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Holes in the Medical Safety Net

Swamped with patients and hit hard by state cuts to Medicaid, community health clinics struggle to make ends meet in the recession.

Cynder Sinclair, chief executive officer of the Santa Barbara Neighborhood Clinics in Southern California, wants to keep her doors open for the poor and sick, but it’s getting harder by the day.

On top of their normal caseloads, Sinclair’s four clinics are seeing 400 new patients per month, a record. No one is ever turned away, regardless of his or her ability to pay. Yet this month, state Gov. Jerry Brown signed a budget that cuts funding for Medicaid — a federally funded, state-administered program for the poor that goes by the name Medi-Cal in California — by $2 billion. The cuts (partly a result of a drawdown in fiscal stimulus spending by Washington) include a 10 percent reduction in Medi-Cal reimbursements to community clinics.

Last year, the Santa Barbara clinics faced a $2 million shortfall in operating revenues, partly because of previous cuts in Medi-Cal and partly because they received no compensation for treating uninsured patients. This year, the clinics expect to be short $2.5 million. That’s a lot of money to go begging for from the community.

“It is a constant struggle for us,” Sinclair said. “At a time when we’re getting squeezed financially by the state, we’re seeing more and more patients. The more customers we have, the less money we have. We have to start another business called fundraising to pay for it. We want to see more patients because that’s our mission, and yet if we can’t make our financial bottom line, we’re not going to have any mission to deliver.”

Put another way, it costs the clinics $150 for each doctor’s visit, 25 percent of which, or $37.50, was not reimbursed by the state or federal government last year. Now, the clinic stands to lose $41.25 on each visit; and with 70,000 visits yearly, those losses add up. For the first time, the state will require Medi-Cal patients to pay $5 per visit, but most clients can’t afford even that much, Sinclair said — and still they must be treated.

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The Santa Barbara clinics are part of a patchwork of 8,000 nonprofit, independently run community health centers and clinics that provide primary care to about 23 million Americans, a third of them children. Most of their patients are either uninsured or enrolled in Medicaid. In some rural communities, the clinics are the only health provider around.

Between 2006 and 2009, the total number of patients at 6,600 community health centers jumped from 15 million to nearly 19 million, according to a new report by Direct Relief International, the largest nonprofit provider of donated medicine in the United States. During the same period, the report shows, the portion of patients seeking treatment at community clinics for diabetes, hypertension and asthma — chronic diseases that require expensive medications — also increased.

A recent study for the National Bureau of Economic Research, based on a random sample of thousands of low-income Oregonians, shows that Medicaid makes a big difference in people’s lives. Those selected in a 2008 state lottery for Medicaid were much more likely to see a particular doctor, get outpatient care, stay in a hospital and take prescription drugs. They were also less likely to be in debt or skip paying other bills because of out-of-pocket medical expenses than those not selected, the study shows. Those on Medicaid also reported feeling healthier and less depressed.

Medicaid patients now represent 37 percent of the clientele at community clinics, and the program is the clinics’ single largest source of revenue. As patient demand goes up and reimbursements go down, Santa Barbara’s neighborhood clinics may fare better than most: They can ask wealthy residents for donations to close the funding gap. But clinics in less affluent communities may not be so fortunate.

In Utah, Wisconsin and Illinois, per-patient Medicaid reimbursements to community health centers dropped 28 percent, 25 percent and 22 percent, respectively, between 2005 and 2009, according to the National Association of Community Health Centers, a Washington D.C. nonprofit group. Nationwide, the drop was 7 percent.

Meanwhile, since the two-year infusion of federal stimulus funding for Medicaid ended on June 30, there has been no plan for a new subsidy.

Claudia Gibson, a spokeswoman for the association, said the group was especially worried about proposals in Congress to cap or reduce federal reimbursement for Medicaid, a move that Gibson said would surely force states to further cut their payment rates to community health centers.

“We already operate on a very thin margin,” she said. “Regardless of who’s paying for the patients, we have to serve them. We’re very concerned about drastic changes that could undermine this delicate balance for our health centers.”

The New America Foundation, a nonprofit, nonpartisan think tank based in Washington, D.C., suggests a way out of the spiraling problems of overburdened community clinics and state governments alike. The personal health of poor Americans and the financial health of states will depend on “federalizing” Medicaid — that is, converting it into a national program like Medicare, the foundation says in a 2010 report. State autonomy over Medicaid should end, it says, because “some state governments simply don’t care much about the poor.”

President Barack Obama’s health care reform is expected to increase the number of people on Medicaid to 84 million by 2019. Presently, 68 million people are enrolled in Medicaid. For the first 10 years of the reform, the federal government will bear the lion’s share of the cost of the new enrollees.

That’s a good start, the foundation says, but the feds eventually should take over the whole program: “Medicaid really does threaten to crush state budgets throughout the country unless responsibility for it is further shifted entirely to federal control where it belongs.”

Editor’s note: Sara Miller McCune, the founder of Miller McCune magazine, is a donor to Direct Relief International.

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