Systemic Underfunding of Michigan’s Public Mental Health System

Below is the analysis that our association conducted around the systemic underfunding of Michigan’s public mental health system.  The executive summary provided in the attached is also provided below, for ease in access. Of special note are items 3 and 4, especially given the on-going debate as to whether the state’s Medicaid mental health care management system should be privatized.
Executive Summary of the CMH Association analysis: Systemic underfunding of Michigan’s public mental health system

Michigan’s public mental health system is one of the most comprehensive and advanced in the country. However, over the past several years, a number of financing decisions, by the State of Michigan, have systematically eroded the ability of Michigan’s public mental health system to meet the needs of Michiganders who have come to rely upon the system while similarly eroding the fiscal stability of this public system.

These practices result in “death by a thousand cuts” and include the following:

1. Growing demand for mental health services not reflected in funding to the public system: While the demand for wide range of mental health services, in communities across Michigan, has grown dramatically over the past several years, the funding for the public mental health system responsible for meeting those needs has not. Those needs range from addressing the opioid crisis to preventing suicide; from keeping kids in school safe and successful to supporting persons with disabilities to live in the community.

2. Insufficient Medicaid funding to meet community demand and real costs of care: The factors behind this underfunding include: the funding approach being based on two year old data, thus not reflecting current and emerging needs and costs.

3. Insufficient Medicaid funding to meet community demand and real costs of care: The state’s public Medicaid mental health system was underfunded by $133 million in Fiscal Year 2017. During that period, the public system spent over 99% of the funds that it received on mental health services with 6.1% spent on administration. During that same year, the private Medicaid managed care plans took in profits of over $136 million, while spending only 89.8% on medical services with administrative costs 40% higher than the public system.

4. Failure of the state to fund federally required contributions to public mental health system’s risk reserves: For the past twenty years, the Medicaid funding provided to the state’s public mental health system did not include the federally required risk-reserve contribution component that would have allowed Michigan’s public mental health system to build and retain the necessary risk reserves – reserves necessary for any risk-bearing managed care entity.

If the Medicaid rates paid to the public mental health system had included even a modest component (2%) to provide for contributions to reserves and risk margins, the public mental health system would have received $50 million more in Medicaid payments in the current fiscal year, FY 2018 and nearly $700 million over its twenty-year history, providing reserves sufficient to weather a range of fiscal storms.

5. Inability of the public system to retain savings of sufficient size to ensure fiscal stability:  The PIHPs (the public health plans that receive the Medicaid payments from the state) are prohibited from holding sufficient risk reserves. Similarly, the CMHs are prohibited from retaining any Medicaid savings that they generate through efficiencies and effective clinical practices. These savings, permitted for any other healthcare provider, would allow the CMHs to invest in meeting community needs and ensuring their clinical and fiscal stability.

6. Inappropriate state demand that county funds be used to close Medicaid gap: County funds are inappropriately drained from the system to cover state Medicaid obligations:

A. Over the past several years, in lieu of holding up its end of the risk-sharing arrangement that MDHHS has with the state’s public mental health system, MDHHS has demanded that county funds be used to cover the Medicaid costs not covered by state Medicaid dollars

B. For the past decade, the State of Michigan has required that the public mental health system use of local dollars – the bulk of them coming from Michigan counties – to underwrite part of the state’s share of the Medicaid mental health budget. Over $25 million is annually used to cover this obligation.

7. General Fund short fall: While long insufficient, the State General Fund (non-Medicaid) support for the public mental health system and its ability to meet increasing community demand has fallen off dramatically. The 60% cut to the GF revenues of the state’s CMHs, in 2014 and 2015, led to 10,000 fewer persons receiving services.[1]  As a result of this cut, $7.50 per person per year is available, to the public mental health system, to provide mental care to the 8 million Michiganders without Medicaid coverage.

Call for Action: Action must be taken to close these funding and financial practices gaps to ensure ready access to mental health care, for Michiganders, and to ensure the fiscal stability of the public system upon which these Michiganders have come to rely.

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