Election season is upon us, and if you are like me, you are counting down the days until it is over: no more texts requesting political donations, no more campaign commercials, and no more daily news coverage of the latest polls. Yet even as we look forward to its end, this is an incredibly important election, one that will help steer our country, state, county, and even our profession in the direction we choose.
Several propositions on this year’s ballot affect health care, but the one with the greatest potential impact on family physicians is likely Proposition 44. Proposition 44 requires federally qualified health centers (FQHCs) and community clinics to spend 90% of their total revenue on “program services” or pay a penalty. The measure is sponsored by Service Employees International Union–United Healthcare Workers West (SEIU-UHW West) and is opposed by the California Academy of Family Physicians (CAFP), the California Primary Care Association, and the California Medical Association. “Program services” are defined as services that advance a clinic’s charitable mission; they do not include management, overhead, or accumulated surplus revenue. Compliance is measured by what the measure calls the “mission spend ratio.” However, the proposition does not specify which expenses qualify as “program services.” Instead, it leaves that determination to the California Attorney General.
A clinic whose mission spend ratio falls below 90% will owe a penalty equal to the difference between what it actually spent on mission-directed expenses and 90% of its total revenue. The penalty is refunded only if the clinic comes into compliance within five years and agrees to spend the returned funds on mission-directed expenses under the direction of the California Department of Public Health. Money that is not refunded is redirected to clinic-worker training, recruitment, and retention.
To put this in simple terms, consider a community clinic that brings in $10 million in a year. Under Proposition 44, it must spend at least $9 million (90%) on qualifying “program services.” If the clinic spends $8.5 million on qualifying services, it falls $500,000 short and owes the state a $500,000 penalty. That penalty must be paid out of the remaining $1.5 million, the same funds that cover billing, information technology, regulatory compliance, and emergency reserves. Put another way: if a clinic is required to spend 90 cents of every dollar on patient care but spends 85 cents, it owes the state the missing five cents on every dollar it earned, even if that money was spent on necessary expenses or was set aside to keep its doors open.
Although increasing spending on patient care sounds like a worthy goal, this policy carries significant risks for California’s FQHCs and the underserved patients they serve. Even clinics that allocate their revenue responsibly will have limited ability to build reserves for emergencies, at a time when they already face federal Medicaid cuts due to H.R.1. The measure may also exclude spending on services such as interpretation, transportation, and case management, despite their clear contributions to patient care. Whether these expenses count, and therefore the financial health of every affected clinic, will be determined by a single, partisan elected official: the Attorney General.
This policy will come at a great cost, both in dollars and, more importantly, in patients’ access to care. According to an analysis by the Berkeley Research Group, more than 90% of FQHCs could face penalties totaling $1.7 billion in the first year alone. Losses on that scale would be financially crippling and could put two-thirds of the state’s community clinics at risk of permanent closure.
For the sake of ensuring access to care for our patients, please discuss this important measure with your own friends and family and encourage voting NO on Proposition 44.
