Potential changes to federal funding, Medicaid worry FQHCs about their ability to provide care

The Trump administration froze federal grants in January that support a wide variety of institutions, including Federally Qualified Health Centers.

In Indiana, these centers serve an estimated 700,000 people in Indiana — most earn incomes that are 200% below the Federal Poverty Level and nearly half are on the state’s Medicaid program.

Now, the centers say they face some uncertainty, not just around the flow of federal grants, but also potential changes to Medicaid funding at the state and federal levels.

In January, a federal memo ordered a freeze on federal grants and various programs so that funding could be reviewed. The memo was met with several legal challenges resulting in a temporary stay, which could be resolved as early as this week.

Immediately following the federal freeze several Indiana health centers said they weren’t receiving funding — even after a judge blocked the move.

Ben Harvey is the chief executive officer of the Indiana Primary Health Care Association, which represents over 40 FQHCs statewide. He said as many as one-third of those centers were not able to access federal grants in the two weeks following the freeze.

That’s been resolved and currently, all of their members are receiving federal funds, but there is lingering concern about the future.

“There's certainly a level of vulnerability that health centers have that maybe other folks don't have just because of their reliance on federal funding,” he said.

René Kougel is the CEO of HealthNet, which has 10 primary care offices across Indianapolis. She said after the judge's order pausing the freeze her FQHCs were able to receive funding, but the uncertainty worried her. 

“It was very confusing, just trying to kind of scramble to understand that executive order,” said Kougel, “and then, just analyzing if it was going to have a financial impact on us.”

Across Indiana, nearly $88 million in primary health care grants were awarded to FQHCs in 2024 according to the Health Resources and Services Administration.

Federal grants, which Kougel said account for about 24% of HealthNet’s budget, cover salaries, supplies, utilities and operational expenses of the health centers. She said if funding went away permanently it would impact their ability to service some 61,000 patients every year.

“As an FQHC, our profit goes back into providing essential care to the communities which we serve. That's why it's just vital that we continue to have access to these funds,” Kougel said.

Harvey with the Indiana Primary Care Association is cautiously optimistic. He said he does not believe the Trump Administration will directly target community health centers for cuts. He points to statements made by Trump’s health secretary, Robert F. Kennedy Jr., during his confirmation hearings in support of community health centers.

However, Harvey acknowledges that potential changes to Medicaid funding are likely to impact health centers.

At both the state and federal levels, lawmakers have proposed changes to Medicaid that could result in cuts to the program and reductions in the number of people covered.

Indiana lawmakers are looking at legislation that would cap the number of people who can be on the state’s Medicaid expansion program, which they say is in an effort to reduce rising health care spending.

That’s despite the fact that Indiana’s Medicaid expansion is covered almost entirely by the federal government, with the remainder funded through fees on hospitals and a state cigarette tax.

At the federal level, the U.S. House passed a Republican budget resolution Tuesday that calls for slashing federal spending over a decade. Many fear these measure will mean deep cuts to Medicaid spending. Already, Republican lawmakers had talked about sharp cuts to Medicaid, including adding work requirements into coverage — which critics argue will only add red tape to the program — or reducing the share paid by the federal government for some enrollees.

Indiana is also one of twelve states with a trigger law in place that would end its Medicaid expansion should federal funding be decreased below a certain threshold.

That worries FQHCs, many of whom say more than 50% percent of their patients are covered by Medicaid.

Ann Lundy is the CEO of Indiana Health Centers, which operates 10 FQHCs across the state. She said they will still provide services to the uninsured but she worries the loss of coverage will be a barrier.

“We do fear that a cap [on Medicaid] will, again, kind of take us in the wrong direction,” she said.

Lundy said Indiana Health Centers offer a sliding fee for uninsured patients to help ensure care remains affordable, but those fees rarely cover the full cost of services they provide patients, which makes Medicaid reimbursement a critical funding source for FQHCs.

Community health centers are also quick to point out that they save the state money. According to one estimate, they saved Indiana around $1 billion in 2023 because they reduced Emergency Room visits, helped manage chronic conditions and offered preventative health care.

“One way or another, we're paying for everyone's health care. And so, the question really becomes, ‘How much do we want to pay?’” said Angela Boyer, the CEO of the Clinically Integrated Network of Indiana, which works to create collaborations between community health centers across the state.

“The reason that FQHCs are so important across our state and across our nation is because their care is relatively low cost. It can save a lot of money if we can catch people early,” she said.

Contact Health Reporter Benjamin Thorp at bthorp@wfyi.org.

Side Effects Public Media is a health reporting collaboration based at WFYI in Indianapolis. We partner with NPR stations across the Midwest and surrounding areas — including KBIA and KCUR in Missouri, Iowa Public Radio, Ideastream in Ohio and WFPL in Kentucky.