California & The Mental Health Carve-Out

Executive Briefing | by David Conn, Ph.D. Senior Vice President of Business Development and Public Policy, MHS, and OPEN MINDS Advisory Board Member | July 28, 2015


Last week, OPEN MINDS Market Intelligence Analyst Athena Mandros gave a great overview of all the many changes happening in California’s Medicaid program (Medi-Cal) and discussed why it’s important for other states to keep an eye on California’s system (see California As A Bellwether). Amid all of these changes, one of the most important policies that California’s behavioral health community is keeping an eye on, is the mental health carve-out. At the end of June, the Centers for Medicare and Medicaid Services (CMS) approved California’s 1915(b) Specialty Mental Health Services (SMHS) waiver for an additional five years. This preserves California’s county-based mental health system until at least 2020. In spite of the approval, CMS did voice some concerns about program integrity and access – this resulted in increased reporting and transparency requirements (see California’s Mental Health Carve-Out Preserved For Five Years, But With New Performance Transparency Requirements).

This was considered a success for those (e.g., California Coalition of Community Mental Health Agencies) that wanted to preserve the existing structure for financing and providing specialty mental health services in California. Others, such as the California Hospital Association, had wanted to revise the 1915 Waiver to bolster problem areas, such as involuntary holds. In my opinion, the renewal of the waiver has both benefits and challenges.

The five-year carve out approval removes ambiguity among many mental health provider organizations as to whether they will need to switch from traditional (county) funding sources to new managed care plan (MCP) funding and rules. This is maintaining the status quo in a manner that removes anxiety for both provider organizations and consumers with serious mental illness (SMI).

On the other hand, CMS has also taken a different approach to concerns regarding past deficits caused by audits. Rather than waiting for retrospective audits (which often were received and shelved, since no corrective action plan was attached), every county will be required to report on current activities, require the state Department of Health Care Services (DHCS) to issue and publish corrective action plans (CAPs) based on these reports, and truly monitor service delivery for quality, access, and timeliness. In part this is a means of ensuring that the MHPs conform to parity requirements.

California has 56 counties, ranging in size from under 100,000 to over 12 million in population. Some counties contract out for all services. Some provide all services themselves, and some form consortia to jointly provide/contract for the full array of services. Even the definition of SMI is left to counties to decide (in negotiation with the managed care plans for that county), so it is not surprising that there is wide divergence among mental health plans. The dashboards will provide the first data set to discern whether some counties are performing better or worse than other counties, which will presumably lead to pressure for all counties to improve their performance. Everyone is very interested to see if counties comply in earnest with these reporting requirements and what the results will look like.

The new reporting requirement CMS is imposing on both the DHCS and the county mental health plans may either increase the bureaucratic burden born by subcontractors or allow the counties to work with subcontractors to establish performance measures that are more meaningful. If the latter occurs, it may even pave the way for pay-for-performance contracts that will improve consumer care and make the counties look better to DHCS and CMS. If all levels in the delivery system start focusing on meaningful performance, that should enhance consumer client care.

To learn more about California’s county-based mental health system, check out my article California’s Mental Health Carve Out: Past, Present & Future, Innovation, California Style, and California Behavioral Health System State Profile Report. And be sure to join me in San Diego on August 27 for The 2015 OPEN MINDS California Management Best Practices Institute where Steve Ramsland, Ed.D., Senior Associate, OPEN MINDS; Dawan Utecht, Mental Health Director, County of Fresno; Manuel Jimenez, Jr., MA, LMFT, Mental Health Director, Alameda County; and Alfredo Aguirre, LCSW, Director, Behavioral Health Services Division, Health and Human Services Agency, County of San Diego will discuss where the California mental health system is headed in their panel session: California’s County Mental Health System: An Update On Policies, Programs & Funding.


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