Federal Grants are Essential to Community Health Centers

What role do federal health center grants play?

For FY 2023, Section 330 funding totals slightly more than $5.7 billion. Over two-thirds of these funds flow through a special, multi-year mandatory Community Health Center Fund, while the remainder comes from annual appropriations. In order to sustain health center operations, Congress must extend the fund and renew annual appropriations for FY 2024.

Section 330 grants are critical to supporting CHC operations.5 Grants perform several essential functions. Most importantly, grants enable CHCs to support the costs of caring for uninsured patients.  Grants also support the cost of services for low-income insured patients who need care that insurance does not cover, such as adult vision and dental care, and who experience high deductibles and coinsurance costs that they cannot afford. Finally, grants enable CHCs to meet staffing and related costs associated with launching new services, extending hours, or adding accessible service locations.

How do federally funded CHCs differ from “look-alike” CHCs?

Federal law recognizes two types of CHCs: those that receive federal grant funds (FF-CHCs); and look-alike CHCs (LAL-CHCs) that meet all Section 330 requirements but do not receive federal 330 grants.6  To satisfy federal requirements aimed at ensuring affordable care for uninsured and underinsured patients, LAL-CHCs instead rely on state and local grants. State and local funding is modest in comparison to the level of funding made available through federal grants.  In 2021, FF-CHCs vastly outnumbered LAL-CHCs – 1,373 federal grantees, compared to 108 LAL-CHCs.  Federal grantees also serve a greater number of communities compared to LAL-CHCs.  In 2021, FF-CHCs served 14,276 communities across all 50 states, DC and the US territories.  LAL-CHCs by contrast served 399 communities across 31 states and DC.

Data maintained by the Health Resources and Services Administration (HRSA)7  underscore important differences between FF-CHCs and LAL-CHCs. As Figure 1 shows, in 2021 uninsured patients accounted for twice the share of all people served at FF-CHCs compared to LAL-CHCs (20 percent versus 10 percent).  Figure 1 also shows that LAL-CHCs are also more Medicaid-dependent; 53 percent of all LAL-CHC patients were Medicaid-insured in 2021 compared to 48 percent of FF-CHC patients.  Similarly, LAL-CHC patients were more likely to be privately insured (24 percent versus 20 percent for FF-CHCs).

Figure 2 shows that, consistent with differences in patient characteristics, CHC revenue support varies in important ways depending on whether the CHC is a look-alike or federally funded.  In 2021, 19 percent of LAL-CHC revenue came from fees paid by private insurers versus 12 percent for FF-CHCs, meaning that LAL-CHCs relied substantially more on privately insured patients. Privately insured patients are less likely to be as poor as Medicaid patients, either because they work for employers that offer affordable workplace benefits or because they qualify for subsidized marketplace plans (which are available to people whose income exceeds the poverty threshold in nonexpansion states or exceeds 138 percent of poverty in ACA Medicaid expansion states). 

Finally, as shown by Figure 3, differences in FF-CHC and LAL-CHC patient characteristics have become more pronounced over time. These differences became especially evident during the pandemic. In 2017, over 15 percent of LAL-CHC patients were uninsured, while 23 percent were uninsured at FF-CHCs. By 2021, however, in the midst of the pandemic and when the need for affordable care among medically underserved populations and communities at highest risk had exploded, the percentage of uninsured LAL-CHC patients had dropped to 10 percent – a 50 percent decline - while the percent of uninsured patients at FF-CHCs remained at 20 percent. 

It is not surprising that, generally, CHC uninsured patient rates would have dropped during the pandemic, since Congress created a special continuous Medicaid coverage guarantee and also made ACA marketplace subsidies more generous. Both of these reforms reduced uninsurance among poor and low-income Americans -- the people who receive care at CHCs.  But in the case of LAL-CHCs, the effects were especially big. This suggests movement on the part of LAL-CHCs away from deeply impoverished patients experiencing the highest health risks.  This development in patient characteristics is reinforced through evidence drawn from HRSA data showing the role played by FF-CHCs for the most impoverished, highest-need patients.  In 2021, FF-CHCs served nearly 1.3 million homeless patients compared to 13,068 served by LAL-CHCs.  Similarly, that year, FF-CHCs served over one million agricultural workers compared to 11,174 served by LAL-CHCs.

Federal grants make a key difference in other ways.  HRSA data show that LAL-CHCs that became eligible for federal grant funding during FY 2019 achieved a 23 percent increase in overall patients served, a 33% increase in uninsured patients served, and a 17 percent increase in oral health services.  In the case of substance use disorder and mental health treatment, services rose by 1,471 percent and 401 percent, respectively, while care coordination, transportation, outreach and other enabling service increased 264% overall.8

Taken together, this evidence underscores the vital role of federal grants in enabling CHCs to fulfill their mission and reach underserved rural and urban communities and those in greatest need.  Where they are available, state and local grants are extremely important, but the capacity of states and localities to support CHCs is clearly limited. Fewer than three percent of all community health center sites are LAL-CHCs, and this figure has declined as new federal funding has become available. With this decline has come a commensurate increase in capacity at newly established FF-CHCs. 

Furthermore, and not surprisingly, because LAL-CHCs lack the resources made available through Section 330 grants, they are more Medicaid dependent, more dependent on privately insured patients, and substantially less able to make care affordable to uninsured patients. 

Finally, as states begin the task of unwinding continuous Medicaid enrollment, the importance of federal grants will only grow. Of special concern are low-income working-age adults and, importantly, mothers of young children who were able to retain their postpartum coverage following birth but who now will see that coverage disappear.9  Sustaining and growing grant funds will never be more important than during this pivotal period of changing insurance patterns for the poorest Americans in the wake of the end to federal pandemic emergency benefits.