Costs to operate Michigan health centers have increased steadily over the past several years, and have outpaced Medicaid reimbursement rate increases. But the Michigan Primary Care Association (MPCA) has proposed a plan to fund the gap between the actual cost of Medicaid services and reimbursement rates.
Expenses to maintain facilities and pay employees have increased with inflation, while reimbursement rate increases have not represented that growth. Health Management Associates research shows that, on average, Michigan health centers are paid $61 less by Medicaid than it costs to provide each Medicaid patient visit.
States use the Medicare Economic Index (MEI) to adjust payment rates annually, but MPCA Director of Policy and Government Affairs Frank Waters told State of Reform that the MEI does not keep pace with actual inflationary cost increases.
“One of the main challenges regarding a rate increase are the state’s budget constraints, as health centers are competing with hundreds, if not thousands, of other entities for state funding,” Waters said. “Any increase in the Medicaid reimbursement rate grows what the state will pay for those services in future years, so if rates are increased, those dollars must be accounted for beyond the fiscal year they are enacted.”
A common misconception about health centers is that they receive enough federal funding to make up for low Medicaid payments, Waters said.
“It may be perceived that federal funds provide health centers with the majority of their funding,” he said. “In truth, Medicaid payments are essential to health center viability, as federal grant funding only accounts for about 25% of health center revenue. Those federal dollars are largely intended for the care of the uninsured, and were never intended to backfill underfunded Medicaid services.”
MPCA has requested that the legislature appropriate funding to increase Medicaid reimbursement rates for federally qualified health centers to fund the gap between the actual cost of services and reimbursement rates, which the MPCA estimates to be $112 million annually.
“If reimbursement rates do not increase, health centers will likely have to curb services and potentially reduce staff,” Waters said. “Each health center will make individual decisions as to what services will have to be reduced. This is not an exhaustive list, but services that could see reductions are transportation assistance, dental services, and behavioral healthcare.”
MPCA is also looking to supplement the state’s workforce, as shortages are the most significant concern affecting health centers, Waters said.
“Health centers face difficulties finding enough staff to fill all positions throughout the organization, from administrative staff and clinical support roles to dentists, physicians, and other clinicians,” he said. “Healthcare workforce and labor issues are a challenge for many healthcare entities. But because of budget realities, health centers are not able to compete with other providers as it relates to wages or employment enticers like sign-on bonuses.”
In addition to advocating for increased Medicaid reimbursement rates, MPCA is also aiming to supplement the workforce through appropriations for the expansion and extension of the Health Center Careers Training Program (HCCTP). The HCCTP was launched in March 2022 to train and employ up to 300 new healthcare professionals using a $7.6 million investment of American Rescue Plan funds.
“Participating health centers receive funding to cover employer costs, including tuition and wages, which avoids prohibitive student loan debt [or] other cost barriers,” Waters said. “Within the first year of the program, health centers hired and trained 59 new medical and dental assistants in some of Michigan’s most underserved communities. In year two, the program has been expanded to include high-demand careers, including community health workers, doulas, and pharmacy technicians.”
MPCA also supports Rep. Christine Morse’s (D-Kalamazoo) House Bill 4213, which would continue current Medicaid reimbursements for telehealth services (including an audio-only component that is critical for a segment of health center patients) beyond the public health emergency, Waters said.
The House and Senate are expected to pass individual chamber appropriations recommendations before negotiating on a budget, which is expected to occur in June.