Strategies to navigate the OBBB FQHC impact
By now, most healthcare leadership is keenly aware that the federal One Big Beautiful Bill (OBBB) is projected to cut federal funding for Medicaid by $1 trillion over the next 10 years. Less clear is how the OBBB will directly affect federally qualified health centers (FQHCs) in particular and over what time horizon.
Here’s an overview of the OBBB FQHC impact and potential actions you can take to minimize risks, enhance sustainability and preserve services and access for those who need it.
OBBB healthcare overview
The most significant aspects of the OBBB FQHC impact are those that adversely affect the expansion of Medicaid to new populations authorized by the Affordable Care Act (ACA).
FQHCs located in Medicaid expansion states will feel the brunt of these provisions. Given that only 10 states have declined to expand Medicaid, many community health centers will be significantly impacted.
Your potential next steps:
Don’t panic. While the OBBB has provisions that could be detrimental to FQHCs and Medicaid patients, these provisions are being phased in over the coming years.
Impacts to 2025 and 2026 budgets should be minimal, though increasing in intensity during future years. This gives FQHCs time to plan out an organized and deliberate response.
Medicaid eligibility recertification cadence
OBBB Medicaid changes create new recertification timelines for Medicaid expansion populations.
Beginning January 1, 2027, Medicaid expansion populations must recertify their Medicaid eligibility at least every six months. States can still elect to require non-expansion beneficiaries to recertify eligibility at any time up to 12 months.
In Medicaid expansion states, this could potentially lead to multiple recertification timelines for different populations, depending on how states choose to implement the new regulation.
Your potential next steps:
- Work closely with your state’s primary care association and other advocates to understand how your state is planning to implement this new regulation. Will all Medicaid beneficiaries be required to recertify at the same cadence, or will the expansion populations need to recertify more frequently?
- Educate your Medicaid populations about their applicable recertification cadence.
- Find out how your outreach/enrollment teams can identify patient recertification dates and train eligibility workers in advance to track these dates in your EHR system.
- Evaluate if your health center needs additional enrollment staff and if adding a particular certification may help trigger the ability to receive a higher Medicaid Prospective Payment System rate (e.g., adding community health workers in California).
- Look into patient text messaging systems to automatically advise and work with patients to update eligibility information before they come to the clinic. Can eligibility documentation reminders be added to existing reminders that reduce no-show rates?
- Create and run monthly reports filtering for patients whose Medicaid recertification due date is within 60 days for outreach to help ensure patients do not unwittingly lose their health insurance.
Medicaid work requirements
The OBBB also requires states to implement community engagement or work requirements for most Medicaid expansion populations beginning January 1, 2027. However, there are some exclusions, including people with disabilities or severe medical vulnerability.
The OBBB allows this requirement to be satisfied through sufficient employment, community service, educational/work programs or documenting a minimum level of income. However, it’s possible some states may elect to narrow the criteria.
States, and therefore outreach and enrollment teams at FQHCs, will be required to reevaluate beneficiaries’ compliance with the work requirements at least every six months during the eligibility recertification process.
Your potential next steps:
- Train your outreach and enrollment teams on what satisfies the work requirements and which populations must comply to be eligible.
- Educate Medicaid expansion populations about the work requirements.
- Look for partnerships with local service organizations, such as downtown cleanup teams, that can scale up volunteer projects.
- Consider implementing a volunteer program specifically for patients at your clinic or administrative sites, perhaps by successfully identifying new grant funding.
Patient cost sharing
The OBBB patient cost sharing provision that emerges for some Medicaid patients in October 2028 will thankfully not apply to FQHC services.
Your potential next steps:
Develop culturally and linguistically appropriate messaging to Medicaid patients for release in the run-up to October 2028 to educate patients that your health center is exempt from this provision.
Non-citizen Medicaid restrictions
The OBBB revokes Medicaid eligibility for non-citizen humanitarian entrants to the United States (i.e., those granted asylum or refugee status). In addition, the bill will cancel the enhanced federal matching dollars to which states are currently entitled for Medicaid expansion populations receiving “emergency Medicaid” services, such as emergency services provided to individuals who would otherwise qualify for Medicaid if not for their immigration status.
Both provisions go into effect on October 1, 2026.
Your potential next steps:
- Analyze the projected effects of these policy changes in concert with any relevant state Medicaid program changes (e.g., California has indicated future Medicaid program cuts for non-citizens).
- Work closely with your state’s primary care association and other advocates to learn what proportion of your Medicaid patients may be affected by these changes.
- Develop culturally and linguistically appropriate messaging, educating affected patients about the changes.
- Conduct grant prospecting and donor solicitations to raise funds to help cover the cost of unfunded care for these populations.
- Explore scheduling templates that maintain access for affected patient populations while promoting a sustainable payor visit mix.
Elective abortion provider funding
The OBBB attempts to defund Planned Parenthood by prohibiting federal funds from being used to support Medicaid payments, for a period of one year, to any nonprofit 501c3 organization that:
- Is classified as an essential community provider (ECP) in the ACA.
- Provides elective abortions.
- Received more than $800,000 in Medicaid payments in federal fiscal year 2023.
Since FQHCs are also classified as ECPs in the ACA, they are technically covered by this provision. And while a federal judge has issued a temporary injunction blocking the immediate implementation of this provision, the injunction only applies to Planned Parenthood specifically.
Your potential next steps:
- FQHCs concerned that this provision may apply to them should contact a health policy attorney for qualified legal advice.
- If legal counsel advises that your FQHC may be affected, explore other options to support your patients’ reproductive health, such as incorporation of a new legal entity that is not classified as an ECP or partnerships with other organizations.
Health plan provider taxes
OBBB tax provisions incrementally decrease the maximum tax a Medicaid expansion state can levy on health plans from 6% of the taxpaying entity’s revenues to 3.5% between fiscal years 2028 and 2034. This maximum is referred to as the hold harmless safe harbor provision. In all states, only provider taxes with hold harmless safe harbor provisions enacted prior to October 1, 2026, will be allowed.
The Congressional Budget Office (CBO) estimates that these changes to provider taxes will result in $191 billion of savings for the federal government over the 2025-2034 period. This loss of federal matching dollars could impact FQHCs, as states may feel obligated to cut Medicaid benefits to balance state budgets.
Your potential next steps:
- Work closely with your state’s primary care association and others to advocate for any changes to exempt or minimally impact FQHCs.
- Develop a call to action to mobilize grassroots fundraising, major donor solicitations and grant proposals to counter any cuts to Medicaid reimbursement.
- Consider launching a management services organization (MSO) with other FQHCs in your consortium to more efficiently deliver administrative services such as billing, credentialing, HR, IT and/or compliance.
Marketplace/exchange premium tax credits
The current enhanced premium tax credits (PTC) authorized during the COVID-19 pandemic that increased subsidies for the purchase of health insurance on exchanges such as HealthCare.gov for eligible households are currently slated to sunset on December 31, 2025. The OBBB did not extend these enhanced PTCs.
The CBO estimates that the termination of these enhanced PTCs will result in the loss of health insurance for more than 5 million individuals. Since these individuals, by definition, did not qualify for Medicaid, most will likely become uninsured and seek sliding scale and/or self-pay services at safety net providers, such as FQHCs and emergency departments, resulting in uncompensated or undercompensated care.
Your potential next steps:
- Review sliding fee discount program schedules and evaluate if any need revisions to accommodate an increase in self-pay and sliding scale patient visits.
- Consider implementing same-day payment discounts, payment plans and other strategies to incentivize collections.
- Explore scheduling templates that maintain access for affected patient populations while promoting a sustainable payor visit mix.
Long-term solutions: PPS optimization and revenue diversification
The passage of the ACA in 2010 began a paradigm shift for how FQHCs could deliver and be reimbursed for providing high-quality, patient-centered care. While the OBBB is not a return to pre-ACA days, it may create significant barriers for vulnerable populations to obtain and retain Medicaid and subsidized private health insurance.
FQHCs, along with almost all health safety-net providers, may be negatively impacted by these unprecedented cuts. But knowledge is power. Understanding how the OBBB may affect FQHCs in your state is paramount for preparation and planning initiatives.
Given the projected OBBB Medicaid cuts, it’s critical for FQHCs to optimize their Medicaid PPS rates and establish 519 wrap rates for Medicare Advantage patient visits to help ensure they are being reimbursed for their true cost per visit. Adding new service lines is often considered a triggering event for PPS rate recalculations in many states.
Additionally, many FQHCs have already been seeking to diversify their revenue streams through risk-based opportunities. FQHCs are increasingly turning to full and partial risk opportunities to enhance their sustainability and improve patient care, including:
- Launching a program of all-inclusive care for the elderly (PACE).
- Joining a Medicare-accountable care organization.
- Forming an independent practice association that can negotiate capitated health plan contracts.
All healthcare safety net providers need to assess whether partnerships that drive financial efficiencies can be developed, including MSOs, mergers and acquisitions.
For FQHCs that have not done so already, the passage of the OBBB should make exploring and evaluating these risk-based opportunities a top priority.
Looking forward
While the passage of the OBBB creates new challenges for FQHCs, there are other takeaways:
- Provisions restricting funding for gender-affirming care were removed from the final bill.
- There were no cuts to the Children’s Health Insurance Program.
- The OBBB included the creation of the Rural Health Transformation Program, which provides $50 billion over five years to states that apply for funding. States have discretion about how to allocate the funds as long as the program guidelines are met and FQHCs are an eligible provider type to benefit from these new funds.
As ever, advocacy about the value proposition of Medicaid and health insurance is paramount. Elections are bellwethers, and the passage of a budget reconciliation bill that rolls back these regulations is possible in 2029, if citizens understand the value of their collective health.
How Wipfli can help
Wipfli assists hundreds of FQHCs each year with the guidance they need to navigate their most critical challenges. We follow the latest healthcare shifts and regulatory changes so that we’re ready to help you adapt and build sustainable success in patient care and financial health.
Contact us today to talk about how to prepare for your FQHC’s future or visit our policy updates page to learn more about OBBB changes.
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