Rule Changes May Reduce Medicaid Services for Mental Illness

Implementation of a newly issued federal rule granting increased“ flexibility” to states in designing their Medicaid programs must be vigilantly monitored by mental health advocates in each state, according to experts.

Federal regulators issued a final rule on December 3, 2008, to implement provisions of the Deficit Reduction Act of 2005 (DRA) that are primarily related to an effort to provide states with “increased flexibility” in their Medicaid programs. The regulatory change would allow states to redesign coverage so it is benchmarked to existing private health care plans.

Critics worry that this may lead to cuts in mental health funding, including for addiction treatment, because many private plans that could be used as benchmarks provide substantially less mental health care coverage than Medicaid plans have historically offered.

The new rule would exempt some groups of Medicaid beneficiaries from having to switch from their standard Medicaid benefits package to new“ benchmark” benefit packages or “benchmark-equivalent plans.” Included in the exemption are the so-called dual-eligibles who qualify for both Medicaid and Medicare, but other Medicaid beneficiaries, including some with mental illness, might be affected by the changes.

Similar private-plan benchmarking authority previously given to State Children's Health Insurance Plan (SCHIP) administrators led some to use private plans with much less mental health coverage than was previously mandated in their state models, according to policy experts with the National Council for Community Behavioral Health.

Furthermore, some critics say, potentially negative consequences of the new DRA rule may come through future Medicaid plan amendments that state health care officials could seek from the Centers for Medicare and Medicaid Services (CMS). These complex and extensive amendment requests will require state mental health advocates to educate themselves about any changes their Medicaid officials are seeking and, as necessary, to make their objections known when they see such proposals, said Irvin “Sam” Muszynski, director of APA's Office of Healthcare Systems and Financing.

“The law gives the states incredible flexibility to do this,” Muszynski said, about the benchmarking authority. “So, state activists need to weigh in at the state level.”

Mental health advocates strongly criticized the DRA rule in February 2008, when it was initially proposed, specifically regarding the lack of transportation for beneficiaries in many benchmark plans. Transport services are often needed to maintain regular and ongoing treatment, and their loss can lead to more hospital emergency rooms visits and cost shifts to emergency medical services.

“Benefit packages designed outside the important consumer protections in traditional Medicaid may fail to meet beneficiaries' needs and will not save money over the long run if these individuals experience significant unmet needs that escalate into problems that require treatment in emergency rooms,” wrote APA Medical Director James H. Scully Jr., M.D., in a March 2008 letter to CMS outlining concerns with the proposed rule.

Other critics of the rule told CMS that low-income beneficiaries would be likely to forgo needed treatment if all medically necessary services and transportation were not included in the benchmark plan.

“We have developed these policies based on what is provided for in statute,” the regulators responded in writing when they issued the rules last month. “And, since the Medicaid program is administered broadly by the states, they have the flexibility to determine how they will design their programs.”

Still, critics argue that private health plans, such as those listed as benchmarks under the law, frequently have limited coverage of mental health services, and few cover any of the intensive community services covered by Medicaid under “rehabilitation” or the home- and community-based services option.

People faced with mandatory enrollment in a benchmark plan under the rule include children with serious mental disorders. They qualify for Medicaid based on family income, are not receiving Supplemental Security Income benefits, and are not otherwise recognized as children with disabilities. Many low-income parents on Medicaid who have been diagnosed with depression, mental health advocates said, also could have trouble getting treatment under a plan with a limited mental health benefit.

Federal regulators noted that the law requires that benchmark plans be“ appropriate to meet the health care needs of the population being served.” This provision may result in new coverage that is actually more generous than the state's traditional Medicaid plan.

On a separate but related front, mental health advocates are eyeing the end of a moratorium on two other controversial Bush administration Medicaid regulations that were also created to implement provisions of the DRA. They impact targeted case management (TCM) and rehabilitation services. The mental health community is strongly opposed to lifting the moratorium because doing so would limit services upon which people with psychiatric conditions rely.

Congress approved the moratorium in June 2008 out of concerns that the Medicaid changes would lead to many people losing benefits. The moratorium, which is set to expire in April, followed a congressional moratorium that expired in May 2008 for most of the regulations under the DRA rule (Psychiatric News, May 2, 2008).

The TCM program coordinates health care and support services needed by people with disabilities. Implementation of the rule will result in barring federal funding for school-based medical services for children with disabilities and set a limit of one case manager per child.

Implementation of the other regulation will result in limiting federal funding for rehabilitation services, such as help with transitions to independent housing, for people with mental illness or developmental disabilities.

The intent of these regulatory changes is to cut funding for activities that the Bush administration has maintained were never intended to be funded under Medicaid, such as transportation of beneficiaries to care appointments. The administration estimated that if these rules had not been put on hold, they would have saved an estimated $17 billion of Medicaid's expected five-year spending total of $1.2 trillion, according to CMS.

President-elect Barack Obama has not taken an official position on the immiment expiration of the moratorium, but mental health advocates hope that his repeated statements during the campaign in support of expanded mental health care will translate into their revocation.

“The loss of both programs would be devastating to people with serious mental illnesses because that would impact the community support services that they need,” said Ron Honberg, J.D., national director for policy and legal affairs at the National Alliance on Mental Illness.

The expiration of the moratorium also comes at a time when states have requested $40 billion in additional federal Medicaid funding due to a major drop in tax revenue used to fund Medicaid. Federal legislators and Obama are expected to consider the request early in the new Congress.

The new final rule on benchmark plans is posted at<http://edocket.access.gpo.gov/2008/pdf/E8-28330.pdf>.▪