Publications & Resources

State Budget Crises and the Threat to the Health Care Safety Net

Since 2008, state funding for health centers has been on the decline. A recent NACHC survey of state primary care associations found that while 36 states and the District of Columbia will provide a total of $435 million in funding for their health centers in 2010, this amount represents a 13% decline from the nearly $502 million directed to health centers in 2009 and a 23% decline from the $566 million provided in 2008.

Thirteen states will, however, increase their investments in community health centers in 2010 despite widespread state budget troubles. Health centers in Arkansas and Illinois will see their funding levels increase at least five-fold when they receive one-time appropriations of $5 million and $50 million respectively for capital improvements.

f the states that will continue to support health centers next year, five will level fund and 23 will appropriate a significantly smaller amount than in previous years. Health centers in Arizona, California, Colorado, D.C., Indiana and Massachusetts will each lose over $10 million, while Alaska centers will see their first-time funding of $3.85 million appropriated in 2009 cut to only $350,000 for the upcoming year. Health center funding in two states – Idaho and South Dakota – will be completely eliminated.

In addition to reductions in 2010 appropriations for health centers, a number of states filled existing revenue gaps by decreasing 2009 funding levels and most states are cutting even deeper into 2010 funding as the gaps increase.

Increasing demands on the safety net

While states were knee deep in budget battles this past February, Congress moved to jumpstart the economy by passing the American Recovery and Reinvestment Act (ARRA). Included in this unprecedented stimulus package was $2 billion in one-time funding over two years to the Community Health Centers Program. Since then, these funds have been critical to helping health centers enhance capacity to provide care to rising numbers of people who have lost their jobs and insurance and are increasingly turning to the health care safety net for help.

NACHC survey data shows the total number of health center patient visits increased 14% between June of last year and June this year, compared to 6% the previous year. Also, two-thirds of health center survey respondents reported that at least 10% of their patients have recently been affected by unemployment. The number of people served by community health centers reached an alltime high earlier this year at 20 million.

The stimulus funds will help them serve another 2.1 million (including 1 million uninsured), as well as create or save jobs that would have otherwise been lost due to the economy. A significant portion of this funding is also being directed to build and strengthen health center capacity in the areas of facility improvements and purchase and implementation of health information technology.

One step forward, two steps back?

While stimulus funds have been a well needed boost to keeping health center doors open to more patients, it’s important to remember that the funding is temporary. After two years, health center projects funded through the ARRA will need to be sustained through state and local support in order for centers to continue providing essential primary care services to their neediest populations and communities at the same level. But the willingness and ability of states to do so in the future is uncertain.

What is happening today, however, is that many states are justifying large cuts in state funding to health centers by pointing to the ARRA funds centers have received. Policymakers in Arizona, California, Colorado, Connecticut, Ohio, and North Carolina have directly referenced the ability of health centers to access these federal funds as a reason to reduce state support.

In California, Governor Arnold Schwarzenegger warranted cutting the state’s Expanded Access to Primary Care fund (which previously provided $27 million to the state’s community health centers) by claiming, “Many of these clinics are also receiving increased federal stimulus funds, which will help soften the impact of this necessary reduction.” In North Carolina, the state senate proposed cutting health centers that received ARRA money out of the state’s Community Health Grants, a program that the health centers themselves helped to create and from which they had previously received nearly half of the funds. Fortunately, this proposal was defeated.

What most concerns health care advocates is that severe cuts in (or in some cases, total elimination of) state funding for health centers and other vital safety net programs could not have come at a worse time – when needs have never been greater. Furthermore, such reductions undermine the intent of the health center stimulus package to serve growing health care needs and to create and/or retain jobs in this challenging economy. “We are not making these [stimulus] investments so that states can take money away from community health centers and spend it elsewhere,” said HHS Secretary Kathleen Sebelius at NACHC's Community Health Institute in August. “These funds are intended to supplement state money so that community health centers can meet the growing demand for their services in this time of need.”

Additional hits

On top of cuts in direct state funding, health centers in many states also confront the added pressure of cuts to Medicaid and the Children’s Health Insurance Program. A recent survey by the Kaiser Family Foundation indicates that Medicaid enrollment across the country grew by 5.4% in 2009, which is the highest rate of growth in six years. In conjunction with this, Medicaid spending growth averaged 7.9%, the highest in five years for the program. In order to help states with the increased enrollment and higher spending in Medicaid, the federal government provided program assistance under ARRA. States received an enhanced federal match as long as they met specific maintenance of effort requirements. However, once the federal assistance runs out states will no longer be held to these requirements and may begin to make cuts in eligibility and benefits. The outlook for 2011 does not offer much hope given the slow pace of the economic recovery and as a majority of states already are bracing for continued budget deficits. At stake will be the health care safety net and the millions of people who need it.

Dawn McKinney is Director for State Affairs and Colleen Boselli is State Policy Analyst at NACHC.



Health centers depend on a variety of revenue sources, including state funding, to provide health care to the low-income and uninsured. Community Health Forum asked three state primary care representatives to provide a "read" on how their state's fiscal situation has affected health centers and ultimately how these budget woes have placed growing numbers of people at risk.


The Crisis: Field Perspectives -- COLORADO

Polly Anderson, Policy Director
Colorado Community Health Network

Colorado’s community health centers are facing current-year (July 1, 2009–June 30, 2010) state budget cuts totaling $32.4 million, not including some of the cuts that will affect Denver Health's1 programs and services. These cuts jeopardize care to 48,175 patients, at an annual cost of only $685 per patient, and they come at a time when demand for health center services is higher than ever. In January this year, health centers in the state reported that demand is up as much as 40 percent by Medicaid patients and 23 percent by the uninsured.

State budget cuts affecting health centers this year included: reductions in FQHC Medicaid reimbursement rates; Medicaid fee-for-service rates; state tobacco tax funding for care to the uninsured; state tobacco settlement grants for expanding access for the uninsured; and state tobacco tax grants for tobacco education, cancer, cardiovascular and pulmonary disease, and health disparities. In addition, increased reimbursement for the Colorado Indigent Care Program will end a year earlier than originally planned – three months into the year in which health centers had budgeted for income from the program. In September, updated revenue projections showed revenues continue to fall and will result in an additional $240 million in budget cuts in late October 2009.

Colorado is not making cuts to a rich budget. The state ranks near the bottom when compared to other states for covering families and children for health care, for investing in public education and higher education, and for transportation and highway investment. A complicated matrix of statutes and voter-approved constitutional amendments make revenue increases very difficult.

While health centers in Colorado are working to minimize the impact of the cuts, they are too large for some of them to avoid service reductions. For some centers, the cuts add up to as much as 20 percent of their annual operating budgets; on average the impact is a 10 percent cut to annual budgets. At the same time that health centers are struggling with $32.4 million in state budget cuts, they are receiving only $3.75 million in this fiscal year to help cover the cost of the growing demand for services. Clinic site closures and staff layoffs are taking place, as well as service hour reductions and lengthening waiting lists.

Colorado Community Health Network (CCHN) and health centers are working hard to communicate with state officials, partner organizations, and the news media  about the negative impact of the state budget cuts on health center programs. CCHN is working with its online grassroots network of more than 1,200 advocates to contact Governor Bill Ritter, and is participating in coalitions working to address the ongoing budget and revenue crisis.

One success to date has been a decision by the governor to restore funding to the Aid to Needy Disabled (AND) program, which provides a very small but essential monthly stipend to individuals who are poor, disabled, unable to work, are awaiting SSI benefits, and who are not eligible for other state assistance programs. The Social Security  Administration reimburses Colorado once their disability benefits are awarded. CCHN joined a statewide effort led by the Colorado Coalition for the Homeless, a member of CCHN, to advocate for this restoration of funding.

In the meantime, CCHN continues to closely monitor the state budget and its impact on community health centers. [At the time CHForum went to press, the governor was expected to make public his state FY10-11(July 1, 2010-June 30, 2011) budget on November 6.]

For more information about the Colorado Community Health Network, visit:

1. Denver Health is a public integrated health system, with hospital, emergency services, and a network of Community Health Center sites. The other 14 members of CCHN are private non-profit Community Health Centers.


The Crisis: Field Perspectives -- CALIFORNIA

Serena Kirk, Senior Policy Advocate
California Primary Care Association

Over the last 18 months, California has made headlines because its cumulative structural budget deficits have exceeded $70 billion – by far the largest fiscal gaps of any state in the nation. The state has found itself in both the worst economic and unemployment crisis since the Great Depression. California’s unemployment rate rose to 12.2 percent this summer, much higher than the 9.7 percent national rate and the worst in 70 years, with 2 million Californians actively seeking employment. This rapid increase in unemployment has created waves of uninsured patients flooding into the health care safety-net system, as individuals and entire families lose their employer- based coverage.

California’s community clinics and health centers (CCHCs), which already provide a disproportionate amount of care to the state’s uninsured, have seen significant increases in uninsured patients, anywhere between 10-50 percent statewide, with one clinic experiencing an 80 percent increase.

On top of that, the state’s health care system has been significantly dismantled in recent months due to California’s fiscal crisis which has resulted in billions of dollars of reductions and even eliminations of entire health care programs, many of which are the lifeblood for California’s more than 800 CCHCs and their ability to provide care to their communities. Despite Governor Arnold Schwarzenegger’s signing of an 18-month budget in February, closing a $42 billion deficit, by May the state found itself $24 billion in additional debt. The state’s legislature and administration have taken drastic measures, reducing the amount of resources provided to the health care system, at the very time health care needs are increasing rapidly, especially in underserved areas of the state.

The governor’s budget included billions in program reductions across sectors, which even after a hard fought battle included the devastating elimination of nine Medicaid (Medi-Cal in California) Optional Benefits, including dental benefits for adults. The loss of adult dental, the largest Medi-Cal Optional Benefit, is the most troubling as it serves 2.8 million recipients statewide and provides $56.6 million in Medi-Cal revenue for CCHCs.

The governor’s “May [budget] Revision” brought nothing but additional loss, with entire program eliminations on the chopping block. Ultimately, the legislature did seek to leave the safety net intact and held the line at “minimal” program reductions, however, when the governor received the legislature’s approved budget, which fell $1 billion short from closing the entire deficit, he made close to $500 million in line item veto reductions, most of which were cuts to health and human services programs. As a result, all state General Fund dollars were eliminated for California’s Traditional Clinic Programs (used to provide care to uninsured, rural, Native American, and farm worker populations); 60 percent of California’s CHIP program (Healthy Families) was eliminated; and additional reductions were made to Adult Day Health Centers (ADHCs), HIV/AIDS programs, as well as a multitude of other fundamental CCHC programs.

The California Primary Care Association (CPCA), regional consortia, and clinics across the state, fought tirelessly against these unconscionable cuts to core clinic programs. CPCA employed multiple advocacy efforts to protect health care programs, including lawsuits, innovative legislative solutions and grassroots advocacy.

Despite many failed attempts, there were some successful fights, including a lawsuit arguing the cuts to ADHCs were in violation of the federal Americans with Disabilities Act, as well as legislation that mitigated the cuts to California’s CHIP program. Although these two programs were saved, the hundreds of millions of additional cuts have jeopardized the ability of CCHCs to continue to provide vital services and in some cases, are impacting entire communities – with the closure of four clinics statewide so far. Clinics around the state are doing everything possible to provide care, despite having to make difficult decisions such as reducing clinic hours, laying off staff, or eliminating internal programs.

There are currently projections of a $7 billion to $10 billion deficit next year, with some speculation about the possible need to reopen the budget yet again. In the meantime, CPCA is focusing on identifying the impact this year’s budget cuts had on CCHCs. The goal is to build enough evidence to demonstrate that these eliminations did not result in cost-savings to the state, but instead shifted costs to already overburdened emergency rooms and drained the safety net detrimentally.

For more information about the California Primary Care Association, visit:


The Crisis: Field Perspectives -- ILLINOIS

Jill Hayden, Director of State Governmental Affairs
Illinois Primary Health Care Association 

After passing what many have termed as an “85 percent budget,” members of the Illinois General Assembly left the State Capitol, returned to their home districts, and thought they had at least funded the basic priorities of state government—maintaining state agency operations, making the school aid payments and paying Medicaid providers within 30 days. However, due to a technicality, community health centers are now subject to devastating cuts, putting over one million patients at risk of losing access to affordable health care.

Under the American Recovery and Reinvestment Act of 2009, states were given the opportunity to draw down additional Federal Medical Assistance Percentages (FMAP), (i.e., the Medicaid federal match rate), which in the case of Illinois would amount to $2.9 billion in extra Medicaid funds so long as the state maintains Medicaid eligibility levels and pays most Medicaid providers within 30 days. However, due to a glitch in the Federal Prompt Payment Act, [which requires federal agencies to pay their obligations within certain time periods and to pay interest when payments are late], community health centers are not included in the federal mandate and were therefore not included in the state’s budget that appropriated state Medicaid funds to most other providers. As a result of the General Assembly’s failure to fully fund the Medicaid program for community health centers, it will be difficult for them to simply maintain their current operations this year.

When the General Assembly dedicated a lump sum of over $2 billion in the final FY 2010 budget for “community-based providers,” health centers saw a glimmer of hope that those funds could be used to decrease the payment cycle to a manageable number of days. Unfortunately, only a third of the necessary funds were dedicated to the Medicaid and All Kids programs, leaving many health center administrators with the possibility of having to lay off staff, cut back operation hours, eliminate services and/or put much needed expansion projects on hold.

Essentially, this “cut” to the Illinois Department of Healthcare and Family Services (HFS) will come in the form of extended payment cycles for community health centers and other providers not included in the itemized Medicaid budget. Any increase in the length of the payment cycle is especially difficult for health centers as they are responsible for treating the Medicaid and All Kids populations, as well as the uninsured. Medicaid is the primary source of revenue for   community health centers. Without timely reimbursement, their operations will become stressed and lead patients to seek primary care at hospital emergency departments – a more costly source of care that the state will have to absorb in the long run.

Community health centers are among the many health and human services organizations affected by the state’s fiscal crisis and are a prime example of the irony associated with both state and federal policy. During a time when these services are needed most, the safety net system upon which the government relies to keep communities educated, safe and healthy, has become even more vulnerable.

For more information about the Illinois Primary Health Care Association, visit:

Related Documents:

01-13-2010 Printable - CHForum Fall 2009 - State Budget Crises (437kb)

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