Three health-center funding authorities expire on December 31, 2026

What expires on December 31

The "triple cliff" is shorthand for three authorities that all expire December 31, 2026:

• The federal Community Health Center Fund (CHC Fund) — the mandatory funding stream worth ~$4.6 billion a year, about 70% of federal health-center money. This is the national leg: it touches every Section 330 grantee in every state.
• California's CalAIM Section 1115 waiver — the demonstration authority under which the state built its Medicaid transformation, including the care-management programs many health centers staffed up to deliver.
• The Medi-Cal MCO tax — the ~$4.5B/year tax on managed-care organizations that draws down federal matching funds for the Medi-Cal primary-care, maternal-care, and non-specialty behavioral-health rate floor that supplements non-PPS revenue.

Just as important is what the triple cliff is not. It is not "PPS ending." The Prospective Payment System — the per-visit rate that anchors FQHC Medicaid reimbursement — does not expire on December 31 or any other date. The State-Only/UIS clinic-payment change people sometimes fold into the December story is a separate policy file, and the signed budget moves the major clinic-payment reduction into a 2027 planning lane. We cover that updated timing in The signed budget delays California clinic payment cuts to July 2027; this article is about December.

And December 31 is not the end of federal health-center funding, either. The Section 330 base grant keeps flowing regardless — more on that in the "what survives" section below, because the honest version of this story includes the columns that don't go to zero.

The Community Health Center Fund

Federal health-center funding comes in two slices. Annual appropriations carry the discretionary slice — about $1.9 billion. The mandatory Community Health Center Fund carries the rest: roughly $4.6 billion a year, about 70% of all federal health-center money. The discretionary slice gets renewed (or continued) every budget cycle. The mandatory fund requires its own reauthorizing legislation — and that authorization runs out December 31, 2026.

Here is the live-risk part. On June 9, 2026, the House Appropriations Committee approved the FY2027 Labor-HHS-Education bill on a party-line 34-28 vote, funding HHS roughly 4% below FY2026 — with no CHC Fund extension. None was expected in an appropriations bill, structurally: the fix has to come from House Energy & Commerce and Senate HELP, where no reauthorization bill has been introduced. The party-line vote also signaled that FY2027 appropriations would not pass by October 1, and a stopgap followed: the continuing resolution signed September 2 (P.L. 119-103) funds agencies through December 11. A CR holds the discretionary slice flat. It does nothing for the mandatory cliff.

What stands between here and December: NACHC's sign-on letters — 288 House members and 57 senators — remain the vehicle-in-waiting, and the realistic path is a year-end legislative package. Congress has resolved this cliff before, often late and sometimes retroactively. That history is the planning assumption: health-center boards should build Q1-2027 cash positions assuming the cliff resolves late, retroactively, or partially — not assuming it resolves on time, and not assuming it doesn't resolve at all.

The stakes are national. This is the one leg of the triple cliff that hits a health center in Ohio or Texas exactly as hard as one in California — which is why we track it across every state's intelligence page. GW researchers estimate the cliff could cost the sector 100,000+ jobs nationally, and the human side of every one of those numbers is a care team a community already counts on.

The CalAIM 1115 waiver

If you read only the headline — "CalAIM expires December 31" — this looks like the scariest leg. California built Enhanced Care Management and Community Supports under CalAIM, health centers hired care managers, CHWs, and housing navigators to deliver them, and the programs carry real money: ECM is a $956M-a-year program and Community Supports adds $231M a year.

But this is the leg where the news has been genuinely good. On May 11, 2026, DHCS formally submitted the CalAIM renewal to CMS, requesting a five-year term from January 1, 2027 through December 31, 2031. The ball is in CMS's court. More importantly, DHCS clarified something that materially shrinks the cliff: ECM and most Community Supports continue under California's standalone Medicaid managed-care regulatory authority regardless of whether the 1115 waiver is approved in time. The revenue lines health centers built care-management teams around are substantially more durable past December than the cliff framing suggested.

What's still live risk: the narrower set of services that specifically depend on 1115 authority, and — the real variable now — whatever conditions or cuts CMS attaches to an approval. Watch the approval terms, not just the approval. The companion 1915(b) managed-care waiver renewal comment window closed June 20, 2026; centers that submitted feedback should track the DHCS/CMS response, and centers that missed it should document implementation evidence for the next formal or informal comment window.

The Medi-Cal MCO tax

The Managed Care Organization tax is the least visible of the three cliffs and the one with the most moving parts. The tax raises about $4.5 billion a year and is the mechanism California uses to pull down federal matching dollars that fund the Medi-Cal primary-care, maternal-care, and non-specialty behavioral-health rate increases — the rate floor health centers rely on to supplement non-PPS revenue. The current tax runs through December 31, 2026, when the federal transition period for California's tax ends. Four dates shape what comes after it.

• June 15: California's constitutional budget deadline arrived with Governor Newsom and the Assembly deadlocked against the state Senate, which wanted to replace the MCO-tax renewal with a new $285-per-employee monthly fee on large employers for each worker enrolled in Medi-Cal. The LAO had called the two-component renewal itself "novel and risky."
• June 29: the Governor signed SB 125 (Chapter 24, Statutes of 2026). It sets a new MCO tax for 2027 through 2029 of $8.85 per enrollee per month on Medi-Cal and commercial health plans, with the money going to a new Medi-Cal Stability Fund. DHCS cannot collect it until CMS approves it or DHCS certifies that federal rules allow it. H.R. 1 bars taxing Medicaid plans at a higher rate than commercial plans, a test the current tax fails.
• October 1: the California Medical Association and the California Association of Health Plans asked the California Supreme Court to block SB 125. They argue it amends Proposition 35 without the vote that measure requires, and they want DHCS to send CMS a tax that meets both Proposition 35 and federal law by December 31.
• December 31: the current tax ends, and DHCS must submit a compliant tax to CMS by this date. DHCS plans to send two versions and expects CMS to reject the one written to Proposition 35's terms, which leaves the SB 125 version as the working successor.

What hangs on this for health centers, concretely: Proposition 35 programming — about $264 million in FY2026-27, including FQHC PPS supplemental payments — is tied to the MCO-tax mechanism. If the tax restructures or lapses, those line items face reset risk.

The hopeful note: a successor is now law. SB 125 cleared Sacramento in June. It still has to clear CMS and the Supreme Court petition before any 2027 money flows, so keep the rate floor in your 2027 scenarios as at risk until both are settled.

ACO REACH ends and LEAD begins

One more thing ends the night of December 31, and for once the story is mostly resolved. ACO REACH — Medicare's value-based model with the heaviest safety-net participation, 1,042 FQHCs, RHCs, and critical access hospitals in 2024 and 74 ACOs in its final 2026 performance year — sunsets December 31, 2026. For most of the past year, that sunset had no successor, which made it a genuine existential question for FQHC-governed Medicare ACOs.

Then CMS answered. The LEAD Model, launched March 31, 2026, is a 10-year voluntary ACO model running January 1, 2027 through 2036, with three features that matter structurally for health centers: a financial benchmark that is not rebased for the entire decade (ending the success-punishment treadmill), FQHC and RHC services classified as primary care (auto-enrolling health-center participants in the Primary Care Components track), and a streamlined application for current ACO REACH participants. The first-cohort application window closed May 17, 2026 — so the question for a California health center is no longer "should we apply" but "did our enabler (C3, MHN, Aledade) apply," with future cohorts expected. The full successor map lives in our value-based care hub.

What stays funded

An honest explainer needs this column, because cliff coverage tends to imply everything goes dark at midnight. It doesn't. These keep running no matter what happens December 31:

• Section 330 base grants. The base federal operating grant is separate from the expiring CHC Fund supplement and keeps flowing — the proof point landed June 3, when SAC Health announced HRSA renewed its ~$3.6 million annual Section 330 grant. When boards model FY2026-27 revenue, the base grant is a counterweight to the cliff narrative.
• ECM and most Community Supports. Per DHCS, they continue under standalone managed-care authority regardless of 1115 timing — the care-management teams centers built do not lose their funding rail at midnight.
• The PPS itself. Medi-Cal's per-visit Prospective Payment System is not expiring. SB 164 moved the State-Only (UIS) rate change to July 1, 2027; the core PPS mechanism stays.
• The Medicare ACO pathway. LEAD launches January 1, 2027 with a 10-year horizon and FQHC/RHC services classified as primary care — structurally better terms than the model it replaces.
• NHSC awards already in motion. The FY2026 cycle raised loan-repayment maximums — up to $75,000 for primary care plus a new $5,000 Spanish-language-proficiency enhancement (up to $80,000 total), $105,000 for the Rural Community LRP, and roughly $160,000 for Students-to-Service with the maternity-care supplement — with awards landing by September 30. The honest caveat: NHSC's own mandatory funding now runs on a continuing resolution (~$350M/yr against NACHC's $950M ask) and the FY2027 President's Budget proposes zeroing out 14 Title VII/VIII pipeline programs. Bank the richer awards now; treat December as the real workforce risk.
• A successor MCO tax is law. SB 125 sets a tax for 2027 through 2029, so "sunset" need not mean "gone". It still needs CMS approval and faces a state Supreme Court petition.

"Survives" does not mean "unscathed." It means these lines do not turn off at midnight — which is exactly the distinction a board needs when it decides what to protect and what to scenario-plan.

Decision calendar

June carried five decision dates, and the year does not slow down after that. This calendar separates the dates that already shaped the path from the dates still ahead, so leadership can stop treating every item like a countdown and start assigning owners to the remaining decisions.

What each role should do before year-end

For the CEO:

• Set the board's expectation now: the realistic CHC Fund path is a year-end package, so plan out loud for the cliff resolving late, retroactively, or partially — and say which one you're budgeting for.
• Put your center's name on the advocacy record. NACHC's sign-on letters (288 House, 57 Senate) are the only vehicle-in-waiting; pair the national push with your state primary care association's.
• Close the June decision log: budget deal, SB 125, and the ballot-measure withdrawal window. Assign one named owner to each unresolved implementation thread on the calendar above.
• Keep the message with staff honest and steady: the mission doesn't expire — specific authorities do, several have successors, and the team's work (especially ECM and care management) continues on rails that survive.

For the CFO:

• Build three Q1-2027 cash scenarios — cliff resolves on time, retroactively, or partially — and size your line of credit before December, not during it.
• Split federal revenue into the Section 330 base grant versus the CHC Fund-supported share, so the board sees exactly which dollars sit on the expiring ~70%.
• Tag every Prop 35-funded line item (part of ~$264M statewide in FY2026-27, including FQHC PPS supplemental payments) as MCO-tax-contingent, and track SB 125's CMS review and the Supreme Court petition.
• Keep the UIS/PPS delta separate from December — it is a different policy file, now best modeled as a signed-budget 2027 sensitivity.
• Don't double-cut: ECM and most Community Supports revenue survives on standalone authority. Cutting those teams on cliff anxiety subtracts revenue the cliff wasn't going to take.

For the board chair:

• Calendar a December special session now, with delegated authority to act between meetings if Congress moves late in the year.
• Revisit the reserve policy against the three Q1-2027 scenarios and decide in advance which trigger produces which response.
• Approve the advocacy plan and put trustee signatures on it — sign-on letters carry more weight with community board members attached, and that board structure is the health-center movement's signature.
• Ask management for a one-page version of the decision calendar at every meeting between now and January.

For care-management and ECM leads:

• Keep building. DHCS says ECM and most Community Supports continue under standalone managed-care authority regardless of waiver timing — don't shrink a team the cliff isn't coming for.
• If you submitted 1915(b) waiver comments by June 20, track the DHCS/CMS response; if you missed the window, document operational evidence now so you are ready for the next formal or informal comment opportunity.
• Watch the CMS approval conditions on the 1115 renewal; conditions, not survival, are now the live variable for your program design.
• Start January 1 work-requirement navigation prep now. The early-state data shows the chilling effect arrives before the policy does — eligibility and navigation capacity is the rail your patients will need most in Q1.