FQHC Payment Priority Paper

Problem: Federally Qualified Health Centers (FQHC) and FQHC 'look-alikes' are important safety net providers. An increasing number of publicly-funded programs to address the needs of the uninsured are not classified as Medicaid and are therefore not required to abide by the FQHC payment methodology created by Congress to protect these safety net providers.

Recommended Action: Extend the FQHC payment methodology to all publicly-funded health care coverage programs.

As the economy slowly recovers, the need for a safety-net to maintain access to health care services for the publicly insured, uninsured and underinsured continues to increase. Federally Qualified Health Centers (FQHC) and FQHC 'look-alikes' are effective partners in maintaining access to essential health care services to high risk and special needs populations. By federal program requirement, FQHCs are located in medically underserved communities with severe shortages of primary care physicians and high need indicators.

A 1999 study conducted by Milliman & Robertson (M&R) concluded that safety net clinics may be better prepared to serve patients who have special needs and that those patients may receive more valuable services at safety net clinics. M&R also determined that safety net clinics have patients with more complex and difficult to manage conditions in addition to other factors that negatively affect their ability to manage care within Medicaid reimbursement levels. In spite of their complex patient load, FQHCs save the health care system tremendously by helping to prevent unnecessary usage of the emergency room and specialty care referrals. Several studies have found that health centers save the Medicaid program more than 30% in annual spending per beneficiary due to reduced specialty care referrals and fewer hospital admissions. We estimate that Michigan's FQHCs saved the State $35 million in 2001 in state Medicaid expenditures alone. In exchange for the $25.9 million in primary grant support received from the federal government, Michigan's FQHCs saved $80 million in federal Medicaid expenditures.

Given FQHC's proven effectiveness, it seems obvious that publicly-funded programs would benefit from FQHC support. FQHCs must receive adequate payment for services or we risk their financial viability. In 2002, FQHCs cared for 327,647 people, of which 36.2% were covered by Medicaid and 28.8% uninsured. In recognition of their special safety net role, Congress created a prospective payment system (PPS) for FQHCs and Rural Health Clinics. Currently, Medicaid (Title XIX of the Social Security Act) funded programs are the only publicly-funded insurance programs mandated to pay FQHCs according to the PPS. Development of public insurance programs that fail to recognize the financial vulnerability of FQHCs while relying on their willingness and ability to care for all persons regardless of their ability to pay, risks the safety net for everyone.

One example is the State Medical Plan population, now part of the Adult Benefits Waiver Part I. Enrollees once considered uninsured for purposes of an FQHC's federal grant are now considered Medicaid. Even though this population is very ill with multiple complications and the FQHCs are critical providers in many communities, the Michigan Department of Community Health has proposed to only pay FQHCs as much as they would a private practitioner. We estimate it will cost the State of Michigan less than $1 million to extend the FQHC payment methodology to this population. While the cost to the State is minor, the cost to individual centers for providing the necessary care is crippling.

For over 30 years, Michigan's community, migrant, HIV/AIDs and homeless health care programs have been delivering comprehensive primary care to the medically underserved communities in our state. Michigan's 26 Federally Qualified Health Center (FQHC) and FQHC 'look-alike' organizations form an essential component of the state's safety net for health care services and provide a comprehensive set of health care services at almost 100 different locations. These organizations are on the front lines of health care serving the most vulnerable populations, including rural and inner city communities lacking adequate providers, patients on Medicaid, the low-income uninsured, the underinsured (working poor), and persons living on the edges of these groups. FQHCs are committed to providing high quality, comprehensive health care services to federally designated medically underserved areas/populations.

For these reasons, we are requesting your support. For more information, please contact: