October 03, 2025
KFF Health News: Health Centers Face Risks as Government Funding Lapses
Approximately 1,500 federally funded health centers across the United States are grappling with severe financial difficulties as a government shutdown exacerbates existing revenue cuts. These centers, which provide essential services to millions of low-income individuals, may be forced to reduce staff or services, and some could even close their doors. Advocates warn that this could lead to increased pressure on already overcrowded hospital emergency rooms.
“This is the worst time in all the years I have been working in health care,” stated Jim Mangia, president and CEO of St. John’s Community Health, which operates 28 clinics serving over 144,000 patients in California. “We are facing federal cuts and extreme state cuts that will impact services.”
St. John’s and other federally qualified health centers provide primary care and a variety of services either free of charge or on a sliding fee scale. Nationwide, these centers serve nearly 34 million patients in the most underserved areas of the country.
Funding for these centers primarily comes from two sources: grants from the federal Community Health Center Fund and reimbursements from programs like Medicaid, which provides health insurance for low-income individuals and those with disabilities. However, both funding routes are currently facing challenges.
Recently, Congress has approved grant money in small increments. In March, lawmakers extended funding until September 30, but that funding expired after the Republican-controlled Congress failed to pass a funding law, resulting in a government shutdown.
Advocates argue that health centers require long-term funding solutions to plan effectively, ideally through a multiyear funding commitment. In early 2024, the centers received $4.4 billion in grants, but the National Association of Community Health Centers is advocating for at least $5.8 billion annually for two years to maintain operations.
The challenges facing the health center safety net are multifaceted, according to Vacheria Keys, vice president of policy and regulatory affairs for the association. The new spending law, dubbed the “One Big Beautiful Bill Act” by Republicans, proposes significant cuts to Medicaid, further threatening the financial stability of health centers.
Medicaid accounted for 43% of the $46.7 billion in health center revenue in 2023. Advocates warn that reduced Medicaid payments will widen the gap between funding and operational costs.
Additionally, funding for workforce programs is crucial to support healthcare delivery, as centers struggle to hire and retain staff, according to Feygele Jacobs, director of the Geiger Gibson Program in Community Health at George Washington University.
The first community health clinics emerged in the 1960s, with Congress typically providing bipartisan support for their funding. However, the current struggle began when the Trump administration froze domestic aid in January, preventing some centers from accessing already approved grant money, leading to closures or mergers in states like Virginia.
As these cuts loom, patients are expected to face new challenges. Changes in Medicaid under President Trump’s tax-and-spending law will require enrollees to report work or service hours to maintain their benefits. Furthermore, enhanced tax credits provided by the Biden administration to assist consumers with Affordable Care Act health insurance are set to expire at year-end, potentially increasing costs for many.
One reason for the government shutdown is the disagreement over extending these tax credits, which protect consumers from rising insurance costs. The Republican funding bill did not include an extension, with leaders suggesting the issue should be addressed separately.
“Consumers will need more support than ever,” Jacobs noted, emphasizing that Medicaid cuts and the expiration of tax credits could “potentially throw people out of coverage.”
Notably, 90% of health center patients live at or below the federal poverty level, with 40% identifying as Hispanic. “We are receiving 300 calls per day from patients concerned about their coverage,” Mangia added.
While Republicans are not directly targeting health centers, their support for Medicaid cuts will impact clinic finances. Many argue that Medicaid spending has ballooned and that reducing its growth is essential for sustainability.
State and Local Support
In the face of these challenges, health centers are also seeking support from local governments and communities. Some states, including Connecticut, Minnesota, Illinois, and Massachusetts, have allocated funds for health centers in their annual budgets. Maryland, Oregon, and Wisconsin have also provided support.
However, the sustainability of this funding remains uncertain. While some states have increased their support, others, like California, are making cuts to their programs in anticipation of Medicaid reductions.
In Los Angeles, Mangia suggested that collaboration with county partners could be a potential solution, noting the county’s large population. “We can tax ourselves to increase funding for health care services,” he proposed.
Health center leaders are forming a coalition that aims to include key stakeholders in the county’s healthcare system—community health centers, clinics, hospitals, doctors, health plans, and unions—to initiate a ballot petition. The goal is to allow voters to decide on tax measures to support health centers.
“We are learning that the federal government and the state government are not reliable when it comes to continuing to fund health care,” Mangia concluded.
By Paula Andalo
KFF Health News is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF—an independent source of health policy research, polling, and journalism. Learn more about KFF.
