Early Impacts of the Recession on Health Care Safety Net Providers

Federal Stimulus Funding Helps Offset Losses in State, Local and Private Funding

News Release
Jan. 27, 2010

Alwyn Cassil (202) 264-3484 or acassil@hschange.org

WASHINGTON, DC—While the recession increased demands on the health care safety net as Americans lost jobs and health insurance, the impact on safety net providers has been mixed and less severe-at least initially—than expected in some cases, according to a new study by the Center for Studying Health System Change (HSC) of five communities—Cleveland; Greenville, S.C.; northern New Jersey; Phoenix; and Seattle.

Federal stimulus funding—the 2009 American Recovery and Reinvestment Act (ARRA)—has helped safety net providers weather the economic storm, partially offsetting reductions in state, local and private funding, according to the study funded by the Robert Wood Johnson Foundation.

Enacted in February 2009, ARRA included higher matching funds for state Medicaid programs, increased funding to support hospitals serving disproportionate numbers of low-income and Medicaid patients, and additional grants to federally qualified health centers (FQHCs).

Given the recession’s severity, the impact of higher demand on safety net providers was not as great as might be expected in the five communities, the study found. To some extent, this reflects that safety net providers were experiencing increasing demand for care before the recession as employer-sponsored coverage declined and other providers’ reluctance to treat uninsured and Medicaid patients grew.

However, unemployment and uninsured rates will likely remain high for some time despite some signs of an economic recovery at the end of 2009, and greater demands on safety net providers likely will persist even as federal stimulus funding ends.

"Safety net providers have adopted strategies to stay financially viable, but many believe they have not yet felt the full impact of the deepest recession since the Great Depression," said Laurie E. Felland, M.S., an HSC senior health researcher and coauthor of the study with HSC Senior Fellow Peter J. Cunningham, Ph.D., HSC Health Research Assistant Genna R. Cohen; HSC Health Research Analyst Elizabeth A. November, J.D., M.P.H.; and RWJF Program Officer Brian C. Quinn, Ph.D.

Along with the injection of stimulus funding, other factors may have helped the safety net in the five communities. For example, federal expansion grants for community health centers during the past decade have increased capacity, and programs to help direct people to primary care providers may have helped stem the expected surge in emergency department use by the uninsured during the downturn.

The study’s findings are detailed in a new HSC Research Brief—The Economic Recession: Early Impacts on Health Care Safety Net Providersavailable here. Between June and September 2009, a total of 45 telephone interviews were conducted with representatives of safety net hospitals, community health centers, free clinics and other knowledgeable observers in the five communities, as well as with national experts. Other key findings include:

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The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely research on the nation’s changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is funded in part by the Robert Wood Johnson Foundation and is affiliated with Mathematica Policy Research.