Medicaid's Uncertain Future: How Cuts Harm Community Health Centers

Community Health Centers (CHCs) face an uncertain future as funding deadlines and proposed cuts threaten safety net systems for some of the most vulnerable in our country. Unlike traditional healthcare providers, CHCs have long been a lifeline for underserved communities, providing essential healthcare to nearly 33 million people at over 1,400 sites nationwide. 

Their ability to operate depends on federal grants and Medicaid reimbursements, which support not only primary care but also health education, diabetes management, and preventative services, all of which improve health outcomes, lower costs, and strengthen local economies. Yet, CHCs receive only a fraction of national healthcare funding.  

This blog explores CHC’s critical role in the healthcare system, the mounting threats to Medicaid, and what can be done to protect this essential program. 

Medicaid and the Important Role to CHCs 

Medicaid plays an important role in continuing CHCs' mission to bring healthcare to those without access. The public insurance program covers nearly 1 in 5 Americans, including those that live at or below the 138% federal poverty level in states that expanded Medicaid (Source). CHCs rely heavily on Medicaid reimbursements as their largest source of revenue since most of their patients are insured by the public insurance program as shown in Figure XX below (Source). In fact, 67% of CHC patients are at or below the 100% federal poverty level (FPL) and 20% are between 101-200% FPL making the majority eligible for Medicaid [1].

Medicaid funding is essential to CHCs, enabling them to provide comprehensive services including chronic disease management, women’s health, dental, behavioral health, and preventative services. However, Medicaid reimbursements fail to cover the full cost of these services, leaving CHCs financially strained [2]. In LA County, CHCs serve 72% of Medicaid patients but only receive about 55% of the revenue needed to cover their care [3].

Medicaid and CHC Funding Threats  

Since their inception, CHCs have traditionally garnered bipartisan support, but new policy and budgetary proposals threaten their financial stability. CHCs are funded from a variety of sources including Congressional appropriations and the Community Health Center Fund. In December, Congress extended funding under a Continuing Resolution, however, funding is set to expire March 14th and March 31st. The looming budget deadlines have created financial uncertainty for CHCs, but threats to Medicaid are most concerning.  

Recently, the U.S. House and Senate passed their budget proposals directed at the relevant committees to make substantial cuts to programs that would include Medicaid in the amounts of $880 billion over ten years. To address these drastic cuts, several policy changes are being discussed that can harm CHCs' financial stability and patient care, including:  

Lowering federal matching dollars: Congress is considering reducing the Federal Medical Assistance Percentage (FMAP), the funding match the federal government provides to states for Medicaid.  FMAP rates vary by state, with lower-income states receiving a higher percentage.  In California, the state’s FMAP is at 50%, including a 90% enhanced FMAP for Medicaid expansion that serves older adults over 65 [4].  

• Impact: A reduction in FMAP would place an unprecedented burden on California’s budget and force it to downsize Medicaid/Medi-Cal services. For example, lowering the FMAP for expansion populations would increase California’s costs by 400% or $12.4 million [5]. CHCs would also have to reduce their services and operations. Meanwhile, enrollments would be reduced and eligibility requirements changed.  

Fixed block grants for Medicaid: Another proposal under discussion would convert Medicaid funding into fixed block grants, meaning states would receive a set amount rather than funding that adjusts based on need. This approach fails to account for rising healthcare costs, economic downturns, or public health crises.  

• Impact: Block grants would shift cost onto states, which would lead to a reduction in eligibility for millions. CHCs would see reimbursement rates drop despite already low rates [6]. When Congress initially considered Medicaid block grants, it was projected CHCs would lose over $7 billion [7]. CHC would be forced to shut down facilities or reduce hours of operation, which in turn would significantly reduce patients' access to healthcare. 

Requiring Medicaid work requirements: Imposing Medicaid work requirements would establish a reporting requirement for all beneficiaries, including individuals who are disabled. Currently, Medicaid requirements are largely based on income levels. The proposal would require enrollees to consistently document and submit proof of employment or hours worked.  

• Impact: Requiring Medicaid enrollees to verify employment is not practical. Individuals who are disabled may not have the ability to work but need access to healthcare because they are ill or disabled (Source). Some individuals may not be able to report proper or consistent reporting because they hold multiple jobs, are a student, or have infrequent work hours [8]. The elderly would also be significantly impacted if they do not receive other public program assistance or are retired.  

Call to Action 

The fight isn't over. While Congress has passed budget proposals, they are not yet law. Now is the time to act.  

CHCs are embedded in their communities, providing individuals lifesaving access to nearly 33 million patients nationwide, reducing poor health outcomes, and being a cost-saving for the healthcare system. The U.S. Congress is contemplating making significant cuts to a longstanding program to ensure people have access to healthcare. Without critical funding for CHCs and Medicaid, millions can lose access to their treatment, physicians, and CHCs. Here are ways to take action: 

• Stay engaged: Follow the news on what action Congress is taking relating to Medicaid cuts. Also, visit Congress.gov where you can find what Congress will be sending to the floor for consideration.  You can visit House.gov and Senate.gov 

• Contact your Members of Congress: Elected officials take phone calls and letters from their constituents and track their priorities. This only happens when constituents engage! To find out who your House of Representatives is, visit here. In California, we have two U.S. Senators, including Senator Alex Padilla and Senator Adam Schiff 

• Join the NEVHC Advocacy Network! Receive action alerts and quarterly updates on what is impacting community health centers at the federal, state, and local levels. 

Sources 

[1] Pillai, A., Corallo, B., and J. Tolbert. (2025). Community Health Center Patients, Financing, and Services. Kaiser Family Foundation.

[2] Horstman, C., Lewis, C., Ayo-Vaughan, M., and H. Fernandez. (2023). Community Health Centers Need Increased and Sustained Federal Funding. The Commonwealth Fund.

[3] Community Clinic Association of Los Angeles County, 2025.

[4] Williams, E., Mudumala, A., Rudowitz, R., and A. Burns. (2025). Medicaid Financing: The Basics. Kaiser Family Foundation.

[5] Orris, A., and G. Lukens. (2024). Medicaid Threats in the Upcoming Congress. Center on Budget and Policy Priorities.

[6] Murphy, N. (2025). Medicaid Block Grants and Per Capita Caps Jeopardize State Budgets, Health Care Access, and Public Health. The Center for American Progress.

[7] Lee., J. (2019). What Would a Medicaid Block Grant Mean for Community Health Centers? Milbank Memorial Fund.

[8] Coleman, A., and S. Federman. (2025). Work Requirements for Medicaid Enrollees. The Commonwealth Fund.

Written by Julie Leyba, Government & Community Relations Manager, NEVHC