Economic Grand Rounds: State Budget Cuts, Health Care Reform, and a Crisis in Rural Community Mental Health Agencies

In 2008, state general revenue funds were 40% and Medicaid was 46% of state mental health agencies' budgets (the remaining 14% of funds were from a variety of sources, including Medicare, grants, and county funds) (7). Between 2009 and 2011, general revenue funds to state mental health agencies were reduced by $2.1 billion (7). Examples abound. Arizona reduced its 2010 mental health budget by $36 million, which resulted in a 37% funding decrease to behavioral health services for non-Medicaid-eligible patients (5,6). Mississippi has cut its mental health budget by roughly 8% in each of the last three years and plans to cut more; these cuts have resulted in CMHA closures and consolidations (5,6). California's 2010 mental health budget was reduced by $92 million, limiting access to programs across the continuum of care (6). In New York, programs operated by the Offices of Mental Health, Mental Retardation and Developmental Disabilities, and Alcoholism and Substance Abuse Services were reduced by $151 million (10), and Ohio has discontinued almost all funding to behavioral health services for individuals not eligible for Medicaid (5).

For fiscal year 2011 Governor Pat Quinn announced a $90 million (39%) decrease in Illinois general revenue funds for CMHA behavioral health services (11). As in other states, these reductions are part of a three-year trend that has resulted in a total decrease of 56% from 2008 funding levels of $231 million (11). State general revenue funds accounted for approximately 27% of CMHA budgets in 2008.

Recent experiences of CMHAs in southern Illinois show how multiyear cuts to state general revenue funds can affect the availability of behavioral health services in rural areas. Semistructured, journalistic-style telephone interviews were conducted with 12 executive directors from CMHAs serving 24 of the 33 counties in Illinois Region 5. Many of these directors have been mental health professionals for more than 20 years. Region 5 is in the southernmost quarter of Illinois and runs the width of the state. It has a population of approximately 1.2 million, or 15% of Illinois' non-Cook County (Chicago) population. The area consists primarily of depressed agricultural and manufacturing locales that have been hard hit by the economic stagnation and recession between 2000 and 2010.

When asked who was most affected by the 2011 budget cuts, the executive directors universally cited patients who were not Medicaid eligible and who did not have access to private insurance—in other words, people with no tangible means to pay for services. According to the directors, many persons who are uninsured and served by CMHAs have minimum-wage jobs that lack health insurance benefits and do not qualify for Medicaid because of income caps or requirements linking benefits to dependent children. These individuals represent 10%–35% of the population served by Region 5 CMHAs. As a result of state funding reductions, CMHAs can no longer provide treatment planning services, individual or group therapy, case management, or medication administration and monitoring to people without a third-party payer (11,12). Services for uninsured individuals are reduced to two hours of assessment and unlimited access to crisis interventions (12).

The executive directors were asked about the impact of budget cuts on the availability of behavioral health services. They reported that the range of possible services will decrease and the distances that patients travel will increase as CMHAs consolidate or close. When faced with a third year of reductions in state general revenue funds, 100% of the executive directors decided not to accept new patients, 55% reduced services to current patients, 91% plan to reduce services in the future, 87% instituted hiring freezes, 46% laid off staff, 73% used the agency's reserve funds, and 28% borrowed money against future state payments.

There are limitations to journalistic-style telephone interviews with CMHA executive directors in one region of Illinois, but findings from the National Association of State Mental Health Program Directors Research Institute (NRI) show that other states are responding similarly to budget shortfalls (7). NRI reported that in 2010, 53% of state mental health agencies reduced funds to community providers, 40% reduced community mental health services, 35% reduced the number of persons served in the community, 78% instituted hiring freezes, and 53% laid off staff. Community-level services eliminated include clinic services (individual and group therapy), peer support programs, targeted case management, supportive housing, and workforce development programs (7). The survey also found that 56% of state mental health agencies reported an increased demand for community-based services in the same period (7).

Although flaws in patient coverage for behavioral health services remain, policy changes enacted by PPACA and MHPAEA work in concert to address patient-level financial barriers that have traditionally limited access to mental health care (2,3). PPACA expands the number of individuals covered by private insurance or Medicaid from 83% to 94% of the U.S. population—or 32 million individuals who will have better access to health care. Estimates indicate that 25% of uninsured adults have either serious psychological distress or substance abuse issues, and over 6% have a serious mental illness (2). As individuals gain access to private insurance or Medicaid, MHPAEA should guarantee, for the most part, that mental health coverage is available and not cost prohibitive. The institutionalizing of parity in health insurance when coupled with PPACA suggests that more individuals will be able to afford behavioral health services (2,3).

Most increases in coverage created by PPACA for individuals with a mental illness are realized in two phases. First, as of 2010, those with preexisting conditions can enroll in low-cost, high-risk pools, and insurance companies cannot deny coverage because of these conditions. This phase should help persons who can afford to enroll in individual and small-group market plans and have been denied coverage because of prior mental illness. As of March 2011, enrollment in high-risk insurance pools was approximately 18,000, well below the Chief Actuary of Medicare and Medicaid's prediction of 375,000 (13). Two reasons have been cited for lower-than-expected enrollment: high premiums and limited public knowledge about the program (13). The high-risk pools could provide a third-party payer for some of the patients now served by CMHAs and supported by state general revenue funds if premiums are adjusted to better fit the resources of the working poor in rural communities.

Second, effective in 2014 Medicaid eligibility will expand to individuals with income up to 133% of the federal poverty line and will include adults without dependent children. As well, individuals without insurance and employers who do not provide insurance and have more than 50 employees will be encouraged through financial incentives and penalties to acquire health care coverage (2). The 2014 provisions of PPACA are likely to provide the greatest expansion of access to behavioral health services at CMHAs because the provisions are directed at individuals with demographic profiles similar to those of patients supported by state general revenue funds.

Because of multiyear reductions in state funding, the system of behavioral health services that CMHAs provide in rural communities is diminishing, and patients are losing access to care. If PPACA and MHPAEA are fully implemented and uninsured patients gain access to either Medicaid or private insurance, the policies should lessen CMHAs' need for state general revenue funds. Unfortunately, the bulk of increases in patient access to insurance may not occur soon enough, and there is little evidence that other health care providers will assume the services provided by CMHAs. The result could be a diverging supply and demand that is difficult to correct in resource-poor rural areas.

The authors thank Benjamin G. Druss, M.D., M.P.H., for his generous advice on an earlier version of the manuscript.

The authors report no competing interests.