The Program That Provides Health Care, Not Insurance Subsidies

Republicans can only ignore health care for so long. After failing to “repeal and replace” the Affordable Care Act in President Donald Trump’s first term, conservative policymakers have found themselves with little to say on the issue—epitomized by Trump’s own effort in his debate with Vice President Kamala Harris to commit that “if we can come up with a plan that’s going to cost our people, our population, less money and be better health care than Obamacare, then I would absolutely do it,” while acknowledging that he had only “concepts of a plan” of his own. With the coming expiration of the Biden-era expansion of insurance premium tax credits, Democrats are preparing to push their advantage on the issue. 

The opportunity for Republicans is to pivot away from “repeal and replace,” and toward a new health-care policy debate where the advantage is theirs.

The Affordable Care Act (commonly referred to as “Obamacare”) was, is, and always will be a costly and ineffective way to address the nation’s health-care problems. It was passed into law under false pretenses, increased taxes, established a massive and ever-expanding federal entitlement, and squeezed physicians and hospitals—all to get more people “covered” by expensive and heavily subsidized insurance plans that aren’t even accepted by many providers. Still, over 26 million people remain uninsured. But Democrats are able to say that because of the ACA, 40 million people have health-care “coverage” (half through marketplace plans and half through Medicaid expansion). 

This fact alone leaves the Republicans in a policy pickle. As their failed 2017 repeal efforts demonstrated, a government benefit given is almost impossible to take away. The number of people with insurance “coverage” is by far the most visible and thus consequential metric in the eyes of the public, making any reform that would reduce that coverage a political loser. Real reform depends upon Republicans persuading people that what they need is not complicated and expensive “coverage” from an insurance company, but rather simple and affordable “access” to health-care services from doctors and nurses.

In 1965, the same year that Congress passed a law establishing Medicare and Medicaid, the federal government quietly launched a demonstration program to create and fund non-profit, primary health-care clinics in underserved urban and rural areas. Today, most people would be surprised to hear that this “Health Center Program” has grown into a national network of over 15,000 primary care health clinics that serve over 30 million people across the country (roughly 1 in 10 Americans). Most people would also be surprised to hear that although these clinics do treat patients covered by Medicaid, Medicare, and commercial insurance, they are required by law to care for patients regardless of their insurance status or ability to pay. For patients without insurance, co-pays apply based on a sliding fee schedule that varies by income level (e.g., a patient might pay a $0, $10, or $20 co-pay for an office visit depending on their income). 

Health centers are required to offer all services typically offered by physicians in the family medicine, internal medicine, pediatrics, and OBGYN specialties. This includes both well and sick visits and preventive services such as cancer screenings, immunizations, and prenatal and perinatal care. Every center must offer diagnostic laboratory services (i.e., blood tests), radiology services (i.e., x-rays), emergency medical services, and referrals to specialty providers. Beyond these required services, many health centers also offer specialty care services directly (e.g., cardiology, dermatology, oncology, rheumatology, etc.), behavioral and mental health services, and substance use disorder treatment. 

Congress allocates $6 billion per year to fund these health centers via a grant program managed by the Health Resources Services Administration (HRSA) at the U.S. Department of Health and Human Services (HHS). However, this $6 billion supports only 11% of all health center operations. Reimbursement for treating Medicaid patients is their largest source of revenue accounting for 43% of health centers’ budgets. Health centers also rely on reimbursement from Medicare and commercial insurance plans, grant funds from state and local governments, and donations from various charitable organizations and individuals.

Health centers operate in every state and every major city, but over 40% are in rural areas, which has helped sustain strong bipartisan support for them in Congress. The reauthorization of health center grant funding is a key part of the “must-pass” list of health policy funding “extenders” that almost every member of Congress votes in favor of every year. Additionally, some Republicans support not only extending, but also increasing federal funding. In 2023, Senator Roger Marshall (R-KS) co-sponsored a bill with Senator Bernie Sanders (I-VT) to boost grant funding by 30%. Senators Mike Braun (R-IN) and Lisa Murkowski (R-AK) joined Marshall and every Democratic member of the Senate Committee on Health, Education, Labor, and Pensions in voting to approve this bill during a September 2023 markup. 

If Republicans were creating a new health-care policy plan from scratch and no federal health regulations or programs existed, then support for a government-run health center program like this probably would not be part of that plan. Likewise, if Republicans in Congress were gearing up again this December to fight to cut health center funding because they were worried about the growth and influence of this government program, then things would be different. But, given the existence of these 15,000 health centers, this baseline level of existing political support, and President Trump’s pledge not to reduce access to care, Republicans should reconsider what role health centers can play in their health reform efforts, especially in comparison to Obamacare. 

This year, the ACA will spend nearly $250 billion funding Medicaid and subsidizing insurance “coverage” from private plans on the markeplaces. Medicaid in turn covers over 80% of its ACA enrollees through managed care insurance plans. Meanwhile, because insurers have made the claim and reimbursement process so complicated and burdensome, most providers outsource that administrative function to a third party that charges fees equal to roughly 5% of all collected revenue. Thus, of the $250 billion that the federal government pays to provide ACA coverage for 40 million Americans, $50 billion goes directly into the pockets of middlemen.

Even worse, despite the implicit promise, having Medicaid or ACA Marketplace insurance coverage does not guarantee access to health-care services. Nearly 60% of Medicaid patients had difficulty finding specialty care providers that would accept new Medicaid patients. One review of ACA Marketplace plans showed that enrollees had access to only half of medical specialists and a quarter of hospital-based physicians in their geographic areas.

In contrast, when Congress funds health centers, those dollars directly fund patient care in the most efficient way possible. For the roughly $50 billion that the ACA spends just on middlemen, health centers provide care to 30 million Americans. One million dollars in federal grant revenue to a health center supports double the number of patient visits, triple the number of patients, and nearly triple the number of staff members when compared to an equivalent $1 million in Medicaid revenue. Medicaid patients who receive their primary care services at a health center cost Medicaid almost 25% less per year ($2,300) than other enrollees. 

Some of these savings likely result from the simple fact that nearly all health center patients are actively engaged with a primary-care provider who is familiar with their health needs. Patients with insurance “coverage” may instead end up in the hospital or with a medical condition that requires specialist care precisely because they lacked access or chose not to access primary care services in the first place. Studies have shown that one-third of all unplanned hospitalizations could be avoided through better engagement with primary care. This is especially likely to be true with the younger, healthier population typically covered through the ACA’s Medicaid and Marketplace plans. In fact, most people in this group—adult, non-disabled, working but low-income—could probably go years without ever visiting a hospital or specialty care provider if they knew where to and did access primary care and preventive services. 

Seeing as every American—with or without insurance coverage—is entitled to access primary care services at a health center, Republicans shouldn’t be afraid to ask if it makes sense to treat healthy, working-age people differently than the other groups (e.g., children, pregnant women, low-income seniors, the disabled, etc.) for whom our safety net was created. Rather than spending $250 billion per year to subsidize insurers, wouldn’t it make more sense to expand the $6 billion in direct federal grant funding that health centers currently receive? This could be done in conjunction with a national campaign to spread the word that these health centers exist and welcome all patients regardless of insurance or ability to pay. This would also allow state Medicaid programs to refocus their limited resources on caring for the most at-risk segments of the population, and insurance companies to focus their energy on creating affordable insurance plans that people can buy without massive government subsidies (i.e., not the Obamacare plans that cost $800 per month and have an $8,000 deductible). 

Health centers only offer primary care and some specialty care services, and thus they cannot alone deliver the full scope of services currently “covered” by Medicaid and ACA insurance. However, federal law already requires Medicaid to make direct payments to qualifying hospitals that serve a certain number of Medicaid and uninsured individuals to cover their costs for delivering uncompensated care. This Disproportionate Share Hospital (DSH) program currently makes these direct payments to just under half of all U.S. hospitals at a total cost of just under $20 billion per year. Any reform effort that traded Medicaid or ACA coverage for a boost in health center funding could also include a significant boost in DSH funding, which can be paired with policy reform requiring hospitals to establish an income-based sliding fee schedule, so that DSH patients above a certain income level would be expected to cover a portion of the cost as well. And, with more dedicated federal dollars, health centers would be well positioned to expand their in-house specialty offerings. Congress might also consider allowing health center funds to “follow the patient” when a referral is made from a health center to an outside specialty provider. Without the insurance and billing middlemen taking their 20%, health center patients could even bring Medicare-level reimbursements with them, increasing patient access to specialty and hospital care along the way. 

By redirecting a portion of the $250 billion in federal funds currently spent propping up the ACA’s coverage expansion, Republicans could reinvent the health-care safety net for healthy 18-to-64-year-olds by expanding these direct payment programs for physicians and hospitals. If some states felt that this mix of increased funding for primary care (health centers), hospital care (DSH), and specialty care (health centers plus higher reimbursements that “follow the patient” when referred from a health center to a specialist) still left gaps, they would be free to use their Medicaid programs to provide supplemental coverage or support as needed. However, for the population of able-bodied adults targeted by the ACA, a program that offers free primary and hospital care to anyone regardless of insurance coverage is already a very generous safety net, especially for a country that needs to close an annual federal budget deficit approaching $2 trillion.

In political terms, a proposal along these lines would allow conservatives to begin shifting the health debate away from insurance coverage and toward access to care, provided that they offer a commitment to fund it. The 2017 Republican “repeal and replace” plan, focused on state block grants, shifted resources and decisions from insurers to the states, which many saw as a move one step further away from a doctor. A focus on health centers moves resources and decisions from insurers directly to providers, one step closer to a doctor. Next year, Republicans should propose to double health center funding from $6 billion to $12 billion, as an alternative to the likely Democratic stance that the Inflation Reduction Act’s enhanced premium tax credits must be extended at an annual cost of $23 billion, and that anyone who says otherwise is a monster.

The successful expansion of health centers would lay the longer-term groundwork for reconsidering the ACA’s coverage expansion model entirely. Republicans should also keep health centers front and center anytime Democrats want to spend more money on insurance subsidies, or attack them on pre-existing conditions. And hopefully, if they can successfully shift the debate away from “repeal and replace,” Republicans can refocus their health-care policy efforts on other issues. This should include reforming Medicare’s broken physician payment system, enhancing price transparency and surprise medical bill regulations, supporting the use of technology and artificial intelligence in care delivery, and defending other insurance programs from Democratic efforts to destroy them by throwing everyone into a single-payer, government-controlled plan. In fact, expanding this national health center program and making the public aware of it may be the best possible pre-emptive defense against the allure of single payer. It could also be the issue that finally allows Republicans to move beyond the political dead end of “repeal and replace”.