By Madeleine Shaw, Master of Public Policy '16

Some of Medicaid’s greatest challenges complement the structure of a Pay for Success (PFS) Model. PFS can extend Medicaid services to children who depend on them, while improving reporting of services provided, focusing on measurable outcomes of health centers, and expanding cost efficient programs that work with vulnerable child populations.  Congress, state, and local policymakers should consider PFS models to supplement funding to school based health centers and community based health centers.

 Cost-Effective Preventative Care Service Providers Demand New Financing Sources

40 percent of the youth population in the United States, which accounts for 30.5 million children, benefits from Medicaid.[i]  There are four primary pathways that children access Medicaid coverage: Income Eligibility, Child Welfare, Special Health Needs and IDEA funding for the disabled. Each of these pathways depends on a network of “Safety Net Providers” to deliver healthcare services. These include federally qualified healthcare centers, school-based health centers, public hospitals, and school nurses.[ii]  Substantial previous research shows that community and school-based health centers are cost efficient, while simultaneously providing crucial healthcare services and economic benefits to the communities they serve. 

School-Based Health Centers

School-based health centers (SBHCs) save Medicaid an average of $35 per student per year.[iii] The majority of school-based health centers are located on school property in schools where 50 percent or more of children qualify for free lunch. SBHCs provide significant immunizations, screen for behavioral health and provide preventative care for substance abuse, violence prevention, suicide prevention, and dating violence. 1 in 5 SBHCs provide dental examinations on-site. 86 percent provide one-on-one healthy eating counseling and weight management education.[iv]

SBHCs funding models depend on federal grants and Medicaid reimbursement. 89 percent of SBHCs bill Medicaid for reimbursement for their services. SBHCs service roughly 2.1 million students each year, and 60 percent of SBHCs serve community members as well as students.[v]

Federally-Qualified Community Health Centers

Federally qualified community health centers (FCHQs) generate $11 of economic activity for every $1 invested.[vi] This economic activity refers to jobs created by FCHQs, as well as gains in economic productivity due to increased health in communities with FCHQs. In 2012, health centers generated approximately $26.5 billion in economic activity for their local communities. Estimates show FCHQs generate 230,000 jobs in some of the country’s most economically deprived neighborhoods.[vii]

Medicaid savings from FQHC care are estimated at 6.7 billion annually, and $24 billion to the healthcare system at large. FQHCs provide preventative care and screenings for chronic diseases, oral care, and mental health. In March 2016, HHS spent $94 million to expand substance abuse services to 270 community health centers in 45 states as a response the opioid crisis.[viii] FQHCs serve 24 million people nationally, including seven million children.  71 percent of FQHC patients live at or below the federal poverty line, and 47 percent of these patients receive either Medicaid or CHIP benefits.[ix]

The basis of SBHCs and FQHCs cost-savings is the provision of preventative care to communities that may not receive access to basic health services otherwise. For example, a student that seeks a basic health screening at a school-based health center identifies adolescent asthma and receives an affordable inhaler. This inhaler prevents a costly emergency room trip in the event of an asthma attack.This is a realistic scenario, as a 2009 study based on a nationally representative sample found that three quarters of children under 18 accessing service through FCHQs had asthma.[x]

Reducing funding for community and school-based health centers would deny vulnerable children benefits and crucial access to healthcare services. Given limited federal funding, PFS projects offer access to capital, increased accountability from service providers, and would promote the expansion of cost-effective solutions to already proven successful programs.

How Pay for Success Fits

PFS projects that maintain and expand school and community-based health centers will advance the bipartisan goals of cutting costs in healthcare while maintaining and expanding healthcare access to vulnerable populations. These service providers play a crucial role in providing substance abuse and mental health services that have shown to be in increasing importance under the opioid epidemic. Expanding these services in low-income schools will prove to be a preventative measure as children touched by the opioid crisis enter public school and present increased health challenges to their communities.

PFS projects align systems of stakeholders toward a common social outcome with sources of private and public capital. The model also incentivizes service providers to increasingly quantify their results and provide more data to their funders. These health centers have established target populations and the capacity to collect data on services provided and outcomes to the communities they serve. Outcomes that have been measured in the past include: decreased emergency room visits, increased academic performance for student populations, increased work productivity, number of immunizations, and number of dental sealants. Given the many communities dependent on SBHCs and FQHCs, there is significant opportunity to scale them with PFS projects in the future. Previous studies have reported significant cost reduction and improved health outcomes for both community and school-based health centers in Georgia, Ohio, and California. These successes provide reference points for private investors considering the social impact space.

Both school and community-based health centers routinely work with mixed funding sources to maintain their operations. PFS models would further incentivize data collection and accountability of these service providers to private investors and state Medicaid programs. This would give greater insight into how these health centers use Medicaid dollars, who benefits the most from these services, and how to distribute these services most effectively. 

Cuts to Medicaid may arise as part Republican promised tax, healthcare or entitlement reform. Considered reforms include per-capita cap systems and block grants to states with a 30 to 40 percent reduction in federal funding. Decreased Medicaid funding to states would cut funds to the reimbursement programs that both SBHC and FQHCs rely on to continue their operations. This would be a significant detriment to the complex system of “safety net providers” that extend access to healthcare for low-income children across the United States in a cost-effective manner. As such, Congress should reconsider PFS as a strategy toward effectively spending Medicaid dollars and utilizing private and public capital while increasing accountability by focusing on measurable results. 

[i] Kaiser Family Foundation. (2013 March). “Medicaid, A Primer.” Retrieved:   

[ii] Batten School of Public Policy and Leadership Social Policy Clinic, Lecturer Brooke Lehmann

[iii] Guo, J. J., Wade, T. J., Pan, W., & Keller, K. N. (2010). School-Based Health Centers: Cost--Benefit Analysis and Impact on Health Care Disparities. American Journal of Public Health, 100(9), 1617 - 1623.

[iv] School-based Health Alliance. (2014). 2013-2013 Digital Census Report. Retrieved: http://censusreport.sbh4all.org

[v] School-based Health Alliance. (2014). 2013-2013 Digital Census Report. Retrieved: http://censusreport.sbh4all.org

[vi] Brady, Jennifer. (2011 May). “Health Care Centers As Economic Drivers”. Connecticut Office of Legislative    Research. Retrieved: https://www.cga.ct.gov/2011/rpt/2011-R-0224.htm.

[vii] National Association of Community Health Centers. (2016 March). “America’s Health Centers.” Retrieved: http://www.nachc.org/wp-content/uploads/2015/06/Americas-Health-Centers-March-2016.pdf

[viii] Johnson, Steven Ross. (2016, March 11). HHS Gives Health Centers $94 million to Treat Opioid Abuse. Retrieved from: http://www.modernhealthcare.com/article/20160311/NEWS/160319977

[ix]National Association of Community Health Centers. (2016 March). “America’s Health Centers.” Retrieved: http://www.nachc.org/wp-content/uploads/2015/06/Americas-Health-Centers-March-2016.pdf

[x] Zur, J., & Jones, E. (2015). Original Article: Racial and Ethnic Disparities Among Pediatric Patients at Community Health Centers. The Journal of Pediatrics, 167(4), 845 - 850.