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