligibility expansions in the Basic Health Plan, dental care, and State Children's Health Insurance Programs (SCHIPs).

Mr. Braddock described how these subsidies benefit the State in a variety of ways. For example:

  • They help maintain a reliable safety net network.
  • They are capable of serving ethnic minorities and other hard-to-serve uninsured.
  • They allow for expanded community and migrant health center facilities and personnel.
  • They provide a reliable Medicaid and low-income managed care contractor.

The State of Washington has a system of direct and indirect subsidies to support safety net functions. The cost of those subsidies is critical to CHCs, and the benefits of those subsidies, such as immunizations and outcome standards, are above average. Mr. Braddock cautions, however, that the future remains uncertain.


Bailey S, Lagaspki M. Experts with experience report. Health Resources and Services Administration, Bureau for Primary Health Care.

Davis K, Collins KS, Hall A. Community health centers in a changing U.S. health care system. Policy Brief. Washington DC: The Commonwealth Fund; 1999, May.

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