Revised Plan For Procurement Of Specialty Service Prepaid Health Plans

Introduction

Since October 1998 - when the state implemented a ground-breaking managed care program - nearly all Medicaid state plan specialty mental health, developmental disabilities and substance abuse services have been managed by and arranged through designated specialty Prepaid Health Plans. A specialty Prepaid Health Plan (PHP) is a managed care entity that provides Medicaid covered specialty services - under a contract with the state and on the basis of prepaid capitation fees - to beneficiaries who need such care. Under special arrangements between the state and the federal Health Care Financing

Administration (HCFA), MDCH has contracted - on a sole source basis - with Michigan's 49 county-sponsored Community Mental Health Services Programs (CMHSPs) to serve as the specialty PHPs for their designated service areas. Since this special arrangement diverges from federal regulations that require managed care contracts to be procured through "open and full" competition, HCFA stipulated, and the state agreed, that it must develop a plan to transition from sole-source contracts for specialty PHPs to competitive procurement.

It is important to emphasize that the line of reasoning pursued in the paper and the conclusions drawn apply specifically to specialty services for persons with serious mental illness, developmental disabilities and addictive disorders. These populations were historically confined in segregated state-operated hospitals and centers. The long journey from confinement in state-operated facilities to community-care settings has required enormous cooperation and collaboration between the state and local governments. In short, the considerations regarding competition for specialty services are not directly applicable or comparable to other circumstances and situations, such as competitive procurement for Medicaid physical health services or long-term care services for other groups of disabled beneficiaries.