Government News
Govt. Decision Threatens Key CMHC Funding Source
Psychiatric News
Volume 40 Number 7 page 12-12

Advocates charge that the federal government is reneging on a deal to allow the use of savings captured through managed care to be applied to mental health services for people who are not eligible for Medicaid.

The Centers for Medicare and Medicaid Services (CMS) notified Washington state officials that beginning January 1, 2005, the state's Regional Support Networks (RSNs) could no longer use unspent funds for individuals who are not eligible for Medicaid. Counties and their nongovernmental providers are organized into 14 RSNs that provide community-based treatment.

Implementation of the ruling would mean a reduction of $82 million, or approximately 20 percent, in the state's community mental health care budget. About 43,000 people who use community mental health center services in the state are not eligible for Medicaid.

Washington state officials and U.S. Rep. Brian Baird (D) were able to negotiate an extension until June 30, but the Washington state legislature must fill the funding gap; otherwise, people will lose services at that time.

Members of the Washington State Psychiatric Society (WSPS) are concerned about the precedent the action could set for other states and the difficulty of finding new funds in a time of severe budget constraints.

The chair of the WSPS Public Affairs Committee, Christos Dagadakis, M.D., said, "This action removes incentive for innovation. A private managed care company able to save money and still provide mandated services can spend the savings any way it chooses, but a public provider of services cannot."

Charles Huffine, M.D., chair of WSPS's Government Relations Committee, said the state's budgetary situation is difficult.

Advocates, however, are cautiously optimistic about their prospects for supplementing the lost revenue with state funds and even implementing reforms in the mental health system.

The Joint Legislative and Executive Task Force on Mental Health Services and Funding recommended in 2004 that "funds lost due to the changes in interpretation of the Medicaid law be replaced by state funds, to the maximum extent possible...."

A recount gave Democrat Christine Gregoire a very slim victory in the 2004 gubernatorial race, and Democrats control both chambers of the state legislature.

Last month, after seven years of failed efforts, the legislature passed a mental health parity bill, which the governor signed.

An influential Democrat, Sen. Jim Hargrove, supports legislative action to avoid the threatened cuts. He introduced an ambitious bill (S 5763) that would help integrate treatment for mental illness and substance abuse and improve the screening process to identify people with those disorders.

The bill would allow counties to levy a local-option sales tax to pay for expanding treatment. Washington state has no income tax, so that option is particularly important.

Hargrove described himself to an Associated Press reporter as "not a trigger-happy, tax-and-spend kind of person," and added that his experience reforming the juvenile justice system shows that prevention pays off.

He argued that the current mental health system wastes "piles of money, and I mean piles," because mental health and substance abuse treatment are uncoordinated.

Another influential Democrat, Rep. Eileen Cody, has introduced community mental health legislation (H 1290) that emphasizes implementation of recovery-based programs involving families and the use of outcome measures and improved data collection.

The bill also could have the effect of reducing the number of RSNs and thus changing local administrative structures and service areas.

Huffine is worried, however, that even if Washington state is able to compensate for the lost Medicaid revenue, other states soon will be faced with similar cuts.

He has reason for alarm. President George W. Bush projected federal Medicaid savings of $3.3 billion for Fiscal 2005-15 and an equivalent reduction in funding to states by instituting "cost-based reimbursement for government providers."

Psychiatric Newswants to learn about the specific impact on mental health services of Medicaid cuts, exclusive of cuts to pharmaceutical benefits. Please send information to kmulligan@psych.org.

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