Community Government Health & Wellness

State eyes savings from Medicaid pharmacy benefit, which could hurt clinics that help the most vulnerable

Posted on March 12th, 2025 By: Conor Wilson

Each month, Peninsula Community Health Services’ mobile medical clinic traverses the Kitsap Peninsula. It makes stops in Poulsbo, Bremerton, Shelton and elsewhere, delivering primary care to people who face access barriers and may go without routine care.

PCHS is a Bremerton-based Federally Qualified Community Health Center serving residents in Kitsap, North Mason and rural Pierce County. It runs the clinic-on-wheels at a deficit. It is among a group of critical but unprofitable projects at the agency where costs are at least partially offset through an obscure Medicaid program called the pharmacy benefit.

Over two dozen community health centers across Washington – which, like PCHS, care for some of their community’s most underserved and often lowest-income residents – rely on the pharmacy benefit and are concerned they could soon lose that aid.

Amid a billion-dollar revenue shortfall facing the state, Gov. Bob Ferguson has proposed a cost-cutting restructure of the pharmacy benefit that community health advocates worry will upend the region’s health care system.

Medical assistant apprentice Yexsareli Ramirez, right, takes a patient’s blood in a Peninsula Community Health Services mobile clinic at The Summit at Bay Vista in Bremerton on Tuesday, March 11, 2025. Photo by Meegan M. Reid

‘Catastrophic and devastating impacts’

Nothing is official yet. But as the Legislature drafts a budget, health center leaders are warning a restructuring would worsen access for patients on both private insurance and Medicaid, the state-federal insurance program for those with low incomes or disabilities.

“Removing what is a really important form of revenue for our health centers will have catastrophic and devastating impacts to our primary care system in Washington,” said Courtney Smith-Jiles, interim CEO of Washington Association for Community Health. “It will make worse an already dire primary care crisis in the state of Washington, and just fundamentally make it harder for Washingtonians to get services.”

Trepidation began after Ferguson released his proposed budget. The first-term Democrat entered office as the state faces a roughly $12 billion budget deficit over the next four years. Last month, he announced a plan that would produce $7 billion in cuts. Among his plans to rein in that deficit is a restructure of the pharmacy benefit.

The pharmacy benefit, a federal program created by Congress through the Public Health Service Act in 1992, requires drug manufacturers to sell medications to some qualifying health agencies at a discounted rate.

That provides two benefits. First, patients get access to low-to-no cost medications.

Second, Medicaid reimburses providers at the regular rate for the prescription. The difference between the amount Medicaid will pay and the cost of the discounted drug is used to offset uncompensated care or support programs like mobile clinics, substance abuse treatment or mental health care that often operate at a loss.

State wants savings to go into general fund

The first part of that benefit should remain unchanged; The concern is what happens to those savings.

Ferguson wants to change the benefit’s payment model from managed care to fee-for-service. The jargon-laced, seemingly minor administrative adjustment would save the Washington Health Care Authority $52.5 million over the next four years, said Brionna Aho, a spokesperson for the governor. The savings would be diverted from providers and into the state’s general fund.

The governor’s office, which estimates the state’s deficit to be $15 billion over the next four years, acknowledged difficult choices had to be made. Aho said they did everything they could to maintain health insurance for state residents.

Peninsula Mobile Medical Clinic in the parking lot of The Summit at Bay Vista in Bremerton on Tuesday, March 11, 2025.

“For this reason, we concluded that using the purchasing power of the state to drive lower drug prices was a good option that would contribute to our goal of maintaining public health insurance — Apple Health — for our people,” she wrote in an email to the Kitsap Sun and Gig Harbor Now.

“That said, we understand that there are concerns from the Federal Qualified Health Centers about this proposed change and what effect it could have on their operations in the near term, particularly in light of the pending Medicaid cuts being proposed by the Trump Administration,” she continued. “ We are going to be working with our partners in the House and Senate to come up with the best solution for Washington.”

PCHS saved and reinvested $2.2 million last year

Each of the 28 federally qualified community health centers serving Washington — a network caring for over a million residents, including a large share of those on Medicaid or who are uninsured — benefit at varying degrees from these savings. They use them to support a host of unprofitable programs or cover the costs of uncompensated care for those without issuance coverage.

Federal law requires community health centers to invest any pharmacy benefit savings back into their own communities, said Jennifer Kreidler-Moss, CEO of Peninsula Community Health Services, creating an added benefit for those they serve. PCHS got $2.2 million last year in savings from the pharmacy benefit. They used those funds to offset costs for their mobile clinic, behavioral health and substance use programs and school-based clinics.

“It is a direct investment in the people who brought the drug,” she said, calling the proposed restructure “short sighted,” and noting that PCHS may have to scale back or close some programs supported by the pharmacy benefit if a restructure is ultimately approved.

“It will be this cascading effect,” Kreidler-Moss said, noting with less access, more patients will end up at the emergency department or forgo care. “It’s going to cause bigger access challenges as they present somewhere else in our system.”

More challenges ahead

Similar effects would likely be seen across the state, but the impact to the Kitsap Peninsula might be particularly pronounced given its existing challenges with staffing shortages and health care access. The region has a shortage of primary and preventive care doctors, with fewer physicians per capita than the state average. These capacity challenges drive an over reliance on emergency care.

The Washington Association for Community Health pegged the statewide loss for community health centers at more than $100 million, saying it would lead to reduced hours and less services across the board. Smith-Jiles called it “functionally a cut to service for the Medicaid population” and worries about what this could mean amid fears about cuts to Medicaid at the federal level.

Republicans in the U.S. House have released a budget proposal calling for $880 billion in spending cuts to the Energy and Commerce Committee, which oversees Medicaid, according to KFF Health News. If cuts were to happen, it is likely to drive up the amount of uncompensated care health care centers are providing.

“You couple this change with what’s actively being contemplated at the federal level around Medicaid cuts and the magnitude of negative impacts to our health system is difficult for me to comprend,” she said.